System and method for installation of a virtual service processor (VSP) are disclosed. The system include a computer that has a processor, a physical drive having a first partition and a master boot record (MBR) with initial settings indicating the first partition as an active bootable partition, and a non-transitory computer storage medium having computer-executable instructions. The instructions cause the processor to (a) load and execute a hypervisor from the computer storage medium, the hypervisor having a privileged domain and an unprivileged domain; (b) initiate a VSP in the privileged domain, the VSP being configured to manage at least one health, operation, or performance related aspect of the computer system; (c) configure the unprivileged domain to allow an operating system to run therein, the operating system (OS) being executable directly on the computer system; and (d) load and execute the OS in the unprivileged domain.