When cloning a virtual machine to a template, the Clone to Template wizard allows the administrator to choose the data center, cluster, and storage to create the new virtual machine template. Cloning a virtual machine to a template can be done while the source virtual machine is powered on.

When a virtual machine is converted into a template, the virtual machine is converted locally; the template will have the same inventory properties (data center, cluster, and storage) as the virtual machine that has been converted. The virtual machine configuration file (.vmx) is changed to a template configuration file (.vmtx) when a virtual machine is converted. The virtual machine needs to be powered off to be converted to a virtual machine template.

The following screenshot shows the virtual machine template files on a datastore (the virtual machine template configuration file has been boxed in red):

The virtual machine template file is similar to the .vmx file, and it contains configuration information about the virtual hardware that's presented to the virtual machine or template.