A dynamic state manager (DSM) for a server cloud manager (SCM) of a virtualized logical server cloud including a resource definition, a rules module and a state manager engine. The resource definition incorporates information of the available physical and logical resources of the server cloud, including cost, priority, usage and demand information of the resources. The resource definition further incorporates dependencies and relationships between physical and logical resources. The rules module includes predetermined behavioral rules based on demand, usage, priority and cost information. The behavioral rules define optimized resource utilization of the resources of the server cloud. The state manager engine is linked to the resource definition and the rules module and cooperates with the SCM to apply the behavioral rules to achieve optimized resource utilization.