Our company has recently decided that they require a development environment for SharePoint 2010.

They've asked for an copy of our production environment, I was going to clone the VM's (DB, APP & WEB) and sandbox them but this wont work now as they want it to be available to all staff, it is possible to clone the VM's, change the server names (sysprep maybe?) and re-create the environment so that it doesn’t interfere with the current production environment?

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From my experience that doesn't work. What you need to do is to create a new farm, upload any custom solutions you have, take backup of the content databases and upload them to the new farm sql. After restoring those databases you need to 'Attach' them to SharePoint. One element you might review after that is the web.config people quite often modify it directly so those changes will need to be as well restored manually.

If you have the SPDocKit (this is 3rd Party vendor solution) you could use it for creation of config file that you could use with the openSource AutoSPInstaller to build farm with same config.

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