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How many servers can nagios monitor at an instance?
How nagios monitors multiple servers, use round robin algorithm or something else?

How many server a single Nagios instance can monitor is mostly up to the hardware on the instance and the frequency of the checks. It's hard to give an estimate without any info, but I've seen well over 100k checks on one machine.

As for how it does, Nagios operates on a a check interval basis, so you determine how often to check a given server and Nagios balances the checks out slightly so they do not all run on the same second.

the more often your checks run, the more resources it'll require. depending on the plugins you're using as well, this can cause resource usage to deplete pretty quick.

look at using mod_gearman if you have a large setup, or perhaps segregate our your instances based on location, and bring them together with the new Nagios fusion 4 once it comes out.

@mayank__, it's written for XI, but you can certainly take the concepts of https://assets.nagios.com/downloads/nag ... ios-XI.pdf and apply them to Core.