System and method of backup grouping with improved computational efficiency

A production host for hosting virtual machines includes a persistent storage and a production agent. The persistent storage stores a backup groupings queue and a backup process stack. The production agent obtains backup generation requests for the virtual machines; in response to obtaining the backup generation requests, generates the backup groupings queue based on the backup generation requests; identifies a maximum parallelism of the production host based on resources utilized by a portion of the virtual machines specified by the backup groupings queue; consolidates the backup groupings queue to generate the backup process stack; and generates backups for virtual machines specified by the backup process stack in parallel based on the maximum parallelism.