System and method of dynamic system resource allocation for primary storage systems with virtualized embedded data protection

Embodiments provide for a primary storage array having multiple storage tiers. The multiple storage tiers include one or more performance tiers and at least one deduplicated storage tier storing deduplicated data. One embodiment provides for a data storage system including the storage array and an I/O engine to manage I/O requests for the storage array. The data storage system additionally includes a virtual execution environment to execute a virtual backup engine, the virtual backup engine to generate backup data for the one or more storage tiers of primary storage and deduplicate the backup data and a resource manager to manage a resource allocation to the virtual backup engine based on a hint received from the virtual backup engine, the hint associated with a backup operation that has a characterization selected from a set including computationally intensive and I/O intensive.