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If you have a production oracle database (PRIM1) protected using Oracle Dataguard to a standby (STBY1) physical server in a different data centre, the standby server needs to be a similar specification to the primary server, so that in the event of a disaster it can become the primary.

This setup means that you have redundant hardware 'just in case'.

If you have another production database (PRIM2), could you install this on the same physical server as STBY1 of the first application and install the standby for this application (STBY2) on the primary server of the first application (PRIM1).

This setup would mean maximising use of the hardware and in the event of a failover, both primary servers might be running on the same machine so you might need additional memory and/or CPU available to provision in the event of a disaster but you would be using the hardware most of the time.

Any thoughts on the issues a setup like this would create ?

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Of course you can do this. I've seen many sites that do it - the hardware is sized to cope with peak load for both. Issues? If they're pure DB servers I can't think of anything off the top of my head –  FreshPhilOfSO Apr 14 '13 at 10:24
    
Thanks to both Jan and Phil for your answers - i searched around as it seems a logical thing to do, just couldnt find anything in the data guard documents that suggest this is viable and wanted to confirm. I also saw an Oracle slide which talked about using a standby for test purposes and using it in combination with flashback database to return it back to a state to apply redo logs to point of failure on the primary in the event of a disaster - any thoughts on that one use case ? –  Trevor North Apr 14 '13 at 18:19
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Yes, no issue at all. This is done over and over. For instance two servers taking each others database(s) in standby mode.

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