You either have to reduce the reservation of the VM or reduce the number of vCPUs for the VM if you insist on a full reservation / need it for Latency Sensitivity = High.
The calculation for the ESXi system and vim reservations depend on the host size and other factors, to check how much you have available to reserve, you can check the capacity of the user pool (where all the VMs go) via:
vsish -e get /sched/groups/4/stats/capacity
Note that ESXi _reserves_ resources that it ultimately might not _utilize_, still, those reservations are in place to enable ESXi to run even under severe contention and it isn't supported to change the defaults. If you are using a host without vCenter and just running the application for testing purposes, you could probably get away with reducing the hostd reservation as that is set based on an approximation of the maximum number of VMs that run on the host at a certain level of churn. Note that it is probably unwise to reduce the default reservations if you expect your tight fitting VM to do any significant amount of IO.
