1. A method in a networked storage system comprising: detecting, by a processing component of a first server device of the networked storage system, that utilization of memory resources allocated to cache data for workloads of the networked storage system is outside a target utilization, wherein the networked storage system includes at least one compute server coupled to a storage server and multiple workloads each associated with a compute server, based on at least one performance metric for access to the storage server for one or more workloads; determining, by a processing component of a second server device of the networked storage system, that changing a level of caching at a selected one of the compute servers will cause improvement in the utilization of memory resources in the networked storage system; and accessing a hypervisor of the selected compute server to modify the level of caching by dynamically adjusting resource allocation for a virtual cache appliance at the selected compute server.