Hello,
there is absolutly no requirement during an Upgrade for having both applications on the same Hardware.
Chances are high that you will run in performance problems, as stated by Denis, during your Upgrade.
Please read the following Documents:
SAP BI 4.1 Upgrade Guide:
http://service.sap.com/~sapidb/012002523100016820172014E/sbo41sp5_bip_upgrade_en.pdf
Best Practices for running the UMT (The Tool you use for Upgrading):
http://service.sap.com/sap/support/notes/1904814
Regards
-Seb.