The storage servers I've seen generally use 2.5" drives instead of 3.5" drives. In my experience the larger drives have better capacity, speed, and durability. Why are the smaller ones favored in servers?
Note this doesn't apply to C: drives.
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You can fit many more in the same space, due to their smaller size, lower heat generation and lower power consumption. They cost more and store less per disk, but they're simply more practical and I guess the storage in the same amount of space is pretty much equal - but with more disks = more redundancy and more parallel performance.
It's not that many years ago storage (including server system drives by the way) started moving into 2,5" disks though. By the way, there's at least 10krpm 2,5" disks available so individual disk performance can be pretty good despite the lower outer platter speeds.
Even the consumer-oriented high performance Velociraptor is using this form factor so something is definitely up ;)
By increasing the number of spindles in the SAN you can increase the performance.
I don't know where the math is out there, but each disk has a certain number of IOPS it can perform. By adding more disks to the storage array you get a cumulative effect increasing the SAN's total IOPS.
If you can cram more drives into a single 2-3U device, you can start to see the IOPS per Rack Unit increase.
I have been told that you can beat (in performance) a Fiber Channel Disk Array with SATA drives if the spindle count is way in favor of the SATA drives.
XioTech uses a disk virtualization method that makes sure your LUNS are spread across every spindle in the array so they all work for you. Some SANS may use just a few disks in the array for a specific LUN and you will not see the performance gain possible by using all the disks at once.
(I spent many hours with XioTech specing out a SAN for a large Hospital and these are some of the concepts I picked up talking with their engineers.)
They're probably using SAS drives, which I've never seen in any form-factor other than 2.5"