Should I be enabling this feature on a file server?
What type of performance hit is involved with this?
I ask as its not something I can easily turn off once on.
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SIS in Storage Server 2008 is only file based, not byte or block based. It's a rather emaciated SIS feature that only gives you gains if you have an enormous amount of files, and even then only if there isn't disciplined file storing and sharing habits. For example, if people scatter the same file over and over all over the server. I can see it being a benefit for a media server more than an office file server. Byte and block level deduplication is preferred, but Windows Storage Server does not support that.
The performance hit associated is entirely dependent upon your environment. It's the proverbial "how long is a piece of string" question. There is no good answer to it. Use
perfmon to see what the performance impacts are before and after SIS is enabled. If it's too intense, you can simply disable it. SIS is disabled on a volume rather easily.