Is it good, bad, or indifferent to run SQL Server on your webserver?
I’m using Server 2008 and SQL Server 2005, but I don’t think that matters to this question.
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For small sites, it doesn’t make a bit of a difference. As the load grows, though, this scales really badly, and quicker than you think:
If you can afford it, it’s probably better to shell out a few bucks and get a second server, maybe using PostgreSQL. One IIS server and one PostgreSQL cost about as much as on IIS + SQL Server because of licensing costs…