I have seen it in use on Dell servers that I have worked on. We configure our IBMs with RAID10 mailnly because some software manufacturers claim 10 is fastest. I have not seen any perfomance differences between RAID 5 and 10 most likely because we don't really tax our pc servers to much.
RAID 10 is the fastest - here's why: RAID 5 must calculate parity info for each write to the drives. There is some additional overhead to do this (which is why RAID 0 is faster than RAID 5). RAID 10 is 2 RAID 0 Arrays that are mirrored. Back to the original question. RAID 5E uses a portion of each HDD for a "distributed Hot-Spare". It provides slightly better performance than RAID 5, since it uses an additional HDD (more heads = better performance), and you don't have a HDD just idling in the box.
There is a long discussion on this topic in the IBM Redbook on performance tuning netfinity servers. The authors insist that the parity calculation issue you mention is a bunch of hogwash, as the cpu on the raid controller is specifically tuned for this function. They strongly recommend raid 5 over raid 10 with very few exceptions. Their reasoning is that with raid 10, you will not actually get better read performance than with a raid 5 array of the same number of disks. This is due to the number of heads available to seek data. Raid 10 will hit you on the write as it will have to send two writes for every write request - much slower than a parity calculation. Raid 10 is better in case of disk failure though.
Biggest problem with raid 5E, if you lose a drive you have to wait for the system to compress the data and then uncompress it before a rebuild will start. So depending on the size of your drives you could be waiting anywhere from several hours to a day before a rebuild even starts.
You also dont get anymore drive "space" then with raid 5 it is still N-1.
How about Raid 5EE, what is it and what are the pros and cons. I just purchased X345 and ServerRaid-6i Controller Option. I would like to know the difference between Raid 5 and 5EE.
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