What are my options ? We can't afford to buy a beefy server just to do backups. We are uning a centos beige commodity box. Even then, the server seems to be I/O bound. What could I do anyway ? Buy a faster disk subsystem ? What kind of subsystem ?
Well, first off is that extra 4mb/s really going to make a difference to you?
Next, is it really the I/O causing the bottle next? Install the sysstat package and make sure its collecting data. Then tomorrow after the backups you can see if you really did spend a lot of time in iowait.
Finally, the cheapest option would be to add another sata disk, and do raid0 between the two disks for your holding space.
