Is it advised to use SSRS in the database server itself? Will it hamper the performance of the server itself. (in SQL SERVER 2005) What are the merits and demrits of the same?

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When you run SSRS (or any other application for that matter) on the same server as the database engine, you need to be mindful that overall server resources are shared, especially memory and processor. Make sure the server is sized to accommodate both, and consider configuring SQL Server 'max server memory' so that the memory used by SSRS, the OS, and SQL Server doesn't exceed physical memory.

Running SSRS (and/or SSAS) on the same box may be advantageous from a licensing cost perspective since you will need additional SQL Server licenses to run on a separate physical server. However, it will only detract from the resources available to the database engine.

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