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Guidelines for number of files and folders

Are there any guidelines for the number of folders and the number of files possible on a Windows 2000 server? We have 1.000.000+ small files distributed over 1.000+ folders on one system and the system is very slow. Each of these objects is individually secured with typically around 50 users defined on the object.
I would imagine that +1 million objects in a 1,000 folders might present a problem, although I have not come across any specific performance recommendations. Theoretically, the maximum files per volume for NTFS 4 and 5 is 4,294,967,295 objects. It's hard to tell what other issues may be affecting the performance of the server. I'm assuming the server is configured to use RAID 5 with fast hard drives. You may want to use Performance Monitoring to see where the bottlenecks are (memory vs. disk I/O vs. network) and consider performing regular defragmentation.

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