Is there any reason why it would be bad to run web services and your database on the same server?

We are considering running .NET 2.0 on IIS 6 and SQL Server 2005 on one system instead of managing two servers (a web server and a database server).

Disk thrashing could be a problem if you have a heavy userload. It’s usually preferable to have SQL Server on it’s own machine, since it is constantly accessing the disk.

It also gives you a single point of failure. If your server goes down, both your database and your web service are inaccessible.