I agree with both sides in this issue, and I'm not sure that the sides are really different.
There is nothing, anywhere, which says that a server has to be a dedicated machine.
I service a small law firm which uses one of their pcs as a data server (the netowrk is 3 pcs, a router, and a DSL modem.)
All documents live on a pc which acts as a server, and a as a workstation. All data is replicated sychronicly to another drive, daily & weekly backups are made to the other pc's hard drives in compressed/encrypted form and to USB port drives. Weekly backups are cut to DVD as are monthly and annual.
No one is permitted to store data except on the server, which, while admittedly not fool proof is a trainable restriction not enforced by the machines.
So they have a server--and they don't. But what they have works for them and reduces the probability of losing enough work to knock them out of business.
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