What is the purpose of creating LUNs, and in what situation would I create only one LUN and not several?
A LUN, or logical unit number, is a logical arrangement of physical disks that appear to the operating system (and users) to be a single disk. Since the appearance is not physical, it's said to be logical, thus the name logical unit.
You can embed RAID or other disk management functions within a logical unit. For example, a LUN might handle RAID 1 functions, and automatically handle the mirroring of data between multiple physical disks, or automatically include a replication function that copies data to a remote site. Meanwhile, the LUN looks, for all practical purposes, like a standard single disk.
The purpose of creating a LUN is to simplify system management by hiding these functions from the system. In many cases, they also provide a means to ensure that these functions are set up as a routine part of designing a system. A simpler application of a LUN is to create a virtual disk that is larger than any single disk, simply by concatenating the physical disks. (Note that this arrangement will decrease availability because the failure of any disk in a concatenated LUN will cause the whole LUN to fail. If you concatenate and mirror physical disks in a style called RAID 1+0, you will achieve much better reliability and availability.)
As for how many you might need on a particular system, that's a very difficult question to answer. A smaller system might need no more than one or two, while a larger system that is shared by different groups might require more LUNs. More LUNs mean more work in administering a system, but they allow that system to be shared by more groups of users.
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