A storage area network can include a storage virtualization entity—intelligent storage application resource (iSAR)—either as a separate device in the fabric, or as an integrated module in one or more switches within the fabric. All I/O operations can be re-directed to iSAR for processing. iSAR can segment virtual storage and physical storage into units, where each unit of the virtual storage is mapped to a single unit in physical storage. Data associated with incoming I/O operation can be compressed before being stored in physical storage. iSAR includes overflow reserve storage at the block, sub-page and page level to accommodate changes in compressed data size on subsequent I/O operations. These measures can improve I/O performance and reduce fragmentation. iSAR can also employ deduplication of incoming data stored on physical storage to improve storage efficiency.