In a client/server environment, a method and means for reducing the storage requirement in the backup subsystem and further reducing the load on the transmission bandwidth where base files are maintained on the server in a segmented compressed format. When a file is modified on the client, the file is transmitted to the server and compared with the segmented compressed base version of the file utilizing a differencing function but without decompressing the entire base file. A delta file which is the difference between the compressed base file and the modified version of the file is created and stored on a storage medium which is part of the backup subsystem. Alternatively, a copy of frequently accessed base files are maintained on the client in a compressed format. Whenever the client detects that a frequently accessed file has been modified, the modified version of the file is differenced against the base version of that file without decompressing the entire base file and a delta file is generated. The delta file is then transmitted to the server to be stored at the server for storage medium to be utilized either immediately or at a later time to update the base version of the modified file on the server.