Yes, water based sprinklers are not the best choice for inside the server-room proper. But that doesn't mean you can't have other automated fire suppression systems. In the days of yore Halon systems were mostly used for this particular application. Halon has some issues though and has mostly been banned / replaced with cleaner alternatives. These days you see things like FM-200 used for fire suppression in these kinds of applications.

All of that said, speaking as a former firefighter, I'd take a water based sprinkler over nothing, even in that setting. Why? Because at the end of the day, human life is more valuable than a data-center full of computers and data, and if stopping a fire early saves even one life, but ruins a room full of computers, that's an acceptable tradeoff. And of course sprinklers are absolutely invaluable outside of the server-room. I don't have all the numbers memorized now, but to summarize in a succinct form, "sprinklers are wildly effective at preventing incipient stage fires from growing large, and at saving lives and property."

And as @WalterBright continues to say below - you are storing backups off-site, right? And you have a DR data-center on another continent that can be spun up in a matter of minutes by toggling a load-balancer or DNS setting somewhere, right?