True, you could get a server and store all user files there, but then you would still need to backup the server, so that doesn't really answer the question. Backups are a bit easier if you have a server because you only need to worry about backing up one machine instead of the 5 machines you are dealing with now.
Personally, I am not a fan of tape backups. They are slow and not really very reliable. To be reliable at all, tape media must be stored in somewhat controlled conditions. Extreme hot and cold temperatures will cause the tapes to deteriorate rather rapidly. Even under the best circumstances, tapes should be replaced annually.
Today, there are many hard drive backup options. External hard drives can be connected directly to your network, or to a particular computer via USB or FireWire. Backup times, and more importantly restore times, are very fast and the media is much more reliable. You will still need some type of software to copy the data from each workstation to the backup device. The least expensive option is to use NTBackup to run a scheduled backup of each machine to the external drive.
If you are serious about backing up, then you will also want to make absolutely sure you have an offsite copy of your data. While you can rely on rotating a copy offsite manually, this isn't the best option. If you are backing up to hard drives and you want to use the manual option, you will need to get a device that allows swapping drives on a regular basis. There are many to choose from, but we usually use a single bay enclosure from Highly Reliable Systems at www.high-rely.com
I strongly recommend that you invest in some type of remote backup. You will still need an external hard drive to hold the local copies of the data from each workstation, but the remote backup software will also copy the data to a remote server. In the event that your equipment is stolen, you have a fire, flood or other disaster, your data is still secure at an offsite location.
Typically, a complete backup of the selected folders is done one time. After the initial backup, only the changes are backed up and transmitted. Data can be restored as of any of the incremental backups. All of this is scheduled during off hours so that your work day is not interrupted.
Good software will encrypt your data using a passphrase of your choosing. If you lose your passphrase, it will not be possible to retrieve your data. It is also not possible for anyone else to intercept your data.
Also make sure that you have a good idea of how much data you will be storing offsite and what that offsite storage will cost. There are many services that are competitively priced, so you should be able to make sure that your data is protected without spending a great deal of money.