What Is Colocation?

Posted on March 1, 2021 Knowledgebase

At the end of 2020, about 67% of enterprise infrastructure will be cloud-based. As many businesses grow, they are opting to use the cloud because of the security and dedication benefits it provides. If your company is growing at high-rates, in-house data storage may not be working anymore.

With colocation data centers, you are sure to have all of the space you need to grow. But, what exactly is colocation? Read on to find out.

What Is Colocation?

Colocation involves housing privately-owned servers and other equipment into a third-party data center. Instead of networking equipment inhabiting a company’s in-house room, space is rented out. A colocation data center, or a third-party data center, acts as a place where servers can co-locate.

This means your data center may also be another company’s data center. You own the hardware equipment and the data center staff houses it for you. In some cases, the staff may also maintain the hardware.

When you opt to store your equipment in a colocation data center, you don’t have to choose just one. A company can have its servers located in multiple data centers. This is ideal for businesses that have large geographic footprints and want to keep their computer systems near every office they own.

Building your own data center may not be within the budget, even if you are growing at a fast pace. By understanding the key factors of a colocation data center, you may come to realize it is the best option for your business.

Colocation Data Center Key Factors

The biggest thing to understand about a colocation facility is that it is shared. This does not mean you are only sharing storage space with other companies. You are also sharing the cost of cooling, power, communication, and more.

However, every location provider will do things on their own terms. Features may vary from one colocation host to another, but the general factors often remain the same.

This type of data center facility is a cost-effective option. All colocation providers will use their own pricing model. For example, some tenants may get billed based on the space they consume while others bill by the square foot of the floor space.

A pricing model may also consider other factors that influence the total cost. These features include power consumption, geographical location, bandwidth usage, technical support incidents, power distribution unit, and the support contract.

The companies that benefit the most from colocation are those who need full control over the equipment they own. The equipment in a colocation center can be maintained the same way it would be if the servers were installed in-house.

Another key factor of colocation centers is space. If your in-house center is no longer big enough for all of your servers, you can augment the current center by moving your equipment to a colocation center. A normal in-house server room won’t have high levels of bandwidth, but a colocation center does.

Benefits of Colocation Data Centers

Along with affordability, there are many benefits of storing your hardware equipment at a colocation data center facility. Today, the popularity of colocation centers has forced providers to offer more than ever before. Many have opted to expand their portfolio to provide services that back the business initiatives of the client.

The most significant of the benefits are as follows:

Less Technical Staff

You don’t have to worry about technical processes that require you to hire a large IT staff. A colocation center is designed to replace components like managing power, running cables, installing equipment, and more. Whatever IT tasks you need to be handled, a colocation center can get it done.

Better Reliability and Security

Colocation hosting leads to greater reliability and security. Because these centers are built with high specifications, you don’t have to worry about power outages or other unforeseen circumstances becoming an issue.

These facilities are built with many backups in place through backup power generators, multiple network connections, and more. Along with reliability, there is a high level of security.

In colocation data centers, there are better measures set in stone for securing data. This includes private suites, CCTV monitoring, mantraps, suppression systems, and even fire detection.

A colocation provider may fence off areas of the data center to isolate hardware from one tenant to another. The fencing locking gates allow access only to the company that owns the hardware. Before entering the facility, a person must pass through security checkpoints for maximum safety.

If a data center uses the process of remote hands, they will not allow tenants to have physical access to their own hardware. Instead, installation and maintenance are done by the data center staff.


As your business grows, you may need to add new equipment and servers. This is no issue when you opt to store in a colocation facility. Having all of your equipment in an in-house room makes it more difficult for your company to expand.

You can also choose the location of the data center so that it is close to your users. As stated before, you can place your equipment in multiple facilities if necessary. This leads to a lot of room for business growth.

Predictable Costs

Any money you spend on a colocation data center will be predictable because you typically sign contracts. Depending on the facility, these contracts can be one year or more. This means you can know ahead of time how much money you should allocate towards data center needs.

Hybrid Cloud Connection

If you choose, you can connect the clouds you want to the colocation facility you are using. There are many cloud interconnection solutions that companies use to control their data and ensure everything is working properly.

Colocation vs. Public Cloud

The way data is managed and stored is the main difference between colocation vs. the public cloud. With colocation, you have physical assets while you have virtual ones with a public cloud.

Similar to colocation, cloud-based infrastructure is more cost-effective because it also works as a shared facility. This is the only connection you can find between the two services.

With cloud services, a cloud provider will manage the storage, network elements, and servers. Your own staff is not responsible for setting up these factors which mean you save money. The provider’s staff is included in the cost to store with cloud services.

Although some colocation services have staff on board to manage the equipment, most require a company to set up the servers on their own. This includes setting up network elements and storage. Although still an affordable option, this move requires additional costs.

One major benefit of cloud services is that there is a lot of flexibility to scale data up or down depending on the needs of the business. A provider can control the environment, address necessary changes, and manage infrastructure resources without being physically present.

Cloud providers will manage data for a business, but there is a downside when data expands. As your company grows, you are expected to pay additional costs like storage. Because of this, some opt for a colocation data center instead.

When you use colocation data center services, you are renting the space for the assets you have. With cloud services, you are renting the asset itself which can be limited depending on the subscription you choose.

Data Center vs. Server Rack

Another option for businesses is a colocation server rack. Contrary to popular belief, the two are not interchangeable. A colocation data center is rented out in its entirety while a colocation rack is just a rack space rented out to multiple companies inside a data center.

You may hear the term “wholesale colocation” to describe renting out a data center, and “retail colocation” to describe renting out a server rack. A lot of companies choose to start with a server rack because it provides the space they need at an affordable price.

A retail colocation data center allows you to rent out an entire rack so you don’t have to share it with another company. For added security, these racks may get locked up.

Your Colocation Storage Needs

No matter your storage needs, colocation is probably your best bet. If your company is expected to reach new heights, you need to work with facility services that are flexible enough to adapt with you. By using this guide, you can decide which colocation services fit the needs of your company.

Need IT support? Schedule a consultation with us today to discuss your IT service needs and storage options.

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