Hospitals today face mounting pressures to deliver uninterrupted care, handle growing volumes of patient data, and meet stringent regulatory requirements. Traditional on-premises data centers often struggle with escalating capital expenses, complex compliance mandates, and limited scalability. In response, an increasing number of healthcare organizations are adopting a colocation data center model to offload infrastructure management, enhance security, and optimize costs.
By leasing space in third-party facilities, hospitals can tap into enterprise-grade power, cooling, and network connectivity without the burden of constructing and maintaining their own data centers. Compared to an in-house approach, this shift yields predictable operational expenses, robust physical and cyber protections, and the flexibility to scale resources in line with clinical needs. From streamlining electronic health record (EHR) systems to supporting telemedicine platforms, colocation enables IT leaders to focus on strategic initiatives rather than routine maintenance.
That’s why colocation has emerged as a strategic option for healthcare IT decision-makers. The following sections examine the challenges of on-prem data centers, outline the advantages of colocation adoption, and offer guidance on selecting the right partner.
On-Prem Data Center Challenges
Capital and Operational Costs
Building a private data center demands significant upfront investment in real estate, construction, and core infrastructure components such as power distribution and cooling units. Ongoing expenses—staffing, utilities, maintenance, and hardware refreshes—add further strain on hospital budgets. According to the Uptime Institute, colocation services can be 19% to 64% more cost-effective than a Tier 2 in-house facility over five years (365 Data Centers).
Compliance and Security Demands
Healthcare organizations must comply with HIPAA, PCI DSS, and other regulations that mandate rigorous safeguards for patient data. Maintaining physical security—access controls, surveillance, containment areas—and cybersecurity protocols such as encryption and intrusion detection requires specialized expertise and continuous auditing.
Limited Scalability and Resilience
On-premises facilities can face capacity constraints, delaying expansion of storage or compute resources when patient volumes surge or new digital services roll out. Achieving redundancy for power, cooling, and network connectivity often requires duplicate systems and extra floor space, driving costs higher and complicating resilience planning.
Benefits of Colocation Adoption
Cost Optimization
Shifting from capital-intensive build-outs to predictable operational expenses enables hospitals to allocate budget to clinical priorities. Colocation providers spread infrastructure costs across multiple tenants, delivering volume discounts on power, cooling, and bandwidth. This model supports flexible growth without large upfront commitments.
Shifting CapEx to OpEx
- Eliminates building costs and major equipment purchases
- Converts unpredictable maintenance expenses into fixed monthly fees
Volume Discounts and Shared Resources
- Access to carrier-grade bandwidth at lower rates
- Reduced per-unit power and cooling costs through multi-tenant efficiency
Enhanced Security Posture
Colocation facilities typically deploy a multilayered security framework addressing both physical and digital threats.
Physical Protections
- Perimeter barriers and secure access points
- Biometric authentication and key-card controls
- Surveillance cameras and trained security personnel
- Secure server racks and environmental controls
Cybersecurity Protocols
- Network firewalls, intrusion prevention and detection systems
- Encryption in transit and at rest
- Multi-factor authentication and role-based access controls
- Endpoint protection and permissions management tools
(DataBank)
Scalability and Redundancy
Hospitals can adjust rack space and power density as clinical workloads change, ensuring capacity without lengthy procurement cycles. Colocation sites maintain redundant infrastructure to minimize downtime:
Power and Cooling Systems
- Backup generators and uninterruptible power supply (UPS) units
- Precision cooling and environmental monitoring
Network Redundancy
- Multiple carrier points of presence for failover
- Diverse fiber paths to reduce connectivity disruptions
Improved Connectivity and Performance
Proximity to major network providers in colocation facilities reduces latency for real-time applications such as telemedicine and imaging exchanges. Dedicated cross-connects and private peering arrangements support high-throughput data transfers between hospitals, partner labs, and cloud platforms.
Key Selection Criteria
Compliance Standards and Certifications
Organizations may consider facilities certified under SOC 2, HIPAA, PCI DSS, and ISO 27001. These audits validate adherence to best practices in data security and operational controls.
Geographic Location and Connectivity
Choosing a location near patient populations or major network hubs improves application performance and supports disaster recovery planning. Hospitals often evaluate regional risk factors—natural disasters, power grid stability—when assessing sites.
Service Level Agreements and Support
Robust SLAs should cover network uptime, power availability, and on-site technical support. In critical care environments, rapid response times for hardware replacement and remote hands services can make a significant difference in clinical operations.
Comparing Deployment Models
Colocation vs Cloud Hosting
While cloud services eliminate infrastructure management entirely, they may not meet data sovereignty or latency requirements for certain clinical workloads. Colocation offers physical control over hardware and predictable network performance, complementing cloud initiatives in a hybrid strategy. See colocation vs cloud for a detailed comparison.
Colocation vs On-Prem Infrastructure
Compared to a fully owned data center, colocation reduces financial risk and complexity. Hospitals retain control over server hardware, operating systems, and applications while offloading building maintenance, security, and utility management to the provider. For insights into cost structures, review colocation costs.
Conclusion
As healthcare delivery becomes increasingly digital, hospitals must balance performance, security, and cost. Adopting a colocation data center model empowers IT leaders to meet peak demands, comply with regulatory mandates, and scale infrastructure without heavy capital investments. By evaluating compliance credentials, geographic factors, and SLA commitments, organizations can select a partner that aligns with clinical objectives and growth trajectories.
Need Help With Hospital Colocation Challenges?
Finding the right colocation provider and service model can be complex. We help healthcare organizations identify optimal facilities, review pricing models, and ensure compliance with industry standards. Whether evaluating colocation providers or exploring managed colocation offerings, our team guides you through each step.
Connect with our experts to streamline your transition to a secure, scalable colocation solution.
