Colocation, often shortened to colo, is renting space in a data center operated by someone else to house servers, storage and network equipment that you own. The provider supplies the building, power, backup power, cooling, physical security and access to network carriers. You supply and manage the hardware and everything that runs on it. It gives you a purpose-built facility without the cost of building or running one.
At a glance
- You own the equipment; the provider owns and runs the facility.
- Space is sold by the rack unit, full rack, caged area or private suite, usually with a power allocation attached.
- Power, cross-connects and remote hands are typically the costs that grow over a contract term.
- Being in a carrier-dense facility can make network and cloud connections easier to get, though what is available depends on the building.
- Contracts often run for multiple years, so renewal terms and price escalators matter.
What problem it solves
Many companies start with servers in an office closet or server room. That works until it doesn’t. The room runs out of power or cooling, the building has no generator, a single internet provider serves the site, or an office move puts critical systems at risk. Building a proper data center to fix that is expensive and slow, and few mid-sized companies want to run one.
Colocation lets you move that equipment into a facility designed for it. A professionally run data center typically has redundant power feeds, uninterruptible power supplies and generators, engineered cooling, controlled physical access and multiple network carriers on site. The level of redundancy differs by facility, so check rather than assume. You keep full control of your hardware and software while the provider handles the building.
How it works
Space and power. You contract for space and a power allocation, measured in kilowatts or as a number of circuits. Power density matters: modern high-density servers, and especially GPU systems, can need far more power per rack than older facilities were designed for, so confirm the facility can support your equipment at the density you need.
Connectivity. Your equipment connects to the outside world through cross-connects, physical cables run by the data center to carriers, internet exchanges, cloud on-ramps or other customers in the building. Each cross-connect usually carries a one-time and a monthly fee. Some facilities are carrier-neutral, meaning many network providers are present and you can choose among them; others are tied to one provider. Many buyers use colocation as a hub for private connections to public cloud and to an internet exchange point.
Access and support. Your staff can visit with authorized badges and escorts as the facility requires. For physical tasks when nobody can travel, the provider’s remote hands staff will reboot, swap or check equipment, typically billed per task or hour.
Contracts. Terms are commonly one to five years. Power pricing may be fixed per circuit, committed per kilowatt or metered, and many contracts include annual escalators. You can explore options on our Colocation solutions page, and our blog on what drives colocation costs covers pricing in more depth.
When it matters for buyers
- When an on-site server room is at its limits. Power, cooling, space or resilience problems in an office are a common trigger.
- When you move or close offices. Moving servers into colocation removes them from the critical path of an office move.
- When you are reducing cloud spend. Steady workloads moved off public cloud often land in colocation or on bare metal.
- When you need better connectivity. A carrier-dense facility can give you more network choice and direct links to cloud providers and partners.
- At contract renewal. Power rates, escalators and cross-connect fees are negotiable, and your actual power use may differ from what you committed to years ago.
Questions to ask vendors
- How is power billed, what happens if we exceed our allocation, and what escalators apply?
- What maximum power density per rack can you support, and how is cooling delivered?
- What redundancy does the facility have for utility power, generators, UPS and cooling, and has it been independently certified?
- Which network carriers and cloud on-ramps are present in the building?
- What are the setup and monthly fees for each cross-connect?
- What does remote hands cost, what response time do you commit to, and is any time included?
- What is the uptime SLA for power and cooling, and how are credits calculated?
- What are the renewal terms, and how much notice do we need to give to change or exit?
How it differs from bare metal and public cloud
Colocation, bare metal and cloud differ in who owns the hardware and who operates it. With colocation you rent the facility and own the servers, so you buy, install, maintain and eventually replace them. With bare metal the provider owns a physical server and rents the whole machine to you, so hardware purchases and repairs are its problem. With public cloud you rent virtual capacity on shared hardware the provider owns and operates, and you can add or remove it on demand. Colocation gives the most control and the most work; public cloud gives the least of both.
Problems this helps with
- Our server room has run out of power, cooling or space
- An office building that can't keep our systems up during outages
- Data center contracts with power and cross-connect charges we didn't expect
- Needing a better place for hardware we already own
