March 6, 2024

What is Co-Location Data Center? Benefits and Types Explained

Ever wondered how businesses manage their ever-growing IT infrastructure without breaking the bank or compromising on security? Enter co location data center, a game-changer in the world of IT management. In this blog post, we’ll dive into the world of co location data centers, exploring their types, benefits, and key components. We’ll also share some tips on how to choose the right co location data center provider for your business.

Be prepared to discover how colocation data centers can save you money, enhance security, and provide a scalable IT infrastructure solution that meets your business’s needs. Ready? Let’s begin!

Short Summary

  • Colocation data centers provide secure, reliable & cost-effective environments for businesses to rent space for their IT infrastructure.
  • Different types of colocation offer unique advantages such as scalability, enhanced security & cost savings.
  • Managed services are available to help businesses maximize performance in a colocation data center while the market is projected to grow rapidly due to emerging technologies and innovations.

Understanding Colocation Data Centers

Co location Data Center diagram
Colocation data center. Source: NetworkCoverage

Imagine a shared facility where businesses can rent space for their IT infrastructure, gaining access to a secure and reliable environment alongside other companies. That’s precisely what a colocation data center is. By renting space, businesses can enjoy cost savings, flexibility, and enhanced security without the hassle of building and maintaining their own data center.

Colocation data centers have become increasingly popular, catering to a wide variety of businesses, from cloud service providers to enterprises seeking scalable solutions with a reliable cloud service provider at a colocation provider’s data center.

Definition of Colocation

So what exactly is colocation? At its core, colocation is a service that provides businesses with data center space, power, cooling, and connectivity as an alternative to building their own data center. This means that servers and other equipment from different companies are housed in a single data center, managed by a colocation provider’s data center team.

Why would a business choose colocation? The answer lies in the numerous benefits it offers. Colocation data centers bring IT infrastructure closer to their physical offices, ensuring better performance and lower latency. This is especially important for international companies that require their computer systems to be geographically close to their operations.

Key Components of Colocation Data Centers

A colocation data center’s main components include infrastructure, power, cooling, and network connectivity. These elements are vital for businesses and cloud service providers to maintain their IT infrastructure. When it comes to power, colocation data centers have got your back. They offer plenty of backup power in case of a blackout, using generators, battery backup systems, PDUs, UPSs, switchgear, and transformers.

In addition to reliable power, colocation data centers provide cooling systems that ensure optimal operating temperatures for your equipment. They also offer enhanced network connectivity through multiple network carriers, ensuring that mission-critical applications keep running without interruption.

With all these components combined, colocation data centers create a secure and reliable environment for businesses to maintain their IT infrastructure.

Types of Colocation Data Centers

Types of Colocation Data Centers
Types of Colocation Data Centers. Source: Briskworldwide

Colocation data centers come in various flavors to cater to the diverse needs of businesses. Retail colocation, wholesale colocation and hybrid cloud-based colocation are the three main types of colocation. Each one comes with its own set of advantages and features. Each type offers its own set of advantages, catering to different business sizes and requirements.

In the following sections, we’ll explore each type in detail and help you understand which one might be the best fit for your business.

Retail Colocation

Retail colocation is all about renting a small amount of space in a data center, typically a rack, a spot in a rack, or a dedicated room. This type of colocation service is ideal for businesses that require limited space and customization. Customers of retail colocation data centers typically require less than 1 megawatt (MW) of power. Their space requirement usually ranges from 500 to 10,000 square feet.

The main benefits of retail colocation include cost savings, scalability, and increased security. By renting space in a retail colocation data center, businesses can enjoy the advantages of a professional data center without having to invest in building their own facility. This type of colocation is a perfect solution for small to medium-sized businesses looking for a cost-effective and secure way to manage their IT infrastructure.

Wholesale Colocation

For businesses with larger IT needs, wholesale colocation is the way to go. This type of data center service involves renting a large chunk of space and power from a third-party provider. Wholesale colocation offers data center space at a lower rate compared to retail colocation, making it more suitable for enterprises with higher power and space requirements.

By choosing wholesale colocation, businesses can enjoy larger spaces at a more affordable price, allowing them to accommodate their growing IT infrastructure needs. This type of colocation is ideal for large enterprises that require extensive customization and flexibility to meet their IT demands.

Hybrid Cloud-based Colocation

Hybrid cloud-based colocation combines the best of both worlds by allowing companies to use both public and private cloud environments while hosting their own servers and equipment in a data center. This setup enables businesses to share applications and data between data centers using a network, providing a flexible mix of cloud computing services.

The benefits of hybrid cloud-based colocation include cost savings, scalability, customization, and heightened security. By leveraging this type of colocation service, businesses can save on data center space while enjoying the freedom to scale their IT infrastructure up or down as needed. Additionally, hybrid cloud-based colocation adds an extra layer of security, as the data is stored in multiple locations, further safeguarding businesses from potential threats.

Advantages of Using Colocation Data Centers

In-House Data Center vs Colocation
Source: lightwavenetworks

Now that we’ve explored the different types of colocation data centers, let’s dive deeper into their advantages. Some of the key benefits of using colocation data centers include cost savings, scalability, and enhanced security.

In the following sections, we’ll discuss these advantages in more detail, showcasing how colocation data centers can help businesses optimize their IT infrastructure management.

Cost Savings

One of the most significant advantages of colocation data centers is the cost savings they offer. By sharing infrastructure and resources with other businesses in the same facility, companies can reduce both capital and operational costs. Research has shown that colocation data centers can be up to 64% more economical than constructing a Tier 2 data center in-house.

How does colocation save businesses money? By providing better cooling and air filtering systems than any office, colocation data centers help reduce energy consumption and operational expenses. Additionally, by consolidating data centers, businesses can save between 10 and 20 percent of their data center budget.


Another significant advantage of colocation data centers is their scalability. As businesses grow, their IT infrastructure needs to expand accordingly. Colocation data centers provide an ideal solution for this, allowing businesses to quickly adjust their resources to meet their customers’ precise requirements.

For example, if a business requires more servers or additional bandwidth, colocation data centers can accommodate these needs without incurring extra costs. This flexibility allows businesses to scale their IT infrastructure up or down as needed, ensuring they always have the resources they need to meet their customers’ demands.

Enhanced Security

A picture of a colocation data center with a service provider and customer

Security is a top priority for businesses when it comes to managing their IT infrastructure. Colocation data centers offer improved physical and network security thanks to their specialized infrastructure and security protocols. Physical security measures in colocation data centers include multiple layers of protocols, such as CCTV surveillance, access control systems, and on-site security guards.

Additionally, colocation data centers employ multiple layers of digital security protocols to protect clients’ equipment from theft and cyberattacks, including firewalls, encryption, and intrusion detection systems. By leveraging the enhanced security measures provided by colocation facilities, businesses can ensure the safety and reliability of their IT infrastructure.

Selecting the Right Colocation Provider

With so many benefits offered by colocation data centers, it’s crucial to select the right provider for your business. Choosing a suitable colocation provider can make all the difference in ensuring your IT infrastructure is secure, cost-effective, and scalable.

In the following sections, we’ll dive into the factors to consider when selecting a colocation provider and how to evaluate service providers to make the best choice for your business.

Factors to Consider

9 considerations for a colocation data center selection checklist
9 considerations for a colocation data center selection checklist. Source: Techtarget

When choosing a colocation provider, there are several factors to consider. Firstly, it’s essential to look at their uptime record, the quality of their infrastructure, and the accessibility of their support staff. These factors will give you an indication of the provider’s reliability and ability to maintain your IT infrastructure effectively.

In addition to reliability, it’s crucial to consider the scalability of a colocation provider. This includes their ability to accommodate more servers, provide additional bandwidth, and offer upgrades as needed. Network connectivity is another critical factor to consider, including the provider’s access to multiple carriers, the quality of their network infrastructure, and the availability of redundant connections.

Finally, location, flexibility, expansion capability, deployment efficiency, financial stability, and the provider’s track record and future prospects should all be considered when selecting a colocation provider.

Evaluating Service Providers

To evaluate colocation service providers effectively, it’s essential to consider their reputation, customer reviews, and the services they offer. Look for customer feedback and testimonials to gauge the provider’s customer service and track record. This will give you an indication of the level of support you can expect from the provider.

Additionally, take into account the services offered by the provider, such as managed services, cloud services, and disaster recovery services. These services can play a crucial role in ensuring your IT infrastructure is secure, efficient, and scalable. By evaluating colocation service providers based on these factors, you can make an informed decision and choose the right provider for your business.

Four Tiers of Colocation Data Centers
Four Tiers of Colocation Data Centers. Source: BMC Software

The Role of Managed Services in Colocation Data Centers

Managed services play a significant role in colocation data centers, providing businesses with additional support and expertise to manage and maintain their IT infrastructure.

In the following sections, we’ll explore the types of managed services offered by colocation providers and discuss the benefits these services can bring to your business.

Types of Managed Services

Colocation providers offer a range of managed services to help businesses optimize their IT infrastructure management. These services can include application management, service maintenance, backups and restorations, system upgrades, disaster planning, hardware and network management, software support, security audits, and firewall configurations, among others.

In addition to these services, colocation providers also offer network monitoring, systems management, and engineering support services. These services enable businesses to proactively monitor and manage their IT infrastructure, ensuring optimal performance and minimizing downtime.

Benefits of Managed Services

A Broad Array of Managed Data Centre Options
A Broad Array of Managed Data Centre Options. Source: Supraits

Managed services in colocation data centers offer numerous benefits to businesses, including improved efficiency, reduced downtime, and expert support. By leveraging managed services, businesses can focus on their core operations while leaving the day-to-day management of their IT infrastructure to experienced professionals.

In addition to these benefits, managed services can also help businesses save money, enhance security, and improve the overall performance of their data center. By providing 24/7 IT support, remote hands assistance, and proactive monitoring, managed services can ensure that your IT infrastructure is always running smoothly and efficiently.

Colocation Data Center Trends and Future Outlook

As businesses continue to recognize the benefits of colocation data centers, the market for these services is expected to grow in the coming years. In this section, we’ll explore some of the trends and future outlook for colocation data centers, including market growth, emerging technologies, and innovations shaping the industry.

The colocation data center market is expected to grow significantly in the coming years. This growth is due to this growth.

Market Growth and Demand

Source: PR News Wire

The global colocation data center market size was estimated to be around USD 50.4 billion in 2021 and is expected to grow at a CAGR of 6.5% from 2021 to 2027. This growth can be attributed to the increasing demand for cloud services, the need for scalable infrastructure, and the growing demand for data centers in emerging markets.

Businesses are continuously seeking ways to cut costs, enhance scalability, and improve security, which has led to a rising demand for colocation data centers. As more companies move to the cloud, it’s expected that the demand for colocation services will continue to grow in the future.

Emerging Technologies and Innovations

Colocation data centers are embracing emerging technologies and innovations to stay competitive and meet the growing needs of their customers. Some of these technologies include artificial intelligence (AI), machine learning, the Internet of Things (IoT), and edge computing. By incorporating these technologies, colocation data centers can improve efficiency, reduce costs, and provide faster, more reliable services.

The future of colocation data centers looks bright, with the market expected to keep growing in the years ahead. As businesses continue to move to the cloud, colocation providers will need to invest in new technologies and services to stay competitive. Sustainability and energy efficiency will also remain major priorities for colocation providers, ensuring that the industry continues to evolve and adapt to the changing needs of businesses.


In conclusion, colocation data centers offer a wide range of benefits for businesses of all sizes, providing cost-effective, scalable, and secure solutions for managing IT infrastructure. By understanding the different types of colocation data centers, evaluating service providers, and leveraging managed services, businesses can make informed decisions about their IT infrastructure management and choose the best colocation provider for their needs.

As the demand for colocation data centers continues to grow and new technologies emerge, the industry will continue to evolve, offering businesses more opportunities to optimize their IT infrastructure and stay competitive in the digital age. Are you ready to make the switch to colocation data centers and reap the benefits they offer?

Frequently Asked Questions

What is colocation in a data center?

Colocation in a data center is a service that provides space to host businesses’ computing hardware and servers, along with the required power, cooling and security.

It is a cost-effective solution for businesses that need to store and manage their data in a secure environment. It also offers the flexibility to scale up or down as needed, allowing businesses to adjust their IT infrastructure to meet changing needs.

What is the difference between data center and co location?

Data centers are facilities designed to efficiently store, power, cool and connect IT infrastructure, while colocation is a service in which IT hardware like servers are hosted outside of your premises in the data center.

Colocation offers a range of benefits, such as improved scalability, cost savings, and increased security. It also allows businesses to access the latest technology and benefit from the expertise of the data center provider.

Organizations of all sizes can benefit from colocation, as it allows for better collaboration.

What is the difference between colocation and cloud data center?

Colocation and cloud data centers differ in that the latter manages and stores data virtually, while colocation allows businesses to own their own servers within the facility.

This difference is important to consider when deciding which type of data center is best for a business. Colocation offers more control and customization, while cloud data centers are easier to scale.

What is co location example?

Co-location is when services are located in the same physical space, like an office, building, or campus, and can refer to them being either completely integrated or not.

What is the difference between retail and wholesale colocation?

Retail colocation is great for businesses with limited space needs, while wholesale colocation is more suitable for enterprises needing larger spaces and higher power requirements at a lower cost.

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