When to bet on colocation facilities vs cloud, private data centers

Lower prices and latency plus easy access to multiple cloud providers make colocation facilities an attractive option compared to building on-site data centers and even cloud data center services

CSO > cloud computing / backups / data center / server racks / data transfer
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Data-center workloads are moving but not only to the cloud. Increasingly, they are shifting to colocation facilities as an alternative to privately owned data centers.

What is colocation?

A colocation facility or colo is a data center in which a business can rent space for servers and other computing hardware that they purchase but that the colo provider manages.

The colo company provides the building, cooling, power, bandwidth and physical security. Space is leased by the rack, cabinet, cage or room. Many colos started out as managed services and continue  to offer those specialized services.

Some prominent providers include Equinix, Digital Reality Trust, CenturyLink, and NTT Communications, and there are several Chinese providers that only serve the China market. Unlike the data centers of cloud vendors like Amazon and Microsoft, these colo facilities are generally in large metropolitan areas.

“Colos have been around a long time, but their initial use case was Web servers,” said Rick Villars, vice president of data centers and cloud research at IDC. “What’s changed now is the ratio of what’s customer-facing is much greater than in 2000, [with the]  expansion of companies needing to have more assets that are network-facing.”

Advantages of colos: Cost, cloud interconnect

Homegrown data centers are often sized incorrectly, with either too much capacity or too little, said Jim Poole, vice president of business development at Equinix. “Customers come to us all the time and say, ‘Would you buy my data center? Because I only use 25 percent of it,’” he said.

Poole said the average capital expenditure for a stand-alone enterprise data center that is not a part of the corporate campus is $9 million. Companies are increasingly realizing that it makes sense to buy the racks of hardware but place it in someone else’s secure facility that handles the power and cooling. “It’s the same argument for doing cloud computing but at the physical-infrastructure level,” he said.

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