According to a recent report, there are 523 companies in the U.S. colocation facilities industry, with the Data Center Market doubling in size in the last four years. This growth is driven by escalating data needs, improvements in networking and connectivity, and widespread digital transformation. At this stage in 2024 98% of organizations plan to adopt a hybrid model using colocation, private cloud and public cloud to manage their workloads.
This transition to a hybrid model allows businesses to adapt to rapidly changing technology whether it is cloud first or in house application builds. As the digital landscape continues to evolve, colocation data center facilities offer shared leasing options and serve various purposes such as providing flexibility in server management, acting as disaster recovery locations, and facilitating cost-effective data center expansions while also enabling IT staff to shift from handling infrastructure concerns to focusing on their core business.
What Are Colocation (Colo) Services?
Colocation, often referred to as “colo,” involves renting physical space within a data center to house servers and IT equipment. Data center colocation allows organizations to rent space for their servers and networking equipment while the provider manages essential services such as power, cooling, and security. This setup offers several advantages compared to in-house data centers, including flexibility, scalability, and cost-effectiveness, making it an attractive option for businesses looking to expand their IT infrastructure without the burdens of building and maintaining a private data center. The concept of colocation also implies that a business’s equipment may be spread across multiple sites. This distribution can benefit businesses by enhancing security, allowing for greater scalability and flexibility, and improving disaster recovery capabilities.
How do Colocation Data Center Facilities Work?
Businesses use colocation facilities to leverage the infrastructure, security, and services provided by a third-party data center. Colocation “providers” offer a flexible alternative to in-house data centers or cloud-based solutions, allowing businesses to rent data center space like cabinets, racks, or rooms to store their servers and networking equipment. These facilities provide reliable power, backup generators, and high-speed internet connectivity to ensure 24/7 uptime. Advanced cooling systems keep optimal temperature and humidity levels, preventing server overheating. Colocation services also include strong security features like biometric access, CCTV surveillance, and firewalls to protect data and equipment. With shared resources such as bandwidth and network redundancy, colocation facilities offer high performance and scalability. While the data center handles the infrastructure, businesses are responsible for managing and maintaining their IT hardware. This setup ensures cost-effective, secure, and flexible IT operations.
Difference Between a Data Center and Colocation
A data center is a facility that houses IT infrastructure, including servers, storage, and networking equipment, usually owned and managed by a single entity. In contrast, colocation refers to renting space within a third-party data center where businesses place their own hardware, such as servers. Unlike an on-premises data center, where the business is responsible for security, power, cooling, connectivity, and maintenance, colocation providers handle these aspects. This allows businesses to enjoy the benefits of a data center without the significant costs and responsibilities associated with maintaining their own facility.
Types of Colocation:
Providers offer a range of colocation solutions to fit different business needs. Here are six common types:
Cloud Colocation: Integrates traditional colocation with cloud services, allowing businesses to combine physical infrastructure with cloud computing.
Wholesale Colocation: Suited for businesses with extensive infrastructure requirements, offering large amounts of space and resources.
Rack Space Colocation: The simplest option where businesses rent individual racks or cabinets in a data center for their servers and equipment.
Private Suite Colocation: Provides a private, self-contained space within the data center, ideal for larger companies seeking privacy, security, and customization.
Cage Colocation: Offers a dedicated, secure area within the data center for a client’s IT infrastructure, providing enhanced security and exclusivity.
Edge Colocation: Specializes in low-latency applications by placing equipment closer to end-users, perfect for real-time data processing and edge computing.
These colocation types cater to various business needs, from small operations to large enterprises, offering scalability and high performance. Some organizations rely on multiple colocation solutions to support their business needs and customer demands.
Who Uses Colocation?
Colocation services are utilized by a diverse array of businesses and organizations across different verticals. Colocation allows organizations to operate their own servers and data center hardware within a shared facility, providing enhanced network connectivity and physical security without the costs of building a private data center. Below are a few types of the primary users of colocation:
- Small and Medium-Sized Businesses (SMBs): Colocation is a cost-effective solution for small and medium-sized businesses (SMBs) as it provides access to high-quality infrastructure and services without the high costs and complexities of building and maintaining an in-house data center.
- Large Enterprises: Large companies with substantial IT infrastructure needs often rely on colocation to enhance their operational efficiency and manage their extensive IT requirements.
- IT Service Providers: IT service providers, including managed service providers (MSPs), cloud service providers (CSPs), and hosting companies, frequently use colocation to support and deliver their services.
- Financial Institutions: For banks, financial institutions, and insurance companies, colocation offers secure and compliant IT infrastructure essential for handling sensitive customer information, managing transactions, and meeting regulatory standards.
- Healthcare Providers: Healthcare organizations, such as hospitals, clinics, and medical research facilities, use colocation to manage and protect large amounts of sensitive patient data efficiently.
Reliability and Performance
Uptime and Downtime
Colocation data centers prioritize reliability and performance to ensure maximum uptime and minimize downtime. These facilities are equipped with redundant power supply systems, advanced cooling systems, and robust network connectivity to guarantee the continuous operation of mission-critical applications. For businesses that rely heavily on their IT infrastructure, even a few minutes of downtime can lead to significant losses. By outsourcing to a colocation data center, businesses can leverage the expertise and resources of a dedicated team, ensuring their IT systems are always available and performing at optimal levels.
Speed and Connectivity
Colocation data centers offer high-speed connectivity options, enabling businesses to connect to multiple internet service providers (ISPs) and enjoy fast data transfer rates. This is particularly important for businesses that rely on cloud-based applications, big data analytics, or other high-bandwidth activities. With colocation, businesses can take advantage of direct connections to numerous ISPs, ensuring fast and reliable data transfer. Additionally, colocation facilities often have specialized systems and employees to create, monitor, and manage comprehensive support systems, ensuring that servers are operating at peak efficiency. This high-speed connectivity enhances overall performance and supports the growing data needs of modern businesses.
Security and Risk Management
Colocation data centers take physical security and risk management very seriously, providing a secure environment for businesses to house their IT equipment. These facilities implement strict security procedures and offer higher degrees of physical protection to guard against theft, unauthorized access, and other threats. Measures such as video surveillance, biometric access controls, private suites, and fire suppression systems ensure that businesses’ IT assets are safe and secure. Additionally, colocation providers often have specialized systems, employees, and resources to create, monitor, and manage comprehensive support systems, minimizing the risk of data breaches and ensuring that servers are operating at peak efficiency.
Six Key Benefits of Colocation:
- Physical Security: Colocation data centers offer advanced physical security measures to protect a business’s IT infrastructure. These facilities typically feature 24/7 surveillance, biometric access controls, and on-site security personnel to safeguard against unauthorized access. By leveraging these robust security protocols, businesses can ensure their data remains secure and protected from potential incidents.
- Connectivity and Latency: Colocation centers are strategically located to provide optimal connectivity and minimize latency. With direct access to high-speed networks and multiple internet service providers (ISPs), colocation facilities ensure fast and reliable data transmission. This enhances the performance of your applications and services, delivering a seamless experience to end-users.
- Reliability: Data centers designed for colocation are built with high redundancy and reliability in mind. They include redundant power sources, cooling systems, and network connections to ensure continuous uptime. This infrastructure reduces the risk of outages and ensures that your IT systems remain operational, even in the event of hardware failures or other disruptions.
- Skilled Staff: Colocation facilities employ highly skilled IT professionals who specialize in data center operations and maintenance. Their expertise ensures that your infrastructure is managed efficiently and that any technical issues are promptly addressed. This access to experienced staff reduces the burden on your internal team and allows you to focus on your core business functions.
- Disaster Recovery and Backups: Colocation providers typically offer comprehensive disaster recovery and backup solutions. These services include regular data backups, off-site storage, and recovery plans to protect your data from loss due to natural disasters, cyber-attacks, or hardware failures. By utilizing these solutions, businesses can ensure quick recovery and continuity of operations in the face of unexpected events.
- Network Security: Enhanced network security is a significant benefit of colocation. Data centers implement advanced security measures, to defend against cyber threats. By leveraging these security features, businesses can better protect their networks and sensitive information from potential attacks.
Colocation services offer a cost-effective solution for managing IT infrastructure by significantly cutting data center costs. By sharing data center resources, businesses can avoid the high expenditures associated with building or maintaining a private data center, making colocation a more flexible and economical option.
Top Three Considerations While Selecting a Data Center
- Location and Accessibility: The location of your data center plays a vital role in operational efficiency. Opt for a data center that offers easy access for your team, as well as any third-party vendors or service providers who may need to visit. Choosing a data center close to your business operations can significantly improve access and reduce response times, thereby enhancing overall operational efficiency.Security and Compliance: Data security is a top priority, especially when dealing with sensitive information. Assess the data center’s physical security features, such as surveillance cameras, access control systems, and on-site security staff. Additionally, check for industry compliance certifications like ISO 27001 (Information Security Management) and SOC 2 (Service Organization Control). These certifications demonstrate the data center’s adherence to stringent security standards and regulatory requirements.
- Security and Compliance: Data security is a top priority, especially when dealing with sensitive information. Assess the data center’s physical security features, such as surveillance cameras, access control systems, and on-site security staff. Additionally, check for industry compliance certifications like ISO 27001 (Information Security Management) and SOC 2 (Service Organization Control). These certifications demonstrate the data center’s adherence to stringent security standards and regulatory requirements.
- Scalability and Connectivity: Consider your business’s long-term needs and growth trajectory when selecting a data center. Evaluate its ability to accommodate future requirements, including additional rack space, increased power density, and enhanced network connectivity. Ensure the data center direct connects to the major public cloud providers. The ability to connect your own colo infrastructure to direct cloud connections is pivotal in today’s modern architecture builds.
How PSM Partners Can Optimize Your Colocation and Data Center Needs
Data storage is one of the most important aspects of your IT operations. Businesses must ensure that data is stored efficiently and that it is well protected. Managing a data center can be costly and complex, which is why using colocation data centers offers significant advantages. Colocation facilities provide cost-effectiveness, scalability, and reliability, along with comprehensive services that support IT infrastructure without the need for businesses to invest in and maintain their own data center. There are many layers to data storage as you have the option of on-premises storage within your local system, online cloud storage, or a combination of both. Our professionals focus on your business’s requirements to strengthen your technologies and execute your IT initiatives. After a thoughtful assessment of your current IT system and your overall business goals, our experts at PSM work to add value where it is needed. To learn more, contact us today.
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Taylor Friend
I'm a goal-oriented Strategic Alliance Manager who is enthusiastic about building and nurturing collaborative relationships that drive business success. My commitment lies in establishing, overseeing, and expanding partnerships that generate greater business opportunities and foster revenue growth for all stakeholders.