How Data Center Colocation Works


May 13, 2024

Domain & Hosting 5 min read

How Data Center Colocation Works?

In 2023, businesses worldwide spent $4.7 trillion on computers, printers, data centers, software, and communication services. By the end of 2024, this spending is predicted to jump even higher, reaching a whopping $5 trillion globally. Data center colocation can help cut these costs because it lets multiple businesses share the same space and resources, making it more affordable for everyone.

Here is a detailed overview of data center colocation services and how they function to manage the IT infrastructure of business organizations.

What Are Data Center Colocation Services?

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According to Gartner, by 2025, about 80% of enterprises will shut down their traditional data centers. This change is happening because it costs a lot to run and keep up traditional data centers on-site. As a result, businesses are turning to other options like colocation or managed hosting services to save money and get better support for their IT needs.

Data center colocation services are like renting a space to keep your important computer servers and networking equipment. Instead of keeping these servers in your own office or building, you can rent space in a specialized data center run by another company.

A data center consists of the following components:

  • Server racks to mount servers, storage devices, and networking equipment.
  • Power Distribution Units (PDUs) to distribute electric power to equipment within the data center.
  • Cooling systems to regulate temperature and humidity levels.
  • Fire suppression systems to detect and extinguish fires quickly.
  • Security systems like surveillance cameras, biometric access controls, and security personnel.
  • Backup power systems such as generators and uninterruptible power supplies (UPS).
  • Network equipment like switches, routers, and firewalls for managing data traffic.
  • Monitoring and management software to monitor and manage data center operations.

How Does Data Center Colocation Work?

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The Data Center Colocation Market was worth $69.3 billion in 2022 and is expected to grow by more than 11.5% each year from 2023 to 2032. With such a big industry, it's important to know how it works to get the best return on investment (ROI).

Here's a complete breakdown of how data center colocation typically works:

  1. Choosing a Provider and Space Rental: The colocation service process begins with assessing the specific needs and requirements of the customer's IT infrastructure. The organization then rents a designated amount of space within the data center facility, typically measured in terms of rack units (U) or cabinets. This space is used to install the servers and networking equipment.
  2. Installation of Equipment: This would include transporting equipment to colocation facilities and installing it into the rented space within the data center. Data centers provide security systems, power outlets, cooling systems, and much more to support all the IT equipment.
  3. Security and Monitoring: Data centers implement physical security measures, such as surveillance cameras, biometric access controls, and security personnel, to protect the equipment housed within the facility. Additionally, data center staff monitor the facility 24/7 to address any operational issues quickly.
  4. Remote Hands Services: Many data centers provide remote hands services where onsite staff can assist with tasks like hardware replacement, troubleshooting, and reboots upon request from the organization.
  5. Service Level Agreements (SLAs): Data center colocation agreements often include SLAs that outline the level of service and uptime guarantees provided by the data center provider. SLAs ensure that the organization's major infrastructure operates smoothly.

Colocation Services vs Managed Hosting

Managed hosting and colocation services are both options for businesses to host their IT infrastructure offsite in specialized facilities. However, they differ in terms of the level of service and control provided to the customer.

This is how they differ in terms of customer support and services provided:

Colocation Services Managed Hosting
  • Colocation involves renting physical space within a data center facility to house the customer's servers, networking equipment, and storage.
  • In managed hosting, the service provider owns and manages the entire IT infrastructure, including servers, networking equipment, storage, and software.
  • Customers own and manage their IT equipment, including server hardware, storage devices, and networking gear.
  • Customers have limited control over the underlying infrastructure. They only manage the applications, databases, and content hosted on the managed servers.
  • Colocation providers offer power, cooling, physical security, and network connectivity, but customers manage the configuration and maintenance of their equipment.
  • The provider offers technical support, system administration, and troubleshooting services.
  • Colocation services are typically priced based on the amount of rack space, power consumption, and network bandwidth used by the customer.
  • Managed hosting is often priced as a subscription service. In this, customers pay a recurring fee based on the resources and level of management provided.

If you require full control over your hardware and software configurations, colocation may be more suitable. Also, colocation service is ideal for businesses with in-house IT expertise who want to manage their infrastructure directly.

Benefits of Leasing Rack Space in Data Centers

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As stated above, leasing rack space in data centers means renting physical space within a data center facility to house your organization's servers and other IT infrastructure. Here's why it is beneficial for your organization:

  1. Physical Space: When you lease rack space, you're typically renting a designated area within a server rack or cabinet. Racks come in different sizes (like 1U, 2U, etc.), and you can rent one or more units (U) of rack space based on your equipment requirements.
  2. Rack Specifications: Each rack unit (U) is a standardized vertical space (usually 1.75 inches in height) where you can mount your servers, switches, routers, storage devices, and other equipment. The width and depth of the rack space can vary depending on the data center's specifications.
  3. Scalability: Server housing in colocation centers helps you scale your business. As your business grows or your IT needs change, you can easily expand your footprint by renting additional rack space or upgrading your existing setup within the same facility.
  4. Cost-Effectiveness: Lastly, leasing rack space in a data center can be cost-effective compared to building and maintaining your own data center facility. You benefit from shared infrastructure and operational costs with other tenants. Consequently reducing the overall capital expenditure.

Final Thoughts

Colocation services are set to grow even more as cloud technology keeps improving. As more businesses use cloud services for their IT needs, colocation offers a complementary way to support them. Colocation gives businesses physical space and access to cloud services nearby, which helps improve performance and reliability.

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