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Benefits Of Colocation Services

Benefits Of Colocation Services

Colocation services provide organizations with access to data center infrastructure where they can host and run their own equipment. They are becoming an increasingly popular alternative to in-house data centers (and the public cloud). Here is a quick guide to what you need to know about the benefits of colocation services.

Benefits Of Colocation: Cost-efficiency in colocation services

There are many reasons why modern organizations choose colocation services over traditional on-premises data centers. In many cases, however, the single most important reason is their overall cost-effectiveness. Here are five reasons why colocation services are more cost-effective than traditional on-premises data centers.

Minimal requirement for upfront investment

Traditional in-house data centers require a substantiation upfront investment to cover the costs of real estate, construction, infrastructure, equipment, and security. In contrast, using colocation services enables businesses to access shared facilities without significant initial capital outlay. They can therefore direct more of their cash towards their strategic goals.

Shared costs

In a colocation environment, multiple organizations collectively contribute to the upkeep and enhancement of common IT infrastructure. This shared responsibility translates into lower expenses for each entity. It therefore enables organizations to access high-quality, reliable infrastructure without incurring the full costs associated with independent ownership.

Economies of scale

In a colocation environment, a large number of organizations are likely to need to buy much the same resources (e.g. electricity). It can therefore be very worthwhile for them to combine their buying power to unlock volume discounts.

Direct link between workload and capacity

Traditional in-house data centers have to be provisioned to cope with the operational demands of peak business periods. This means that they are typically over-provisioned for their workload at other times.

By contrast, using colocation services enables businesses to adjust their capacity to reflect their workload at different points in their business cycle. This adaptability promotes optimal resource utilization, reducing unnecessary expenses associated with maintaining excess capacity.

Predictable costs

Technically, the fact that colocation services charge predictable fees does not improve their cost-effectiveness. Practically, however, it can make a huge difference to how organizations manage their budgets and finances. In particular, it means that organizations do not have to worry about coping with unplanned expenses. That means they do not need to insure against them.

Scalability benefits of colocation

As previously mentioned, colocation is vastly more scalable than traditional in-house data centers. What this means in terms of benefits is likely to depend on the size (and life-stage) of a business.


Startups often face unpredictable growth trajectories. Colocation’s scalability enables them to expand resources incrementally in line with demand. This adaptability eliminates the need for startups to make substantial upfront investments in hardware. It therefore provides a gradual and cost-efficient path to resource expansion.


SMBs can generally be divided into two broad groups. The first group is businesses that are passing through the SMB stage on their way to further growth. The second group is established businesses that are expected to stay at around their current size.

For the first group, the main benefit of colocation’s scalability is that it provides a smooth path to expansion. They can just add resources as their business grows. If they over-extend themselves at any point, they can quickly divest the excess capacity.

For the second group, the main benefit of colocation’s scalability is that it enables them to cope more easily with fluctuating workloads. Businesses can simply ramp up their capacity over the course of their peak season(s) and reduce it at quieter times. This means that they always have optimized performance without the expense of overprovisioning.

Medium-sized businesses

Medium-sized businesses can be divided into three groups. The first group is businesses that are still on a growth trajectory. The second group is businesses that still function very much like SMBs. The third group is businesses that function more like corporations but on a smaller scale.

The benefits for the first two groups are the same as for start-ups and SMBs. For the third group, however, the main benefit of colocation’s scalability is as a safety net. These businesses may not be greatly concerned with scalability for much of the time. They do, however, want to know that the option to scale their infrastructure is there if they ever need it.

Corporations and enterprises

With corporations and enterprises, the main benefit of colocation’s scalability is that it can enable them to tap into new business opportunities at minimal risk.

For example, even a major global enterprise is unlikely to want to invest in a new data center if they are trying to enter a new market. At the same time, they are unlikely to want to rely completely on the public cloud. Colocation is, therefore, often the only practical option for them.


Related Resources:

What is Colocation? Ultimate Colocation FAQ Guide

Don’t Go it Alone: Take Advantage of Managed IT Services from Your Colocation Provider

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