Colocation
Colo is back!
Colocation has regained popularity as companies seek cost-effective, scalable infrastructure without the expense of building new data centers. It also offers proximity to cloud providers, improved efficiency, and access to sustainable power options.
Colocation (colo) is a strategy where a company rents space within a third-party data center rather than owning and operating its own.
In a colocation facility, the operator provides:
Physical infrastructure: power, cooling, racks, and network connectivity
Physical security and maintenance
Redundant systems for uptime and reliability
The tenant (customer) provides:
Their own servers, storage, and networking gear, or rents managed equipment within that space.
Strategies Behind Colocation
Data center colocation strategies typically revolve around the following goals:
1. Cost Efficiency
Building and maintaining a private data center is capital-intensive.
Colocation allows businesses to shift from CapEx to OpEx, paying only for the space and resources they need.
Shared infrastructure reduces per-tenant costs for power, cooling, and security.
2. Scalability & Flexibility
Colocation facilities allow rapid expansion or downsizing without major construction or long lead times.
Ideal for companies with fluctuating compute needs or growth across multiple regions.
3. Network Proximity & Connectivity
Colos are typically located near major internet exchange points (IXPs) and cloud on-ramps (AWS Direct Connect, Azure ExpressRoute, Google Cloud Interconnect).
This reduces latency and improves application performance.
4. Reliability & Compliance
Modern colocation facilities are built to Tier III or Tier IV standards, offering N+1 or 2N redundancy and 99.999% uptime.
They also maintain strict security and compliance (ISO, SOC, HIPAA, etc.) that might be costly for a private operator to achieve independently.
5. Sustainability Goals
Many enterprises pursue colocation to access green power and optimized cooling systems that reduce their carbon footprint.
Hyperscale colocation providers often have more efficient PUE (Power Usage Effectiveness) ratings than smaller, legacy-owned data centers.
Why a Data Center Operator Might Choose to Decommission Due to Colocation
Decommissioning due to colocation is typically a strategic business decision, not a failure. Here’s why operators make that move:
1. Shifting to a More Efficient Model
Operating a legacy, underutilized facility is expensive and inefficient.
By migrating tenants or workloads to a colocation provider, operators can retire outdated infrastructure and reduce operating costs.
This also frees up capital for other high-growth areas like edge computing or cloud partnerships.
2. Consolidation of Footprint
Many organizations realize they’re running too many small data centers with low utilization.
By colocating into fewer, modern facilities, they can decommission older sites, improving PUE and cutting power costs.
3. Outsourcing Non-Core Functions
For enterprises whose main business isn’t IT infrastructure, maintaining their own data center is a distraction.
Moving to colocation allows them to focus on core competencies while still maintaining control of their IT stack.
4. Avoiding CapEx for Upgrades
Upgrading aging power and cooling systems to meet modern density or compliance requirements can cost millions.
Decommissioning and shifting to colocation can be more cost-effective than modernization.
5. Leveraging Geographic Reach
Colocation partners often have global footprints, allowing companies to place workloads closer to customers.
This drives decommissioning of single-location private data centers that no longer meet global latency or redundancy needs.
6. Environmental and Power Constraints
In power-constrained regions, operators may choose to decommission in-house facilities and migrate workloads to colos with better power availability or renewable energy access.
