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What Are Colocation Services, and Why Do Businesses Use Them?

Colocation can provide facility infrastructure for your own IT equipment, but your business generally remains responsible for operating it. Learn what to compare before choosing a provider.

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Colocation lets a business place its own servers and other IT equipment in a third-party data center, which supplies the space and facility infrastructure—typically power, cooling, physical security, and network access. It can spare a company from building and operating its own data center, but it does not automatically take responsibility for the company’s hardware, software, monitoring, or recovery.

What colocation includes—and what it leaves to you

In a colocation arrangement, the customer generally owns and controls its equipment while the provider operates the facility environment. That shared-responsibility boundary is central to understanding both the service’s value and its limits. Equinix’s overview of colocation describes the facility services operators may supply; the specific package varies by provider and contract.

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Typically provided by the colocation facility Typically retained by the customer
Rack or other contracted space; facility power and cooling; physical access controls; and facility-level infrastructure. Servers, storage, networking equipment, operating systems, applications, network configuration, monitoring, backups, and recovery planning.

Some providers sell additional services, such as remote-hands assistance, in which facility staff perform specified physical tasks. Do not assume that this means the provider will administer systems or resolve application and network problems: confirm each task, response time, and charge in writing. Data Center Knowledge’s explanation of what providers do and do not do outlines why the division of work matters.

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Why colocation can matter to a business

Use purpose-built facility infrastructure without building your own

A company can place equipment in a facility designed to support IT loads, rather than construct and run a dedicated data center itself. This may reduce the need to manage building infrastructure, but it does not make the customer’s equipment or IT operations someone else’s responsibility. The economics depend on the company’s requirements, utilization, facility location, and contracted services; colocation is not automatically cheaper.

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Connect systems across locations and services

A facility may offer access to network carriers, cloud connections, or other infrastructure in the same location. These connections can be useful for hybrid IT, where workloads span customer-owned equipment, colocation, and cloud. Availability and performance depend on the specific site, providers, configuration, and route; verify the connection options rather than assuming they are present.

In a 2025 survey commissioned by CoreSite and conducted by Foundry, 98% of 300 CIOs, CTOs, and other IT decision-makers surveyed said their organizations were implementing or planning a blend of public and private cloud, on-premises, and colocation services. The finding describes those respondents, not all businesses. In the same survey, 19% said their colocation provider offered interconnection services—a useful reminder to ask providers directly what connectivity they offer. CoreSite’s May 29, 2025 report release describes the survey and its sample.

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Anthony Hatzenbuehler, CoreSite’s senior vice president of operations, said, “To have a truly successful hybrid IT environment, one that creates a secure and low-latency competitive edge, companies need seamless integration and connectivity across applications and services.” This is a provider executive’s perspective; whether a particular colocation deployment delivers those benefits depends on its design and connections.

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Place equipment where it serves the workload

A site near users, business operations, carriers, or cloud connections may suit workloads with location-sensitive needs. The benefit is not inherent to colocation: compare actual locations, network routes, capacity, and service terms against the needs of the application and its users.

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How colocation differs from cloud and managed hosting

Service model What the customer generally supplies What the provider generally supplies
Colocation Customer-owned physical equipment and the team or services to operate it. Data-center space and facility infrastructure; optional managed or remote-hands services depend on the contract.
Public cloud Workloads, configurations, and the operational tasks assigned to the customer under the cloud service model. Rented infrastructure and cloud services, billed under the provider’s model.
Managed hosting Requirements and applications, with the precise division of infrastructure and administration set by the agreement. Hosted infrastructure and specified management tasks, as defined in the service contract.

Colocation and cloud are not mutually exclusive. A business may keep some workloads on owned equipment in a colocation facility and use cloud services for others. The right arrangement depends on workload needs, operational capacity, connectivity, and cost structure. AWS’s data-center overview explains the distinction between a physical data center and cloud services.

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What to verify before choosing a provider

Compare facilities against your requirements and the full contract, not only a headline monthly fee. TechTarget’s colocation provider guide also emphasizes evaluating power, space, network options, location, security, compliance evidence, services, and contract flexibility.

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  • Location and connectivity: Check proximity to users and relevant carriers or cloud connections, available network options, routes, and expected latency for your workloads. Confirm which connections are available at the specific facility and what they cost.
  • Power and cooling: Establish the capacity available per rack, redundancy design, density limits, and how higher power or cooling requirements affect charges. Use the facility’s current specifications for your proposed load; example power capacities in general buying guides are not universal limits.
  • Resilience and access: Ask about planned maintenance, incident communications, site access procedures, and the scope and response times of remote-hands support. Review the service-level agreement (SLA) for what is measured, exclusions, and remedies. An SLA is a contractual commitment with defined terms, not a guarantee that disruption cannot occur.
  • Security and compliance: Review physical controls and independently verifiable certifications relevant to your workload. A facility’s security measures or certifications do not, by themselves, make the customer’s systems or organization compliant.
  • Commercial terms: Compare recurring facility fees with setup, equipment changes, power, cooling, connectivity, and support charges. Check how capacity can be scaled, what happens at renewal or termination, and whether SLA remedies and contract flexibility meet your needs.
  • Responsibility boundary: Put ownership and maintenance of hardware, network configuration, software, monitoring, backups, and recovery tasks in a responsibility plan. Confirm who can access equipment and how the provider handles requests outside its standard service.

When colocation is a reasonable fit

Colocation may suit an organization that needs to retain control of physical equipment but does not want to operate its own dedicated facility, and that has the people or contracted services to manage the IT stack. It may also be worth evaluating when a particular facility offers useful proximity or connections. It is a weaker fit if the business expects the facility operator to manage servers, software, or recovery without buying and defining those services.

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Industry survey figures can add context, but they are not a substitute for site-level diligence. Uptime Institute reported that 61% of surveyed colocation providers hosted hyperscale tenants in its 2024 survey. That figure is about providers in the survey; it does not establish the share of facilities, capacity, or customers that are hyperscale. Uptime Institute Global Data Center Survey 2024.

Product prices and availability are accurate as of the date/time indicated and are subject to change. Any price and availability information displayed on Amazon at the time of purchase will apply.

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