What Is a Colocation Data Center?

Organizations today have a growing technical estate of corporate data, applications and workloads. Each of these assets requires sufficient storage space and computing resources for effective operations. As on-site physical space becomes scarce, many businesses are sizing up alternative data center strategies, such as colocation. 

What is a colocation data center?

A colocation data center (colo center for short) is a shared data center facility that provides managed space for placing privately owned servers and networking equipment. It's one of the popular data center models — with the other two being on-premises data center and cloud data center. 

Colo data centers are multitenant. The space is shared with other organizations that also house their systems with the same provider. You can typically rent colo space by rack, cabinet, cage or room.

In a colocation agreement, the customer brings all the necessary hardware or agrees to lease it from the provider. The provider, in turn, ensures optimum operating conditions for the company's data center — sufficient physical space, undisrupted power supply, proper cooling levels, high-throughput bandwidth and physical security.  

Colocation services providers also establish seamless connectivity between their facility and your operational site(s). This is called interconnection. 

What is data center interconnection? 

Data center interconnect (DCI) is the technical architecture for establishing low-latency connections between two or more geographically distant data centers. DCI networks are powered by a combination of optical cables and digital transport interfaces.  

Data center interconnection enables: 

Point-to-point high-speed packet connection between different data center facilities.
Many-to-many connectivity between different types of assets, hosted in colocation facilities.

Interconnection allows colo vendors to deliver superior levels of services to clients. Point-to-point connections help establish high-speed data exchanges and secure connections between physically separate data centers so that your business can run well-balanced distributed workloads without geographic constraints.

Many-to-many connectivity lets you establish connections with other tenants in the colo data center — network service providers (NSPs), cloud service providers (CSPs) and software-as-a-service (SaaS) providers — and exchange services on the edge. 

For example, Equinix colocation services include interconnectivity as an option for tenants. According to a Forrester-commissioned study, Equinix clients who opted for interconnectivity have achieved:

60 to 70 percent reduction in cloud connectivity and network traffic costs.
30 percent minimum reduction in latency
Over 328 percent in direct and indirect return on investment (ROI)

For digital-first organizations, data center interconnection may be an option well worth considering. 

Why chose colocation? 

Data volumes and connectivity demands have increased significantly over the past year. Consequently, companies find that internal data centers can no longer support organizational goals and objectives. 

The reasons are plentiful — aging hardware, lack of physical space, inadequate or expensive cooling infrastructure. But the outcome remains the same — on-premises data centers come with a high total cost of ownership (TCO). 

Apart from high operating costs, on-premises data centers nearing operational capacity are not conducive to hybrid architectures that many businesses are adopting. Progressive migration of new applications and workloads to the cloud, distributed workforce, and globalized scale of doing business have set new benchmarks for connectivity. Legacy hardware and rigid network setups can no longer cope with these demands. 

So, it follows that companies are looking for alternative scenarios. Gartner predicts that 85 percent of corporate infrastructures will integrate on-premises, colo, cloud and edge delivery options by 2025 — up from 20 percent in 2020. 

Colocation, in such cases, will be a logical alternative to building or maintaining your own data facility. 

Other benefits of colo data centers include: 

Lower operational costs as most CapEx costs are shared with other tenants.
Predictable expenses — most vendors charge a monthly/annual subscription.
Fewer maintenance and updates if you opt for managed colo services.
Increased reliability with automatic failover and business continuity strategies in place by the vendor.
Greater physical security — access to colo sights is highly restricted.
Rapid scaling thorough purchasing extra space at the same or different vendor sight.
Vendor agnostic connectivity — using DCI, you can establish vendor-agnostic network connectivity to create complex digital hub scenarios.

The benefits of having a vendor house a company's IT assets range from realizing a large reduction in future capital costs, increased reliability, simpler management, a smaller number of employees dedicated to managing the data center, and the flexibility to expand or reduce the amount of data center space used.

What's the difference between retail colocation and wholesale colocation?

The two common colo data center models are retail colo and wholesale colo. 

Retail colocation assumes renting colo space for deploying your own equipment. You can bring any type of hardware (as long it's supported) and have the vendor configure it in line with the SLA-specified bandwidth, security and networking requirements. Your organization benefits from joint access to all the available data center amenities, but cannot implement custom controls (for example, related to physical security). Think of this option as renting a hotel room. You have everything you need for a good stay, but you can't ask the hotel to install extra security cameras for your comfort. 

Wholesale colocation allows the tenant to exercise more control over the colo data center layout and operational configurations. However, such an arrangement comes with a longer lease period (a minimum of 10 years isn't uncommon) and a commitment to commission a certain amount of space and resources. You gain more control over every aspect of the facility, but that comes at a steeper price. Businesses in telecommunication, online media, cloud and managed IT services most commonly opt for wholesale colo. 

A sub-type of wholesale colocation is a hyperscale data center. Such ultra-high-performance facilities are usually purpose-built to support the operations of "hyperscale" companies such as Amazon, Google, Microsoft and similar digital-first enterprises. Since such organizations require millions of servers, they have the most bargaining power when it comes to requesting specific design provisions such as power or cooling redundancy, 99.9999 percent uptime, biometrics-based access security and so on. 

Questions to ask before selecting a colo data center partner 

To refine the future data center strategy, discuss the following with your team: 

What do you want to achieve?
What are your business goals?
What are your IT requirements?
Get your requirements straight.
What does your growth look like?
Anticipate increase or decrease?
Do a needs assessment.
Decide on a charge model.
Determine pricing per kW/BTU/SqFt.

Now that the internal needs assessment is complete, let's turn our attention to the colo providers and see what's under their hoods.

Things to look for in a colocation provider

To further narrow down your choice and right-size the offering, analyze each colo partner using the following criteria: 

Understanding their business model: What is important to this provider? Does that align with you?
Flexible master service agreements: Get detailed MSA language. Ask for an example SLA.
Flexible service level agreements: In case of outages, are smart hands available?
Business continuity plans: Ask tough questions.
Compliance: Federal regulations, guaranteed uptime, certification (HIPAA or PCI), and compliance (SOC2, SSAE-18 Type II).
Footprint: How many locations? Where are they located?
Charge model: Is the pricing per kW/BTU/SqFt?
Space/power/cooling/services: What is their topology (N+1/2N/2N+1)? What is the power density to support both current and future? Redundancy (UPS/generator), connectivity (RPP/Overhead busway/Wips), back-up, cooling provisioning (low energy, thermal).
Network carrier redundancy: Carrier neutrality, high-density environment.
Physical security: How does this align with your security audit? Access control/CCTV/mantraps/fire safety.
Alignment with disaster recovery: Smart hands availability? Do they offer DRaaS?
Connectivity: What is the available connectivity to the outside world? High-speed redundant fiber-optic network? Are there dual pathways into the facility?
Monitoring and management: Are there solutions in place to support? Do they provide 24/7 notification and secure remote access?
Future growth: Ability to provide more power/cooling/space with your anticipated increase or decrease.
Getting your requirements straight: Right location, tier classification.

How WWT can help you with colo data center architecture

Colo data centers are a proven alternative to expanding on-premises infrastructure. Boasting lower operational costs and higher connectivity levels, colo facilities are more than new halls for your data — they can become new edge-hosted digital hubs, powering your business.  

However, designing the optimal data center architecture and selecting a colocation provider are challenging tasks. The decisions that need to be made must be grounded in your business goals and objectives. WWT guidance can help you answer many of the fundamental questions that, when overlooked, can affect your relationship with the colo provider. Request our Facilities Infrastructure Workshop to discuss the design of your data center, whether you're building a new facility or upgrading or consolidating an existing one.