How can I use server colocation to cut costs?

Server colocation (“colo”) does not get as much fanfare these days. If cloud computing is the cool kid on the block, then colo just might be the sensible old-timer whose set in his ways. However, many companies are re-discovering that the old-timer actually has some valuable lessons to share. While server colocation has fallen out of favor in recent years, it may be poised for comeback.

First, what exactly is server colocation? As the lines between hosting products have become increasingly blurred in recent years, there is one hard and fast distinction between a dedicated server and a colocated server. That deliniation is always who owns the equipment. A dedicated server is leased or rented by the customer, while a colocated server is owned by the customer.

Since the colo customer provides the servers, the hosting provider does not have to roll the cost of the equipment into the monthly charge. This can mean big savings since the hardware portion can make up 50% or more of the overall hosting bill. It’s important to note that the longer the server is in service, the more financial sense colocation makes. So if you plan to keep a server in service for a short time, colocation may not be the best option.

Many customers have become frustrated with cloud hosting bills that vary wildly each month and seem to get exponentially pricier as usage increases. Colocation offers a more predictable fixed monthly fee, which makes it easier to plan a budget. In more predictable costs, colocation customers can purchase exactly what hardware they want and configure it precisely to their specs.

Historically, colocation was the domain of the largest IT customers, who would often rent a full cabinet of servers, or even an entire room. But many providers now offer colocation on a single server basis, allowing smaller clients to benefit from the advantages as well. Some companies are taking a fresh look at colocation as a way to reduce costs, which may not be glamorous, but is definitely a valuable lesson.