There are many hidden costs to consider when operating a business. One example is server space. If a company outgrows its server room and no longer has the power or cooling facilities to maintain its computing hardware, a decision must be made between upgrading the current infrastructure, or leasing space from a third party.

When your organisation stores its servers in a third-party data centre, it’s known as colocation and serves as an alternative to building and maintaining a data centre in-house. Below we examine the ins and outs of colocation, how it works, and how it can help your business.  

Key takeaways

  • Colocation is the practice of leasing server and hardware space from a third party.
  • This physical space is known as a data centre facility and may house multiple companies’ equipment.
  • Colocation has the potential to save companies money by removing the cost of building and maintaining server space on their own premises.
  • The cost of running and maintaining the data centre, including power and cooling, lies with the data centre provider.

What Is Colocation?

Colocation, or a colocation server, is a service provided by a data centre facility. A third party hosts a company’s servers, networking hardware, information technology (IT) equipment, and IT infrastructure.

A data centre facility provides the power and cooling capabilities required to run this equipment – assuming the company in question can’t or doesn’t want to host the infrastructure itself.

This may be because they don’t have the space, or they see it as a better financial decision. Typically, the Capex (capital expenditures) associated with building a facility is too great.

The Types of Colocation

Colocation servers give you a way to use your own equipment while you weigh up yourcloud service options

iomart offers four different types of colocation servers, provided by our data centre facilities, including:

Standard colocation: 

This gives you access to several standard 42U dual-powered cabinets or vendor cabinets, with full network connectivity and internet connectivity. However, they are unmanaged by facility staff. 

High-density colocation: 

If you use power-hungry equipment and want a single footprint, this colocation might suit you best. You’ll get access to the most suitable rack space and technology with an uninterrupted power supply to fit your data capacity needs. 

High-security colocation: 

When you have specific compliance or security requirements, a high-security colocation is the best option. You’ll get access to caged enclosures for as many of your cabinets as you require, giving you complete control.

Managed colocation: 

Fully managed and cared for. Whether that’s monitoring, analysis, hardware replacement, or any other service that will depend on company needs. You’ll still have manual access to your cabinets when needed, but this option enables customers to leave the heavy lifting to iomart.  

What Is a Data Centre Facility?

Unlike cloud services, a data centre facility is a physical location that leases space to companies for housing their servers and other computer hardware. It provides a location where physical assets owned by a business can be set up away from the company’s main premises. A cloud provider, on the other hand, owns the underlying assets and leases digital versions to the company. 

Data centres offer the service known as colocation. With so many server cabinets or spaces to rent out, it can be used by multiple companies at once. This means the cost of a data centre facility is spread out across every company that uses it, creating a cost-effective alternative to building a data storage facility in-house.

A key difference between colocation and data centres is that the former is a service, the latter provides. As such you will see the term colocation facility being used to refer to a data centre facility that offers the service to multiple companies.

Data Centre Tiers

There is a four-tier classification of data centres, with tier 1 indicating the most basic infrastructure and tier 4 the most complex.

  • Tier 1 – a single path for power and cooling, with no backup systems in place and an expected uptime of 99.671% per year
  • Tier 2 – a single path for power and cooling with some backup systems in place and an expected uptime of 99.741% per year
  • Tier 3 – multiple paths for power and cooling, with some backup systems in place and an expected uptime of 99.982% per year
  • Tier 4 – completely fault tolerant with backup systems in place for every component and an expected uptime of 99.995% per year

Higher tiers don’t necessarily mean better. It’s important to choose a tier that best fits the needs of the business – choosing a higher tier for the sake of it may be an over-investment.

How Does a Data Centre Work?

Data centres keep data secure and ensure it’s always available to the companies that use them. Many facilities can serve both large corporations and smaller businesses alike. 

There are several things all colocation services offer, including:


A shared facility has the obvious benefit of sharing the cost of running the equipment. It can be managed by the facility staff or by the company itself, offering the same level of control as it would have had in-house.

Crucially, it will include everything you need to set up your own servers, including cable trays and cabinets, on hand and ready to be used immediately. An additional benefit is that companies can choose the geographical location of the facility they use.

Power and Cooling Systems

Data centres are built with redundancy in mind because many companies use them simultaneously and failure would affect more than one business. There may be backup generators, batteries, multiple network connections, and more to ensure that equipment is safe, secure, and reliable.

Data centres can “run hot” now and again. This means cooling systems are essential for server rooms. Colocation data centres must be built to the highest specifications to accommodate this.

If temperatures get too high, condensation may form, damaging equipment. In most environments, the recommended temperature for data centre facilities is 21 and 24°C. Thankfully, staff dedicated to environment management are on hand to ensure this temperature is consistent. Data centre staff will also ensure that the heating and cooling is as energy efficient as possible, limiting the overall environmental impact. 


Alongside cyber security, physical security in a colocation data centre is incredibly important. Constant 24/7 surveillance, fire detection and suppression systems, and a 24/7 human on-site presence. This means that hardware is protected and able to run continuously. What’s more, if you need someone to go and press a button, you can ask someone to do it without leaving your home or office.

How Colocation Can Help Your Business

Saving money on building and maintaining your own data centre is just one benefit of using a colocation service. These facilities are manned day in and day out, 24/7/365, so any issues or risks are dealt with immediately. This means there is also a reduced need to hire staff and technical personnel since colocation providers can handle many of the maintenance aspects of the data centre. 

If an organisation is growing or decides to expand, it might outgrow the space it currently has. Rather than needing to build a new room to house more servers, it can simply rent out more space with a colocation service.

In a similar sense, if a company moved offices, they wouldn’t need to worry about any downtime while they set up their new premises. Their servers would be based off-premises and wouldn’t be disrupted.

There is also the cost of renting out server and hardware space to consider. With a colocation service, this is a predictable expense that can be budgeted for based on the contract you have with the colocation provider. It’s also worth bearing in mind that colocation is often the first step on a longer cloud transition journey. That means if your ultimate goal is a more sophisticated cloud strategy then this could be an excellent starting point.

Finally, normally data centres are highly compliant, meaning they meet common criteria like ISO standards. Not only does this help you tick your compliance boxes but it can assist when it comes to things like cyber insurance.

Utilise Colocation Data Centres and Find a Home for Your Hardware

When deciding on a colocation provider, it’s vital you choose one that will respect your hardware and provide the best accreditation. You want to feel safe and confident with your choice so it’s important to do your research and find out everything there is to know about colocation hosting, before taking the plunge.

If you’d like to find out more about how we can help, get in touch.