Reasons to Invest in Colocation Hosting

Today’s organizations are largely dependent on the quality and availability of their IT applications and data for day-to-day operations. Disruptions to IT services, even for a few minutes, can be very expensive, especially to a business highly dependent on systems and applications. To remain competitive, companies need absolute computing reliability, with a focus on core competencies and market differentiators, but with minimal overhead.

That’s why colocation services can be a smart idea. Third-party colocation hosting facilities are an excellent solution to augment data center space and eliminate the need for significant capital expenditures for IT infrastructure and additional sites.

According to 451 Research, the colocation market will reach $33.2 billion by 2018. While colocation still requires an enterprise investment, business is booming because of the great advantages colocation offers over traditional data centers, namely significant cost savings from buying rather than building.

Here are the top four ways companies benefit financially by leveraging the expertise and services of a colocation hosting provider:

CAPEX vs OpEX: Leasing space in a colocation facility is less expensive.

Building your own data center is expensive. The planning and designing phase alone can cost between 20 and 25% of the construction expenditures. Forrester estimates the costs to build the actual building, if you’re not using an existing structure, at $200 per square foot.

Additional setup costs include fire safety systems, building permits and local taxes, capital expenses like hardware and installation, and network connectivity. Once you are up and running costs are difficult to project and include power, maintenance and staffing on an ongoing basis. The cost of power alone, taking into account regional variations, generally accounts for 70-80% of total operation costs.

Colocation hosting providers lower your overall expense of running a data center by providing economies of scale and sharing the physical building expenses, such as climate control, and lowering the overall burden that comes with maintaining your own enterprise data center.

True scalability is easier to achieve.

When building a data center on-premise, organizations need to predict their future needs to determine what size to build. This may mean that you have hardware sitting around that is underutilized, or you don’t have enough capacity at peak times. Either way is costly. Colocation provides the ability to rightsize your data center to your needs today, and the ability to pay as you grow without idle or insufficient capacity.

Colocation is less complex to maintain.

Building and maintaining your own data center consumes a great deal of not only capital resources, but human resources as well. It is difficult and expensive to find the depth and breadth of IT expertise needed to operate your data center 24x7x365, provide business continuity, enhanced security, disaster recovery and optimize applications and systems. The colocation shared-resources model means that the expertise is always on hand to optimize your systems and offload core IT functions freeing up internal staff to devote more time to mission-critical initiatives

Organizations save money by reducing downtime.

The average cost of a critical application failure has been pegged at $500,000 to $1 million per hour, according to IDC. Reliability is a key evaluation criteria. To ensure optimal uptime, the best choice in a colocation hosting provider will have data centers in multiple locations for failover, business continuity and disaster recovery in the case of natural disaster, human error or equipment failure.

It is clear that colocation hosting offers clear cost savings.  However, before making the decision to colocate, organizations need to assess all the pros and cons of establishing an internal data center or finding a colocation facility to host data center operations, i.e. build versus buy, or some hybrid strategy that includes on-premises and colocation.


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