What Colocation Hosting Is - Modern Guide (2025)

Colocation is a data center service where customers install and operate their own servers inside third-party facilities that supply space, power, cooling, security and multi-carrier connectivity. It differs from dedicated hosting (provider-owned leased servers) and cloud (virtualized provider hardware). Colocation supports hybrid and edge architectures and serves as an interconnection hub that improves resilience and performance for enterprise and carrier traffic.

What is colocation hosting?

Colocation (or "colo") is a data center service where companies place and operate their own servers and networking equipment inside a third-party facility. The provider supplies physical space, power, cooling, physical security and multiple carrier connections. Customers retain ownership and control of the hardware and software.

How colocation differs from dedicated hosting and cloud

With traditional dedicated hosting, a provider rents a physical server to a single tenant and manages the hardware. With colocation, you supply the server hardware and pay for space and infrastructure in the data center. Cloud hosting runs virtualized resources on provider-owned hardware; colocation keeps your hardware under your control while offering professional data center infrastructure.

Core components of a colocation offering

• Rack space and cabinets: standard rack units, half-racks or full cabinets; cages for physical separation when needed.

• Power and redundancy: UPS systems, backup generators and metered power for billed consumption.

• Cooling and environmental controls: precision HVAC and airflow management to maintain equipment temperatures.

• Connectivity: multiple carrier options, cross-connects, access to Internet exchange points (IXPs) and dark fiber for high-capacity links.

• Physical security and compliance: 24/7 access control, CCTV, and often certifications such as SOC 2 or ISO 27001.

• Remote hands: on-site technicians who perform hardware installs, reboots and troubleshooting on your behalf.

Why organizations use colocation

Colocation suits organizations that require strict control over hardware, predictable performance, or regulatory compliance that mandates physical control of equipment. It also supports workloads that need high-bandwidth, low-latency connections to multiple networks or cloud providers.

Colocation often plays a role in hybrid architectures: companies colocate core networking and storage while connecting to public cloud services for elastic compute. Edge colocation - smaller facilities closer to end users - has also grown as applications demand lower latency.

Practical considerations when choosing a colo provider

Evaluate carrier neutrality (ability to choose multiple network providers), physical and network redundancy, power density per rack, interconnection options (cross-connects and IX access), SLAs, on-site support options, and sustainability commitments (renewable energy, PUE targets).

How the internet relies on colocation

Colocation facilities act as interconnection hubs where carriers, cloud providers and enterprises meet and exchange traffic. That interconnection fabric contributes to the internet's resiliency and performance by aggregating networks and providing high-capacity links in centralized facilities.