What is Colocation (Housing)? Complete Guide to Server Housing

Colocation, also known as "colo" or "housing," is a hosting arrangement where you own your server hardware but house it in a professional datacenter. The datacenter provides power, cooling, network connectivity, and physical security, while you retain full ownership and control of your equipment.

How Colocation Works

In a colocation arrangement, you purchase and configure your own server hardware, then ship or deliver it to a datacenter facility. The datacenter provides:

• Rack space: Measured in rack units (U), typically 1U-4U per server
• Power: Redundant power feeds with UPS and generator backup
• Cooling: Precision climate control to maintain optimal temperatures
• Network connectivity: High-speed internet with multiple upstream providers
• Physical security: 24/7 surveillance, biometric access, security staff

You maintain full root access and ownership of your hardware. The datacenter staff typically provide "remote hands" service for basic physical tasks like reboots or cable changes.

Colocation vs Dedicated Servers

Dedicated Server Rental

• Hardware owned by the hosting provider
• Monthly rental fee includes hardware
• Provider handles hardware failures and upgrades
• Limited hardware customization options
• Easy to scale up or down
• No upfront capital investment

Colocation (Housing)

• Hardware owned by you
• Monthly fee for space, power, and connectivity
• You handle hardware failures and upgrades
• Complete hardware customization freedom
• Hardware costs are capital expense
• Significant upfront investment

When Colocation Makes Sense

1. Specific Hardware Requirements

If you need specialized hardware that providers don't offer—custom GPU configurations, specific storage arrays, or proprietary equipment—colocation lets you deploy exactly what you need.

2. High-Volume, Long-Term Needs

For large deployments running 3+ years, owning hardware often costs less than renting. The break-even point is typically 18-36 months depending on specifications.

3. Compliance Requirements

Some regulations require hardware ownership or prohibit shared infrastructure. Colocation provides the physical isolation of owned hardware with professional datacenter facilities.

4. Existing Hardware Investment

If you already own server hardware (from office relocation or infrastructure consolidation), colocation lets you leverage that investment in a professional environment.

When Dedicated Servers Are Better

1. Flexibility Needs

If your requirements change frequently, dedicated server rental offers easy scaling without hardware liquidation concerns.

2. Limited Technical Staff

With colocation, you're responsible for hardware failures. If you lack on-call technical staff, managed dedicated servers may be more practical.

3. Smaller Deployments

For 1-3 servers, the overhead of purchasing, shipping, and maintaining hardware often exceeds the cost savings versus rental.

4. Geographic Distribution

Deploying owned hardware in multiple locations multiplies complexity. Dedicated servers let you easily spin up capacity in different regions.

Colocation Cost Factors

Colocation costs are based on several factors including space (measured in rack units), power consumption, and bandwidth. Most providers offer flexible options from single rack units to full racks.

Key Cost Components

• Space: Per-U, quarter rack, half rack, or full rack options
• Power: Typically metered or allocated in amps
• Bandwidth: Metered, committed rate, or burstable options
• Additional services: Remote hands, extra IPs, cross-connects

Choosing a Colocation Provider

Key Factors

• Location: Proximity for physical access, latency to users, jurisdiction for data privacy
• Redundancy: N+1 or 2N power, multiple network providers, generator capacity
• SLA: Uptime guarantees, response times, compensation terms
• Security: Physical access controls, surveillance, certifications (ISO 27001)
• Connectivity: Available carriers, peering options, BGP support

Questions to Ask

• What's the process for accessing my equipment?
• What's included in remote hands service?
• How is power metered and billed?
• What happens if I exceed my power allocation?
• Can I bring my own IP addresses (BYOIP)?
• What's the contract length and termination process?

Getting Started with Colocation

1. Assess Your Needs

Calculate your space requirements (rack units), power consumption, and bandwidth needs. Consider growth over the contract term.

2. Select Hardware

Choose server hardware appropriate for your workloads. Consider serviceability—can parts be replaced without removing the server from the rack?

3. Plan the Deployment

Coordinate with the datacenter on delivery, installation, and network configuration. Many providers offer installation services for an additional fee.

4. Establish Remote Management

Configure IPMI/iLO/iDRAC for out-of-band management. This lets you troubleshoot and reboot remotely without datacenter assistance.

Conclusion

Colocation offers the benefits of professional datacenter infrastructure with the flexibility of owned hardware. It's ideal for organizations with specific hardware requirements, long-term stable workloads, or compliance needs that mandate hardware ownership.

For most businesses, the decision between colocation and dedicated server rental depends on scale, technical capabilities, and how long you plan to run the same hardware. At Packet25, we offer both housing services and dedicated server rental, letting you choose the model that best fits your needs.