What Is a Colocation Data Center?

January 29, 2024

Colocation data centers have become increasingly popular for businesses looking to host their IT infrastructure and ever-increasing volumes of data securely. The colocation market is expected to reach over $61 billion globally by 2025, growing at a CAGR of more than 12%.1 But what exactly is colocation, and how can it benefit your organization?

In this blog, we'll explain what colocation is, its advantages, and factors to consider when comparing colocation providers – so you can determine if colocation is right for your business.

What Is Colocation?

Data center colocation enables businesses to rent space for their servers and other computing hardware within a facility operated by a third-party provider. It provides organizations with enterprise-grade data centers and professional IT management without having to own and operate the facility themselves.

With colocation services, the customer provides their own servers, networking equipment, and software while the provider handles the building, cooling, power, bandwidth, and physical security. Thanks to this shared model, customers can focus on their core business operations rather than data center management.

Types of Colocation Facilities

Colocation data center facilities are generally classified as enterprise, wholesale, or shared. Here's how these types of facilities differ:

Enterprise Colocation

Enterprise colocation facilities lease data center space to multiple customers in cabinet, cage, or private suite arrangements. This type of colocation gives businesses the flexibility to start small and expand their footprint as requirements grow.

Wholesale Colocation

Wholesale colocation is ideal for large-scale businesses that need to lease a fully built data center space, typically by the room or floor. Rather than sharing space and resources among multiple tenants, wholesale colocation often provides a dedicated data hall to ensure a private, secure environment.

Shared Colocation

Shared colocation facilities incorporate both retail and wholesale offerings, giving businesses a growth path from low-density retail colocation services into high-density private data halls as infrastructure scales up.


Data Center Tiers Explained

Colocation data centers typically follow the Uptime Institute's tier classification system, which is the industry standard for evaluating data center infrastructure reliability and resiliency. Here's an overview of the four tier levels:

Tier I

Tier I facilities provide basic data center functionality but lack redundancy across critical systems. Tier I sites have a single path for power and cooling distribution but lack backup components, making them more prone to outages.

Tier II

Tier II increases reliability with redundant components like power supplies and cooling equipment, but the redundant infrastructure is limited to specific zones rather than facility-wide. Additionally, Tier II facilities can experience moderate downtime from equipment failure.

Tier III

Tier III data centers offer concurrently maintainable infrastructure and higher fault tolerance. All power, cooling, and network systems are fully redundant across compartments to prevent single points of failure, enabling maintenance without disruption.

Tier IV

Tier IV facilities offer the highest availability with multiple isolated redundant systems for all data center components. The "2N+1" power and cooling architecture exceeds 99.995% uptime annually, providing exceptional resiliency for mission-critical applications.

What Are the Benefits of Colocation Data Centers?

Moving your IT infrastructure to a colocation facility offers several advantages over building an in-house data center, including:

Cost Savings

In 2022, Uptime Institute warned that supply chain issues and rising energy and labor costs will make running a data center increasingly expensive in the coming years2 – a particular challenge for businesses that build and maintain their own facilities. Renting colocation space is a more affordable option.


Keeping your networking equipment in a server closet or small on-site data center can make it difficult to expand your infrastructure as your business grows. Colocation data centers provide easy scalability to add server cabinets and expand into additional facility space.

Geographic Diversity

Multi-site colocation providers distribute IT assets across multiple regions for geo-redundancy, which helps prevent regional disruptions like severe weather or natural disasters from impacting your business operations.


Approximately 76% of businesses experienced unplanned network downtime last year.3 Colocation data centers are built with the highest specifications for redundancy, including backup power generators, uninterruptible power supplies (UPS), and multiple network carriers. These redundancies help ensure your hardware stays online and accessible at all times.

Expert Support

Reputable colocation providers offer around-the-clock staffed IT support, remote services, and proactive infrastructure monitoring. And because you don’t have to worry about managing power, installing equipment, or other aspects of maintaining equipment, your technical staff have more time to put towards strategic projects.


What Should Businesses Consider When Choosing a Colocation Data Center?

As with all technology solutions, finding a colocation facility that meets your company's specific needs is essential. Here are some key factors to consider when comparing colocation vendors:


Having access to diverse telco carriers and metro fiber connections can help reduce latency and ensure network redundancy. Prioritize colocation vendors that offer connections to major internet exchanges.

Service Level Agreements

Look for a colocation provider that offers robust SLAs, which create accountability for your provider to meet performance metrics like uptime, responsiveness, environmental control, and power continuity.

Redundant Power

Insufficient power density or non-redundant systems risk outages that disrupt operations. Your colocation facility should provide ample, resilient power and backup generators to support high-density server loads and uptime.

Compliance Certifications

Audited compliance certifications are important for meeting regulatory requirements and ensuring the data center colocation provider follows rigorous security controls, transparency, and process quality standards.

Physical Security

Physical security measures are crucial for protecting your valuable IT infrastructure from external and internal threats. Validate that critical security layers like perimeter fencing, security personnel, biometric access controls, and 24/7 video surveillance are in place.

Technical Expertise

Deep technical expertise among your provider's engineering staff translates to optimized infrastructure performance and availability. You can assess the experience and skill of any potential colocation provider's on-site staff through certifications like Uptime Institute and related credentials.

Available Footprint Space

Having sufficient space to support your current IT deployments and the capacity to scale up over time can help you avoid costly relocations down the road. Evaluate options for incrementally scaling from single cabinets to private cages or suites.

Colocation Data Center vs. Colocation Server Rack

The terms colocation data center and colocation server rack are often used interchangeably, but you should understand their differences before shopping for a data center.

  • Colocation data centers offer an organization the entire facilities and services.
  • Colocation server racks refer to renting specific rack spaces within a data center.

Renting an entire colocation data center provides businesses with maximum control – but can be very expensive. Colocating within a shared data center lets your business start smaller at a more affordable price and grow into additional space flexibly while your provider maintains the overall facility.

Colocation Data Center vs. DCaaS

Data Center as a Service (DCaaS) is a hosted service that resembles colocation but also includes proprietary cloud technologies for automated infrastructure management, metering, orchestration, and self-service. In this model, the customer doesn't own any equipment and instead rents computing resources from the DCaaS provider as needed.


Get Started With a Colocation Data Center Platform That Gives You More

Colocation enables companies to leverage secure, reliable data storage on demand while retaining control of their critical IT systems. With the right data center colocation provider, your business can reduce capital expenses, improve resiliency, tap into specialized technical expertise, and scale flexibly as your infrastructure needs evolve.

As Canada's largest data center platform, eStruxture offers the capacity, performance, and flexibility today's businesses need to grow. Trust eStruxture to deliver:

  • 15 carrier-neutral data centers in all the major Canadian markets
  • High levels of security and continuous uptime
  • 760,000 square feet of data center space
  • 130+ megawatts of power
  • Access to hundreds of network and cloud service providers

From cabinets and cages to custom suites, we can help your business get the most efficient combination of space, power, and connectivity to support and secure your IT workload. Ready to get started? Get in touch with our colocation experts today.


  1. https://www.industryarc.com/Research/Data-Center-Colocation-Market-Research-500503
  2. https://uptimeinstitute.com/webinars/webinar-five-data-center-predictions-for-2023
  3. https://atlasvpn.com/blog/76-of-companies-globally-suffered-service-downtime-in-the-past-year

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