What is Colocation and Why Does It Matter?

Author: Andy Bastick, Senior Director, Global Partner & Product Marketing, Digital Realty

Colocation is when companies place their IT hardware, servers, and data storage equipment in a space rented by a third-party data center provider.

Enterprises are increasingly adopting colocation as part of their digital transformation efforts. This is because colocation offers benefits to those looking to get out of managing on-premises data centers, as the evolution of technologies can put a strain on legacy infrastructure.

In this blog, we’ll cover:

1. Why are enterprises increasingly turning to colocation?
2. What are colocation data centers?
3. What are the challenges that colocation solves?
4. What are the benefits of data center colocation?
5. Are Digital Realty colocation services right for your enterprise?

Why are enterprises increasingly turning to colocation?

Modern enterprises must collect and store tremendous — and rapidly growing — amounts of data. Data generation worldwide has ballooned from 0.004 zettabytes (ZB) in 2010 to an estimated 180 ZB in 2025. And by 2025, 80% of data worldwide will reside in enterprises.

The recent explosion of artificial intelligence (AI) and high performance computing (HPC) only increases the demand for more computing power and storage. However, for most enterprises, expanding on-premises data centers is no longer a practical option, as hybrid cloud adoption provides flexibility in scaling data requirements.

Additionally, aging IT infrastructure coupled with the constant need for capacity growth makes investing in hardware and IT capital expenditures (CapEx) a challenge. As a result, many enterprises want to stop operating on-premises data centers, but shifting to a full-on cloud model may not always be the right solution.

Because of the demands of transferring data and the costs of cloud ingress and egress, expenses can add up as a company’s data volume grows. However, when enterprise teams utilize multicloud strategies, IT infrastructure becomes even more complex, an increasing challenge to manage, consolidate, and scale.

Colocation services provide the best of cloud and on-premises options, enabling future-proof, agile IT infrastructure without the cost and long-term commitment of managing on-site hardware. Additionally, colocation offers access to private and public clouds, content distribution networks, and network service providers for businesses looking to scale.

What are colocation data centers?

Colocation allows a company to occupy space in a multi-tenant data center (MTDC) for its IT infrastructure instead of owning and operating a data center. The service provides the physical location, cooling, power, interconnection, and security for the company’s IT setup, helping to build a flexible, future-proof solution.

Companies can utilize varying amounts of physical space within a colocation facility — from an entire room down to a single cabinet, cage, or rack. This flexibility makes colocation a viable choice for enterprises of any size.

Colocation services include options to build multiple and hybrid cloud infrastructures, with direct access to public cloud providers like Google, Amazon Web Services, or Microsoft Azure. Additionally, interconnection solutions, like cross connects, help enterprises transfer information securely to internet service providers that connect their infrastructure to a global network while offering low-latency solutions and better pricing.

What are the challenges that colocation solves?

Colocation can be part of the solution for enterprises facing data management issues, such as:

• Lack of capacity and Data Gravity: Data demands are increasingly exceeding the functionality of on-premises IT equipment, and leaders need ways to expand computing power and capacity. Data Gravity is the idea that as data grows, it attracts applications and services, creating more data that becomes difficult to move or replicate. This compounds as more businesses adopt data-intensive applications like AI. Legacy enterprise infrastructure cannot keep up with the increasing power demands that AI and HPC require.
• Increasing need for private cloud on-ramps: Sending and receiving data from the cloud via a public internet connection introduces security risks to the enterprise data submitted. When evaluating colocation solutions and providers, IT leaders should think about the ecosystem of partnerships offered and ensure their preferred cloud service providers are accessible through private connections or third-party carriers.
• Rising costs of the CapEx model: Escalating hardware and IT maintenance costs motivate leaders to get out of the data center business. Colocation offers the enterprise the flexibility to focus on its core business while freeing up strategic resources for operational expenditures (OpEx), enabling successful IT modernization.
• Lingering sustainability challenges: Many enterprises set ambitious goals to limit or eliminate carbon emissions. However, reaching those goals while building an adequate on-premises data center can feel like an impossible task unless enterprises collocate to a data center provider with the right green certifications and commitment to sustainable solutions, like Digital Realty.
• Growing need for data proximity: A company might need data processing to be in proximity to its points of business presence globally or a center of commerce, such as a stock exchange, for low-latency data transfer. Colocation offers this proximity.
• Heightened security concerns: Keeping hardware like servers on premises exposes physical equipment to typical risks associated with any building and weather-related issues like flooding. A colocation data center provides security controls for enterprise data, and colocation partners like Digital Realty provide access to third-party security companies via orchestration platforms like ServiceFabric™.

Shifting to a colocation solution means enterprises gain access to the internet and connectivity, network service providers, content delivery networks, and power and physical security for IT infrastructure. Additionally, when a company needs to scale up capacity for data storage and processing, it’s more cost-effective than building a new on-site data center.

What are the benefits of data center colocation?

As data is distributed globally across clouds and MTDCs in a Hybrid IT infrastructure, flexible, on-demand, and open interconnectivity solutions are critical for extracting value from data. Colocation is part of the solution enterprises can adopt to achieve the best results in their Hybrid IT strategies.

• Capacity growth: Bring workloads and data closer to users and customers with global coverage and connectivity. With a global partner with the right partner ecosystem and the right locations, enterprises can create centers of data exchange in proximity to their users and workflows. And with the amount of data needed for AI applications, distributed data strategies are crucial, as IT leaders fend off Data Gravity challenges.
• Risk mitigation, data privacy, and proximity: Meet regulatory requirements with on-site security and multiple layers of protection. Additionally, as data privacy regulations shift and expand around the world, placing data in local colocation facilities can provide a simple, secure way to comply with regulations — and reduce latency for nearby users.
• Connectivity and hybrid cloud access: Access an array of ecosystem partners, including clouds, other data centers, and managed service providers.
• Better budget allocation: Gain access to state-of-the-art IT infrastructure without the CapEx costs of building it out and operating it. By leveraging OpEx, IT leaders evaluating data center colocation options offer a competitive advantage by focusing on core competencies rather than relying on in-house resources to manage a hybrid-cloud environment.
• Sustainability: Reduce your carbon footprint and conserve water with energy-efficient colocation facilities to attain environmental, social, and governance goals. Additionally, as the energy demands of AI computing increase power density, colocation providers with high-density solutions will be future-proofed against innovation.

While many colocation facilities deliver these benefits, every provider is different. This is why it’s critical to consider what your company needs from a colocation service and choose a provider that can meet those needs.

What’s unique about colocation services from Digital Realty?

No matter how far along an enterprise is on its digital transformation journey, Digital Realty can provide the right combination of location, capacity, and connectivity. Our footprint includes 300+ data centers across 50+ metropolitan areas and 25+ countries on six continents.

Colocation from Digital Realty provides abundant flexibility to scale, expand, and right-size services as needed. Additionally, a company can lease a single cabinet or an entire suite and expand over time as needs change and grow.

Colocation with Digital Realty includes interconnection, global footprint, security, power redundancy, and cooling solutions

• Low-latency interconnection solutions: Access to an expansive global ecosystem of partners and providers, unlocking new levels of performance and flexibility.
• Global Platform: Digital Realty's PlatformDIGITAL® provides coverage in the Americas, Europe, Middle East, Africa and Asia/Pacific and is a key enabler for Hybrid IT deployments across metros and regions.
• Customer space: Secure, locking IT equipment cabinets and cages installed in data halls provide you with as much space as you need.
• Power: Alternating current (AC) and direct current (DC) power are provided over redundant and separated distribution paths, with uninterruptible power supply conditioning (for AC power) and generator backup to ensure maximum uptime.
• Cooling: Mechanical systems remove heat produced by customer IT equipment and operate within industry-standard environmental guidelines for data centers. Our high-density colocation solution is scalable up to 150 kW per cabinet, helping to resolve your HPC ecosystem and power-density challenges.
• Fire prevention: Fire detection and suppression systems are present in all data halls and common areas.
• Security: 24/7 security monitoring and physical service include video surveillance and access control processes for all visitors, customers, vendors, and employees.
• Certifications: All Digital Realty facilities carry data security certifications. Depending on the region, these often include SOC 1, 2, and 3 reports, ISO certifications, PCI-DSS, NIST SP 800-53, and HIPAA.
• On-site technical support: Technicians are available on-site to help with routine troubleshooting and work-order-style projects at the customer’s request.
• Straightforward terms: All your services are under a single monthly bill, and you can add new services to the contract at any time when needed.

Are Digital Realty colocation services right for your enterprise?

Should your company shift to colocation or a hybrid multi-cloud infrastructure? Get in touch with us to find out how colocation from Digital Realty can take your enterprise data infrastructure into the future and beyond.