Colocation data center: what is it, types and advantages

The colocation data center represents a rising trend within the IT industry. Driven by outstanding advantages such as the model’s cost efficiency and flexibility options, businesses of all sizes are increasingly considering data center colocation services for their operations.

As the demand for data center services continues to grow, data and server colocation is expected to remain a prominent trend in an industry where innovation and growth are constant priorities.

The basic principle behind a colocation data center involves the sharing of resources and expertise that providers offer. This, in turn, means businesses are able to focus on their core operations while the burden of managing a dedicated data center is removed. 

In fact, the functionality of data center colocation service is wide: from being an asset for primary IT operations to augmenting an existing infrastructure temporarily, according to a business’ needs.

The option for server colocation is a sign of an industry that is increasingly mature and where more and more alternatives exist. As such and through a global perspective, growth in both the European data center market  and the future of data centers in the Middle East is expected to benefit from trends such as hyperscale colocation. As an instance, by the end of 2023 there were 73 colocation facilities in the Middle East, according to  a report by JLL

But what exactly is a colocation data center and what are its advantages? Let’s take a look.

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What is a colocation data center?

A colocation data center is a facility that offers multiple organizations the possibility to house their computing and networking equipment. 

Often referred to simply as a "colo," it’s an alternative for companies looking for a flexible data center model. Instead of managing their own data center infrastructure, data center colocation services allow businesses to rent space, power, data center cooling, and connectivity within the colocation facility.

As such, a deal with a colocation data center typically involves:

  • Access to necessary physical infrastructure to support IT equipment (server racks, cabinets, power distribution units, cooling systems, security measures…). 
  • Space rental, which is often measured in rack units or square footage, and refers to the space where businesses can securely be installed.
  • Reliable power and cooling to maximize data center efficiency.
  • Connectivity and network services.
  • Security and compliance to industry-specific standards, such as HIPAA for healthcare or PCI DSS for payment card processing.
  • Remote hands services, where trained technicians are available onsite to assist with tasks such as hardware installation, troubleshooting, and equipment maintenance. 

Types of colocation data center

1. Retail

These types of facilities cater to a broad range of customers (from small businesses to large enterprises), offering top flexibility for space rental, power and connectivity. 

This model typically involves multiple tenants sharing the same infrastructure, thus allowing for cost efficiencies.

2. Wholesale

Larger-scale projects often opt for wholesale colocation data centers, as they’re able to provide larger amounts of space, power, and cooling capacity, as well as custom-built solutions.

3. Carrier-neutral

This type of data center colocation services offer connectivity options from multiple telecommunication carriers and internet service providers (ISPs). This allows customers to choose their preferred network based on their needs for redundancy or cost-effective bandwidth options.

4. Managed

In this case, the colocation provider takes on additional responsibilities for managing and maintaining the hosted infrastructure, from software updates to security monitoring and troubleshooting.

5. Edge

This innovative approach to a colocation data center involves services that are located closer to end-users or specific geographic regions, enabling low-latency access to data and applications. They’re designed for emerging technologies such as the Internet of Things (IoT), where low latency is critical for performance and responsiveness.

Advantages of a colocation data center

Cost efficiency

Compared to building and maintaining in-house facilities, data center colocation services represent an opportunity for outstanding cost savings. Tenants sharing resources (such as power, cooling, and physical security means) translates into a reduction of both capital expenditures and operational costs.


Colocation data center scalability means these services are able to accommodate the evolving needs of businesses, scaling infrastructure both up and down depending on their actual needs. Space rental, power usage, and connectivity are all adjusted as required, without the need for significant upfront investments or long-term commitments. At the same time, adding or removing servers, storage devices, and networking equipment can all be done without the inconveniences that are related to managing a data center.


Redundancy and reliability also stand at the heart of data center colocation services, as this model is designed to guarantee redundant power, cooling, and high availability of network infrastructure. In fact, facilities often feature multiple layers of redundancy, which may involve: 

  • Backup power generators
  • Redundant cooling systems
  • Diverse network connectivity options


Robust physical and cybersecurity measures are implemented in colocation data centers to protect hosted equipment and data. This may involve advanced measures such as biometric access controls, surveillance cameras, or fire suppression systems, all with the aim of providing a secure environment.


Data center colocation services ensure they adhere to certifications and present compliance to industry-relevant standards involving data security and privacy. This frees businesses from internally managing the meeting of legal and regulatory obligations.

Focus on core business

Outsourcing data center operations means businesses can focus on their core strategic objectives without the distraction of managing complex data center infrastructure. In other words, a colocation data center might be a wise strategy to allocate resources more efficiently.


Data center cooling design is a key parameter to guarantee both efficient and reliable operations, as it’s at the heart of data center energy consumption. Today, various strategies are being considered for their potential benefits, including innovative two-phase immersion cooling models and liquid cooling models. 

Through picking the right colocation data center, companies can access advanced cooling strategies that ensure the efficient operation of IT equipment and minimize energy consumption. 

Business continuity

Data center colocation services are also used for disaster recovery (DR) and business continuity planning. As such, it allows businesses to replicate their critical IT infrastructure and data to geographically diverse colocation facilities. 

Are colocation data centers right for your project?

As we’ve seen above, colocation offers multiple benefits that appeal to businesses seeking cost-effective, scalable, and secure IT infrastructure solutions. 

However, potential challenges or inadequacies should also be taken into account when considering what the right model is for a specific project. As such, businesses often cite the dependency on external providers and migration and data-transfer costs as some of the potential disadvantages of the colocation data center model.

All in all, the shared-resource approach of data center colocation services is not the best solution for all businesses, which may fear the potential performance degradation or capacity constraints related to this model.

At the same time, technological advances are increasingly facilitating the development of in-house data centers that are cost-efficient and easily managed.

Such is the case of current DCIM systems (Data Center Infrastructure Management) as well as innovative data center cooling solutions. The latter in particular are playing a key role in minimizing operational costs related to cooling via industrial chillers, all while guaranteeing robust control systems that ensure redundancy.

At ARANER, we’re at the forefront of developing purpose-built data centers that prioritize energy efficiency. Through the application of our expertise in cooling and industrial design, we’re pushing the boundaries of the Data Center industry towards new levels in terms of sustainability and efficiency.

We help companies achieve integral solutions where cooling efficiency is  developed from the design phase, all while achieving the required TIER certifications. 

Want to learn more? Discover our data center cooling services and get in touch with us to see how we can help you achieve the right data center model for your project.

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