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Once upon a time, every business that needed a data center built and operated it itself.

Related: 5 Factors to Consider When Choosing a Colocation Provider

Those days are gone. Today, companies can take advantage of colocation, a practice that allows them to deploy IT equipment in data centers owned and managed by a third-party provider.

That doesn't mean, though, that a colocation data center is always the best choice. Keep reading for an overview of how colocation works, along with tips on deciding when it does and doesn't make sense to migrate workloads to a collocation facility instead of creating your own data center to house them.

Related: Colocation Managed Services: Pros and Cons for Providers

Colocation, or colo for short, is the use of third-party data center facilities to house IT equipment. Companies that use colocation choose a data center operated by a colocation provider, then set up their own servers or other infrastructure inside one of the provider's facilities.

Typically, a business that uses a colocation facility is responsible for purchasing, deploying, and maintaining its own infrastructure inside that facility, although the colocation provider may offer managed services to cover some or all of those tasks. Either way, the colocation provider handles management of the physical facility, including keep it powered, ensuring physical security, providing access to network infrastructure, and so on.

Importantly, colocation is different from using a public cloud. In the cloud, workloads are hosted on infrastructure that is fully managed by a cloud provider. That's different from colocation, where you usually rent data center space from a third-party provider, but not the infrastructure.

Compared with operating your own data center, a colocation data center offers several benefits:

The list of colocation benefits could go on, but these points summarize the main advantages.

On the other hand, colocation can have its drawbacks:

Do the benefits of a colocation data center outweigh the drawbacks? The answer depends, of course, on what your use cases and priorities are.

Colocation is typically a better approach for companies whose workloads are small in scale and are not likely to grow significantly. If you don't have enough servers to fill up your own data center, it makes more sense to host them in a colocation facility.

Colocation is also a benefit to companies with limited IT staffs, since the colocation model effectively makes it possible to outsource some data center management tasks to a third-party provider.

And if you need to deploy infrastructure in several disparate locations, colocation is often the most cost-effective way to do it. That's a benefit if, for example, you have users concentrated in different geographic areas and you want to host your workloads in close geographic proximity to each of them.

But if you have a very large-scale infrastructure or you only need to operate your servers in one specific area, colocation probably doesn't make as much sense to you. You're likely to be better off by investing in your own data center.

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When and When Not to Choose Colocation Over a Private Data Center - Data Center Knowledge