What is colocation?

Colocation is a form of hosting where you buy your own server hardware and place it in a datacenter of a colocation provider. The provider provides the space, power, cooling, security, and internet connection. You own the hardware and fully determine what runs on it.

Unlike dedicated hosting, where you rent a server from a provider, with colocation you own the physical equipment. You buy the servers, routers, switches, and other hardware yourself and bring them to the datacenter. The provider only offers the facility infrastructure.

This is the most advanced form of hosting, especially suitable for companies with specific hardware requirements, strict compliance requirements, or that want complete control over their infrastructure. It requires considerable technical expertise and financial investment.

How does colocation work?

You start by buying server hardware. These can be standard rack servers, blade servers, or custom-built machines. You determine the specifications yourself: processors, memory, storage capacity, and network cards that meet your requirements.

Next, you rent space in a datacenter. This is measured in rack units (U's) - one U is approximately 4.4 cm high. A standard server takes up, for example, 1U or 2U of space. You can also rent a full rack (usually 42U high) if you have multiple servers.

The provider installs your hardware in the datacenter, connects it to power and network, and gives you remote access. Many providers offer "smart hands" services - on-site technicians who can do small jobs for you like swapping cables or restarting servers.

You have full control over the software. Install any operating system you want, configure your own network setup with firewalls and load balancers, and optimize everything exactly as you want it. There are no restrictions from a hosting provider.

The datacenter environment is professionally set up. Redundant power supply (often with UPS batteries and emergency generators), advanced cooling systems, fire detection and suppression, physical security with cameras and access control, and multiple internet uplinks for reliability.

You usually pay per month for rack space, power consumption, bandwidth, and any additional services like smart hands or remote hands. Costs vary greatly depending on the location of the datacenter and the amount of space and power you need.

Advantages of colocation

Complete hardware control is the biggest advantage. You choose exactly which servers, processors, memory modules, and hard drives to use. Want specific RAID configurations, GPUs for computing, or custom network setups? Everything is possible.

Better cost efficiency in the long term can be achieved. The initial investment is high, but if you use the hardware for three to five years, monthly costs are often lower than renting comparable dedicated servers. You only pay for space and facilities, not for hardware rental.

Data sovereignty and compliance are easier to guarantee. Because you own the hardware and know exactly where it is, you can meet strict compliance requirements. This is crucial for financial institutions, healthcare institutions, and government organizations.

Hardware upgrades are done at your moment. Want to install more RAM? Replace drives with faster SSDs? You don't have to wait for a provider or plan a migration. You install it yourself (or via smart hands) when you want.

Higher performance is possible with custom configurations. You can, for example, build servers with extremely large amounts of RAM (512GB+), NVMe SSD arrays for maximum I/O speed, or multiple 10Gbit network interfaces. These types of configurations are often not available as standard dedicated hosting.

Datacenter quality you do enjoy. You get enterprise-grade facilities without having to build a datacenter yourself. Redundant power, industrial cooling, physical security, and multiple internet providers - everything you need for maximum uptime.

Scalability is flexible. Start with a few servers and add as you grow. You can scale horizontally by adding more servers, or vertically by upgrading individual servers. The datacenter space grows with you.

Disadvantages of colocation

High initial costs are inevitable. A decent server costs €2000-5000 or more. Do you need redundancy with multiple servers, switches, and storage systems? Add several tens of thousands of euros to that. This is a large investment before your first customer even pays anything.

Technical expertise is absolutely required. You need to know how to configure servers, install operating systems, set up networks, and implement security. Mistakes can lead to data loss, security breaches, or prolonged downtime. Most companies need dedicated system administrators.

Hardware maintenance is your responsibility. If a hard drive breaks, you have to replace it. RAM module defective? You arrange a new one. The provider does not provide hardware replacement - that's your problem. You must have spare parts in stock or be able to deliver quickly.

Physical access is limited. You can't just walk into the datacenter. Usually, you have to request access in advance, and datacenters often have limited opening hours for customers. For urgent hands-on fixes, you can use smart hands services, but those cost extra.

Depreciation of hardware must be included. Servers lose value over time. After three years, your €5000 server may only be worth €1000. You have to include this in your financial planning - the hardware is a depreciation item.

Risk of over- or under-sizing exists. Do you buy servers that are too powerful for your current needs? Then much capacity is unused. Do you underestimate your growth? Then you have to invest in new hardware sooner than planned. With dedicated hosting, you can scale up and down more flexibly.

Exit strategy is complex. If you want to stop or switch datacenters, you have to physically pick up or sell your hardware. This is a logistical operation that requires planning. With cloud or dedicated hosting, you just stop your subscription.

Who is colocation suitable for?

Large companies with significant hosting needs are the primary target audience. If you need dozens of servers, colocation becomes more cost-effective than dedicated hosting. You save hundreds of euros per month per server in the long term.

Companies with strict compliance requirements often choose colocation. Financial institutions, healthcare organizations, and companies working with privacy-sensitive data need full control over hardware and data location. Colocation provides that certainty.

Gaming companies and streaming platforms with specific hardware requirements use colocation. Think of GPUs for game rendering, custom network configurations for low latency, or huge storage arrays for video content.

SaaS companies with predictable growth often find colocation attractive. If you know you will grow steadily in the coming years, you can plan and invest in hardware. The lower monthly costs then compensate for the high initial investment.

Cryptocurrency mining or AI/ML workloads with specialized hardware are typical use cases. These applications often require custom-built systems with specific GPUs or ASIC chips that are not available with standard hosting providers.

Companies looking to consolidate datacenters use colocation as an intermediate step. Instead of multiple small office server rooms, you house everything in one professional datacenter. This increases reliability and reduces costs.

Practical tips for colocation

Start with an audit of your needs. How many servers do you really need? What specifications? How much power do they consume? How much bandwidth? This analysis prevents you from investing too much or too little.

Choose a datacenter location strategically. Close to your office makes physical visits easier. Close to your users lowers latency. In some cases, you want geographic distribution for disaster recovery. Determine what your priority is.

Read the SLA (Service Level Agreement) thoroughly. What is the guaranteed uptime of power and network? What happens in case of a failure? How quickly does smart hands respond? What are the compensations for downtime? These details are crucial.

Calculate TCO (Total Cost of Ownership) fairly. Add up all costs: hardware purchase, datacenter rental, power, bandwidth, spare hardware, travel costs for visits, time of your technicians. Compare this with alternatives like dedicated hosting or cloud.

Build in redundancy from day one. Dual power supplies in servers, multiple network uplinks, RAID configurations for storage, and ideally multiple servers behind a load balancer. Hardware fails - plan for this.

Make a good backup strategy. Colocation does not offer automatic backups like managed hosting. You have to arrange this yourself. Off-site backups to another location are essential for disaster recovery.

Plan hardware refresh cycles. Servers become slow and unreliable after 3-5 years. Budget for regular replacement. Some companies replace based on age, others based on failure rates.

Document everything. Which cables go where? What are the IP addresses? Login credentials? Network diagrams? If your only system administrator gets sick, someone else must be able to take over. Good documentation is worth gold.

Test your remote management. IPMI, iLO, iDRAC - whatever your server has, test if it works before you take it to the datacenter. If your server won't start anymore, you want to be able to reboot it remotely or access the BIOS.

Negotiate prices at volume. If you rent multiple racks or contract long-term, there's often room for discount. Providers would rather give a discount than have empty rack space.

Consider managed colocation services. Some providers offer additional services like OS updates, security monitoring, or backup management. This costs extra but reduces your own workload.

Compare colocation providers on location, price, service level, and reviews. Look at the quality of the datacenter (certifications like Tier III or IV), the availability of smart hands, and the flexibility of contracts.

Frequently Asked Questions

How much does web hosting cost on average?

Web hosting costs between €3 and €15 per month for shared hosting on average. VPS hosting starts around €10-€20 per month, and dedicated servers from €50 per month.

Can I upgrade to a different package later?

Yes, with most hosting providers you can easily upgrade to a larger package when your website grows. This can usually be done without downtime.

Is Dutch hosting better than foreign hosting?

For Dutch visitors, Dutch hosting is often faster due to the shorter distance. Additionally, communication with support is easier and you comply with GDPR legislation.