The definition of colocation in the managed technology services industry has traditionally meant something like:

Internet service providers (ISPs) or cloud computing providers that furnish the floor space, electrical power, and high-speed links to the Internet for a customer’s Web servers.

Wholesale data center services have usually differed from colocation regarding several factors.


Subscribe to the  Data Center Sales & Marketing  (DCSMI) Update Newsletter

Power Requirements

Colocation services have delivered more capacity and redundancy with electricity.

Over the past few years, wholesale data center providers have needed to increase power delivery.

Wholesale customers need lots of electricity for business-critical applications and heavy traffic workloads.

Service and Support Offerings

Wholesale data center services tend to be delivered in high volume, from a large cluster of physical servers or dense virtual servers. The customers that contract for these services tend to have many skilled IT personnel on staff, and don’t need the level of support retail colocation customers have.

Where skilled technical staff is hard to find, retail colocation services make more sense, and the lines and definitions for wholesale data center and retail colocation get blurred. Some service providers have adjusted their service level agreements (SLAs) and service offerings and classified them as “wholo” data center services.

Contract Terms and Colocation Definition

Due to wholesale services' physical scale and utility demands, a longer contract is usually required.

It also will require more capital investment outlay before systems and floor space are installed and configured.

As colocation providers consolidate, expand, and improve their service levels, customers are entering into longer contract terms with these providers to take advantage of contractual savings opportunities.

Elasticity of Demand

Providers like Microsoft Azure and Amazon Web Services offer usage-based pricing in the wholesale data center space. Colocation customers also have peaks and valleys in their bandwidth and computing capacity utilization. Educated customers demand the same pricing models for colocation as their wholesale counterparts.


Software-defined data centers, virtualization software, and other data center infrastructure management (DCIM) software are changing the game for colocation customers. This offers better visibility into:

Retail colocation providers are offering more tools for their customers to monitor their systems and applications.

Cloud and Application Service Providers

You would think colocation and cloud providers would compete head-to-head.

However, cloud providers are scaling up their services with storage, security, upload, and download capacity. For large application players like SAP, Oracle, Microsoft, and Infor, wholesale data center providers make sense for delivering their applications to end users.

Niche cloud application providers that have traditionally partnered with retail colocation service providers are also pushing for services and contract terms previously only offered through wholesale data centers.

Cloud apps need to live somewhere, and for smaller SaaS providers, colocation services pale compared to those from wholesale vendors like Google, IBM, and Rackspace.

Big Data and the Internet of Things (IoT)

Storage capacity is vital for companies that collect, store, and create a lot of data.

The idea of migrating to another provider when you have many terabytes or petabytes of data is usually not very appealing.

Industry experts are suggesting companies that need real-time analytics from significant data stores should keep these systems in-house, or partner with a provider who can manage:

  • The application layer
  • The database layer
  • The analytics engine


Companies that collect readings from “things” like wearables, or gauges on machines and equipment meters require lots of bandwidth, redundancy, and uninterruptable power.

Like cloud services, big data and the IoT are opportunities that colocation service providers can either step up to with colocation services or lose out on lucrative contracts.

 The colocation industry and its definition are evolving to meet changing technology, increased demand, and customer contract requirements.

Some analysts think wholesale/colocation services are blurring together, while others have suggested the differences are getting clearer.

What do you say? Are colocation services changing to the extent that they will be just another line item on a wholesale service provider’s price list? Tell us your thoughts in the comments section below!

If you're in the data center, mission-critical, or cloud services industries, or you sell to the data center industry, don't miss our weekly update newsletter -- Data Center Sales & Marketing Institute (DCSMI) Update Newsletter. Get notified about new reports, events, podcasts, and blog posts.

Subscribe to the Data Center Sales and Marketing Newsletter (DCSMI)

Submit a comment

You may also like

Which Atlanta Colocation Companies Best Address Business Continuity?
Which Atlanta Colocation Companies Best Address Business Continuity?
6 July, 2015

Should you be looking to contract the services of an Atlanta colocation provider or get a sense of the viability of sett...

Which Philadelphia Colocation Operators Price Most Aggressively?
Which Philadelphia Colocation Operators Price Most Aggressively?
28 September, 2015

A recent study indicated that the data center colocation services market would grow by over 13%. This increased growth h...

The Future of Colocation and Its Inbound Implications
The Future of Colocation and Its Inbound Implications
19 October, 2016

It is pretty safe to say that colocation is in a state of flux, with increasing competition from cloud alternatives. How...