Colocation vs On-Premises: Should You Move Out of Your Server Room?
Colocation keeps your hardware but moves it into a provider's purpose-built facility, so you stop owning the building, power, cooling, generators and physical security. On-premises keeps everything in your own space and under your own control. Colocation usually wins when your server room needs major investment, resilience or connectivity is falling short, or the space is needed for something else.
By DataCenter Hunter
The core difference
In both models you own and manage your servers, storage and network equipment. What changes is who owns the facility around them.
- On-premises: your organization provides the room, power distribution, UPS, cooling, fire suppression, physical security and connectivity, and maintains all of it.
- Colocation: you rent space, power and cooling in a provider's data center. The provider runs the building, and you manage your equipment, on site or through remote hands.
This page compares those two. If you are also weighing public cloud, see Colocation vs Cloud. For a plain-English overview of colo, see What Is Colocation?
Side-by-side
| Factor | On-premises | Colocation |
|---|---|---|
| Facility ownership | You own and maintain power, cooling, UPS, generator and security | Provider owns and maintains the facility |
| Hardware | You own and manage | You own and manage |
| Resilience | Limited by your room's design and budget | Purpose-built redundancy; verify the design per building |
| Connectivity | Usually a few carriers into your building | Often many carriers and cloud on-ramps in carrier-neutral facilities |
| Physical security | Your responsibility | Provider's perimeter and access controls, plus your cage or cabinet locks |
| Cost structure | Capital spending on facility upgrades, plus utility and maintenance costs | Recurring charges for space, power and services, plus one-time setup |
| Scaling | Limited by room size, power and cooling | Add cabinets, power or cages as available and contracted |
| Staff access | On site, immediate | Travel to the facility, or use remote hands |
| Compliance | You evidence physical controls | Provider supplies building-level reports; you cover your own controls |
When on-premises still makes sense
- Equipment must be physically next to people, machines or processes on site, such as manufacturing or labs.
- The room is already well built, recently upgraded and has capacity to spare.
- Connectivity needs are simple and the business can tolerate the room's resilience level.
- Regulations or contracts require equipment on your own premises.
When colocation usually makes sense
- The server room needs major investment. UPS replacement, new cooling, generator work or electrical upgrades are large capital projects. Compare them with the cost of renting purpose-built space over the same period.
- Resilience falls short. If a single utility feed, a single cooling unit or one carrier link can take you down, colocation can offer redundant power and cooling designs. See Colocation Power Redundancy and Tier 3 vs Tier 4 Data Centers.
- Connectivity is limiting. Carrier-neutral facilities offer more carrier choice and private cloud connections. See Carrier-Neutral Data Center.
- The space is needed elsewhere. Office moves, lease ends or building sales often trigger the decision.
- Compliance evidence is getting harder. Colocation providers maintain building-level certifications and reports you can rely on for physical controls. See Colocation Compliance & Certifications.
How to compare the costs fairly
Compare over the same period, typically the length of a colocation term:
- On-premises: planned facility upgrades, maintenance contracts, utility power for IT and cooling, the space's real estate cost, and staff time spent on facility work.
- Colocation: committed power and space, cross-connects and bandwidth, remote hands, one-time installation and the migration itself.
Include risk, too: what would an outage caused by a facility failure cost the business? The Colocation Pricing Guide explains each colocation line item.
Choosing a location for your first colocation site
Most organizations moving out of a server room choose a facility within reasonable driving distance of their team for the first few years. DataCenter Hunter lists facilities in major hubs such as Dallas, Chicago and Atlanta, and in regional markets such as Kansas City, Nashville and Raleigh. Browse the full data center directory to find options near you.
Planning the move
Moving from on-premises to colocation follows the same steps as any migration: inventory, network first, then workloads in waves. The Colocation Migration Guide walks through each phase.
Next step
Request colocation quotes near your location to compare with the cost of upgrading your server room, or book a consult to talk through the decision.
Frequently asked questions
What is the difference between colocation and on-premises?
With on-premises, your organization owns and maintains the room, power, cooling and security for its servers. With colocation, you keep and manage your servers but rent space, power and cooling in a provider's purpose-built facility.
Is colocation more reliable than an on-premises server room?
Often, because colocation facilities are built with redundant power, cooling and connectivity that most server rooms lack. Verify the design of the specific building you are considering.
When should I move from on-premises to colocation?
Common triggers include a server room that needs major upgrades, resilience or connectivity that falls short, an office move or lease end, or growing compliance demands for physical controls.
Do I still manage my own servers in colocation?
Yes. You own and manage your hardware. The provider runs the facility, and remote hands services can handle routine on-site tasks for you.
How do I compare colocation and on-premises costs?
Compare over the same period. Include facility upgrades, maintenance, utility costs, space and staff time for on-premises, and committed power, space, connectivity, remote hands, setup and migration for colocation.
How far should my colocation facility be from my office?
Many organizations start with a facility within reasonable driving distance so staff can reach it for installs and incidents. Strong remote hands support can make a more distant site practical.