Retail Colocation Vs Wholesale Colocation: Which One Is Best For Your Business?

Retail Colocation Vs Wholesale Colocation: Which One Is Best For Your Business?

December 01

Today’s organizations depend heavily upon their IT infrastructure to deliver products and services to their customers. As more and more core business functions shift away from inefficient manual processes and embrace automated digital tools, companies that aren’t able to keep up with those changes will quickly find themselves at a competitive disadvantage. Fortunately, there are many technology services available that can help organizations of all sizes access cutting-edge infrastructure without having to build their own from scratch.

Retail Colocation vs Wholesale Colocation - what's the best fit for your business?

What is Colocation?

Building and maintaining an on-premises technology solution is a massive investment for even a modestly-sized company. Even setting aside initial capital expenses required to establish the physical infrastructure, there’s also the ongoing cost of managing and replacing equipment over time. These deployments are usually difficult to scale quickly because the environment is limited when it comes to space, power, and cooling. Even large enterprises with sizable IT budgets frequently find themselves limited by solutions that were built years earlier to accommodate anticipated needs but are now woefully inadequate.

Colocation data centers offer an appealing solution to these problems. Rather than hosting their assets on-premises, companies can instead rent rackspace, power, and connectivity from a colocation provider. Servers and other essential hardware are then migrated into a colo facility, which is usually much more efficient in terms of energy consumption and uptime reliability. The colocation provider manages the infrastructure and provides access to a wide range of connectivity options and Internet Service Providers.

By shifting their IT expenditures from CapEx to OpEx, companies gain tremendous flexibility. While they still have to purchase new servers to scale their technology stack’s capacity, they don’t have to worry about whether or not adding a new server will require them to also build out their power and cooling infrastructure. They can also take advantage of additional services like disaster recovery solutions and lightning fast connections that allow them to get to the cloud easier than ever.

More importantly, colocation helps companies eliminate needless toil on the part of their IT departments. Since the colo provider is responsible for managing the mechanical and electrical infrastructure while also offering remote hands, IT personnel can dedicate more time to building innovative new products and solutions that will help the organization grow in the future.

Retail Colocation vs Wholesale Colocation

Making the decision to relocate assets to a colocation data center is just the first step in a longer migration journey. Before that journey can get underway, however, it’s important to understand the two main colocation business models available today: retail colocation and wholesale colocation.

What is Retail Colocation?

A retail colocation provider is what most people envision when they think about colo services, and for good reason. According to a 2020 study by Grand View Research, retail colocation makes up a little over 70% of the global colocation market.

Retail customers rent cabinets or cage space in a provider’s facility and then migrate their equipment into those spaces. They typically have fewer than one hundred racks of equipment and power needs up to ~500 kilowatts. Space is commonly allocated in full rack increments and retail colocation providers usually bundle space and power into a single, monthly price. These costs can vary due to factors such as delivered power, density/cooling requirements, deployment sizes, and connectivity requirements, but are generally much lower than managing on-premises infrastructure.

What is Wholesale Colocation?

Intended for larger organizations with extensive IT requirements, wholesale colocation is a more flexible approach that provides customers with more options over their deployment. Rather than leasing individual rackspace or small to modest sized cage space, the typical wholesale colocation customer leases a large space within the data center where they can deploy their IT  equipment. This larger space can consist of anything from a locking dedicated cage to private suite, or even a completely new facility that’s custom-built for the customer’s needs.

Since the average wholesale customer has power requirements exceeding 500 kilowatts, they can usually secure a better rate on a per kilowatt basis provided they sign up for a longer contract. 

Implementing a wholesale colocation deployment is much more challenging than simply installing a few servers into racks. It often involves custom build outs and architecting a custom solution built to the customer's requirements. In some cases, wholesale customers can wind up leasing most, if not all, of the data center floor space, which essentially turns the facility into their own private data center. 

Retail vs Wholesale: Which Is Right for Your business?

Small to medium businesses with relatively modest tech stacks that consist of a handful of servers fall into the retail category. Outsourcing their infrastructure and consolidating their power and connectivity costs into a single bill helps them to streamline their expenditures and reallocate their IT resources to focus on higher-value tasks that contribute to business growth.

Transitioning to a retail colocation arrangement is also a good way for smaller companies to begin their journey to the cloud. Once their servers are placed in a colocation environment, they can begin to connect to various cloud providers and experiment with hybrid and multi-cloud deployments. As new projects come up, or equipment becomes end of life, customers have the option to expand in either their colo environment or their cloud environment. When customers build these options into their solution, it provides the most flexibility for the business. 

Larger enterprises, or emerging companies with a large IT footprint or those who require great flexibility, fall into the wholesale category. They are typically deploying a large environment that has special requirements and often must comply with very specific security or compliance guidelines.

As enterprises grow their workloads, make acquisitions, or launch new products, their on-prem data center, space, power and cooling requirements often fluctuate (oftentimes with little notice). As this happens, a wholesale colocation option can make operational and financial sense. Since the customer works with the data center provider to secure the space and infrastructure necessary to support their deployment, they can also make plans to accommodate future growth. Wholesale engagements tend to be much longer than retail contracts, so the provider is in a better position to make the infrastructure investments their customers are seeking.

Begin Your Migration with Evoque Data Center Solutions

Retail colocation continues to make up the majority of the market, but wholesale colocation services are expected to grow significantly over the next decade as organizations continue to shift away from their on-premises infrastructure and leverage the state-of-the-art data center technology offered by colocation providers. For some of these companies, colocation will streamline a transition to a purely cloud-based deployment, while others will continue to need the control and flexibility that comes from having a technology stack customized to their specific business requirements.

Evoque’s comprehensive colocation services were designed to help organizations meet their diverse technology needs. Whether you’re a promising startup looking to colocate a few servers or an established enterprise with a sizable IT footprint, our data centers offer both retail and wholesale colocation arrangements to support your ongoing digital transformation strategy. Talk to one of our colocation specialists today to learn more about your migration and deployment options.

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