Who’s a Good Fit for Colocation?

who's a good fit for colocation

December 17, 2019

While cloud solutions continue to grow in popularity, they are by no means the right decision for every company or use case. Security and compliance are concerns for many industries and cloud solutions can become astronomically expensive as they scale. (Need proof? Just look at Lyft, who committed to spending $300 million with AWS in 2019-2021!) But on premise data centers are losing popularity as enterprises realize how complex they are to setup and maintain and how little business value they add to the organization in many cases. Because neither cloud nor on prem are perfect fits for every use case, colocation is seeing increasing interest from a variety of verticals.

So who’s a good candidate for colocation? Here are a few use cases that cause companies to consider colocation, either as their main solution or as part of a hybrid approach to data.

1. Companies Running Mission Critical Applications

Organizations simply cannot afford for their mission critical applications to be offline. In 2014, Gartner put the average cost of downtime at $5,600 per minute. Ponemon Institute put that number at closer to $9,000 per minute in a 2016 report. Applications — both internal and customer facing — must be online and available.

Building privately owned redundancy solutions is not very cost effective, but neither is the cloud if the app in question requires a lot of space (remember, scaling cloud solutions gets expensive). Colocation allows enterprises to easily craft and execute redundancy plans with infrastructure that is already in place. Many colo providers also have high level SLAs — like Evoque’s 99.999% — further ensuring that mission critical apps remain operational.

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2. Content Providers

Consumers have increasing expectations for low latency content delivery. Moreover, they have a very low tolerance when those expectations aren’t met and — thanks to social media — can be very vocal about their displeasure. Content providers know this and are continually looking for ways to get closer to the consumer. Colocation and the edge data center solutions they can provide allow content providers to always be close to end users, improving data delivery. It’s impractical for a single enterprise to build data centers in multiple cities, but with colocation it’s a simple ask.

3. Financial Institutions

When it comes to the security and compliance requirements within the financial industry, building on prem data centers is simply too expensive and complex. However, many of these features are already built-in at third party colocation providers. Depending on the provider, individual data centers may also meet many PCI DSS requirements, making it easier for organizations to achieve and prove compliance.

4. Healthcare

The healthcare industry faces similar security and compliance challenges as financial institutions. However, with the threat of large fines due to HIPAA, many healthcare organizations have historically been stuck managing their own data centers regardless of expense. For these organizations, colocation offers a promising solution. Data is kept out of the cloud and high-level security and compliance measures are in place just as it would be with a privately-owned solution. For healthcare organizations interested in colocation, finding data centers that meet HIPAA compliance standards is critical.

5. Growing Startups

When startups have been in business for more than a year and are experiencing accelerated growth, they often find it’s time to adjust their business model a bit. Early on, many startups choose a straight OpEx vs. CapEX model and use solutions like AWS, Azure, etc. However, as business grows, these startups can get killed on the egress charges levied by cloud providers. In order to better manage costs, many startups look at a colo hybrid model as they grow. This approach allows the organization to build out a footprint in a data center(s) while still getting a direct connection into their cloud providers of choice via a direct connection or a tethered connection (i.e. Megaport). It’s a more economical and efficient approach to growth, especially for young organizations that still may be budget conscience.

6. Organizations Connecting to Multiple Providers

Whether it’s for redundancy, reach, or any other reason, some enterprises need to connect to multiple network service providers or carriers. This is commonly the case for managed web hosting providers and informational services like IHS Markit, Edmunds, D&B.  Setting up multiple cross connects in an on premise solution is difficult, but colocation providers have the opportunity to be carrier neutral, giving organizations the options and flexibility they need. Not all colocation providers are carrier neutral however, so if this is a critical requirement make sure you vet potential providers carefully and ensure your required NSP is available in your chosen data center.

What’s Your Colo Use Case?

These are just a few examples of why companies of all sizes and across industries may work with a colocation provider. Colo offers a chance to create a balanced data center strategy that emphasizes security, connectivity, redundancy, and cost efficacy. As enterprises balance need and cost, colocation will continue to be a vital resource. So, what’s your colo use case?