Locating customer equipment in a third-party datacenter. Colocation often refers to 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. Colocation eliminates having to build a secure facility that provides power and air conditioning for company-owned servers. In addition, colocation centers are often located near major Internet connecting points and can provide access to multiple Tier 1 Internet backbones. Although most equipment monitoring is performed remotely by the customer, a colocation datacenter may offer equipment maintenance and troubleshooting arrangements.
Other Colocation Scenarios
The term stems from the telephone industry when one telco would house the equipment of another to facilitate interconnections. Another type of colocation could be a computer distributor or online retailer who locates its warehouse within a PC manufacturer's facility to improve turnaround time to customers. Contrast with managed services
. See cloud computing
and ping power pipe
Colocation Earns Millions
High-frequency trading firms are able to colocate their servers next to the servers on the stock exchange floors to reduce travel time in executing orders. According to the July 2, 2010 issue of "THE WEEK" magazine, and as extraordinary as it may seem, studies revealed that shaving one millisecond from every trade could be worth $100 million to a high-speed trading firm over the course of a year.