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Colo or No? A SWOT Analysis for Utilizing Colocation Facilities

Before your business rents services and/or space in a colocation facility, you need to determine if that’s your best move when compared to keeping data-center-based IT operations in-house. The following analysis can help you weigh your choices. 

You wouldn’t want to rent space in a colocation data center if it would be more valuable to build, acquire, or expand an existing self-operated data center. There are so many considerations, from security to ease of updating software, that any business decision-maker without a clear idea of the trade-offs could easily make a choice they might end up regretting. 

One simple way to determine the pros and cons of running or expanding your own on-premises data center versus using a colocation facility is to perform a SWOT analysis. 

Swot analysis concept business man pointing fingerThe SWOT—strengths, weaknesses, opportunities, and threats—analysis of shifting to a colo should paint a clear picture of its overall performance and its likelihood to meet the needs of your business as a potential customer. An objective SWOT analysis gives you an unbiased, big-picture view of how moving your servers to a colocation facility could impact your business. 

What are the strengths of a colocation facility?

Colocation facilities have strengths that make them attractive to both small and large businesses. A couple of the obvious strengths of colocation facilities are that they have power and cooling resources to ensure uptime reliability and they have carrier-neutral network connectivity.

Additional strengths include:

1. Costs less than using a traditional data center

Colocation facilities rent space to many businesses, so you save both in initial infrastructure setup costs and by splitting ongoing costs with other users. Because you’re paying for just a share of the costs, you can enjoy the strengths of top-notch data center services without being burdened with carrying the entire cost on your own. Colocation gives even very small businesses data center services that they would not otherwise be able to afford.

2. Offers wide variety of connectivity options

In a colocation facility, you are not locked into having a single vendor to provide connectivity. Colocation facilities have a robust network infrastructure—including extensive cabling and fiber networks—that enables you to choose which internet service provider you want to use. You also have many options for network services and for cloud platforms to build a network that will expand as your business grows. 

3. Secures and protects technology assets

Colocation facilities have much better security than you could provide in an on-premises data center. They have extensive security layers that include physically securing your equipment installation, providing locking cabinets and/or cages, surveillance and alarm systems, and onsite staff 24×7 that keep your technology assets safe. In addition, colocation support staff monitor, troubleshoot, and prevent system failures, outages, and breaches.

4. Is scalable

On-premise data centers often can keep up the changing requirements of your systems. Colocation facilities have the ability to scale up to meet your growing business demands. Many colocation facilities scale space on demand, which means they can adjust with your changing needs. Additionally, your infrastructure can connect to other data centers and public cloud providers, including other national or global locations of the company you’re colocating with, which can give you a global presence with high responsiveness.

5. Offers flexibility for users to have as much or as little hands-on control as they want

If you want to, you can manage your own infrastructure when you use a colocation facility. You can purchase your own equipment and you can define your infrastructure’s security strategy. You don’t have to depend on or wait for someone else to do these things.

6. Has expert staff to support technology assets

You manage your own technology assets in a colocation facility, but you have access to facility experts who can help you when you need or want it. They can do everything from the initial installation to expansions and upgrades, and they will perform these tasks flawlessly. This is a compelling reason why small businesses that don’t have IT professionals in-house choose colocation facilities.

7. Decreases a business’s capital expenditures

Lowering capital expenditures is another strength of colocation facilities. If you have an on-premise data center, you are spending a lot of money to update and upgrade your facility and your equipment to keep pace with technology and business growth. In a colocation facility, you are sharing the cost with other businesses (this is an operational expenditure as opposed to a capital expenditure), so you can free up the amount of money you need to allocate to capital expenditures.

8. Amenities

Some colocation facilities offer their clients amenities such as data center lifts, short and long term storage, showers, shared or dedicated office space, conference rooms (where you can do presentations or training sessions), and complimentary food and drink.

What are the weaknesses of a colocation facility?

Businessman looking through binoculars, and is on the money. Happy man in a business suit thinking about investments. A man looks into the future. Vector illustration in a flat style1. Pay build-out costs as long as you are there 

The build-out costs of a data center are higher initially when you’re building your own, but they are one-time costs. Colocation facilities build those costs into their price and charge that pricing (with the initial non-recurring build out costs included) forever. It’s similar to leasing a car instead of buying a car. When you lease a car, you never stop paying.

2. No control over your tenancy 

When you have an on-premise data center, you have complete control over every aspect. You make the decisions about whether you stay on site or you move to a data center or to the cloud. Colocation facilities, on the other hand, make decisions about your tenancy for you. If you are among a certain type of client (size, power usage, etc.) they want to eliminate, then you have to move.

3. No control over management of the business

When you have an on-premise data center, you control how the business end is managed. In colocation facilities, you do not. If the colocation facility owner mismanages their business and is forced to close, you may need to move.

4. No control over occupancy 

Colocation facilities are built in areas where the owners believe they will have a high occupancy rate. This can be speculative because it’s based on what the owners anticipate in the future for the area where colocation facilities are being built. But anticipated growth doesn’t always turn into actual growth, so your colocation facility could shut down because they have a low occupancy rate or they could sell the facility to a non-colocation company. Once again, you would have to move.

What are the opportunities of a colocation facility?

Opportunities in colocation facilities exist, although businesses may not immediately recognize them. Some of the colocation opportunities include:

1. Reduced or no need for in-house IT staff

When you rent space in a colocation facility, you have access to trained professionals who will set up and install your equipment and who can perform maintenance and upgrades. If you have IT staff, and this is their primary function, you can eliminate that cost by moving to a colocation facility.

If you have IT staff that is a mixture of infrastructure support and development, you can eliminate the infrastructure support if you’re in a colocation facility. Another opportunity exists for your developers to focus solely on application development without having to worry about whether the current infrastructure and operating systems will support their applications. This will reduce development times and costs.

2. Lower costs because of promotions or deals

Colocation facilities sometimes offer promotions or deals that are related to certain usage patterns, hardware setups, or to specific times of the year. For example, colocation facilities might offer a seasonal equipment tune-up (maintenance and/or upgrades) at a discounted price, or they might offer a promotion that can save you money if you fall within a certain amount of usage.

3. Future growth

Most colocation facilities are in the growth business. A colocation facility might not have what you need now, but they may have a major expansion planned for the near future that is exactly what you need. You can ensure that you have a space once that expansion is complete.

Your business is on a growth trajectory as well. A colocation facility may have resources that you don’t need today, but you anticipate needing within a year or two. You can seize the opportunity to be in a colocation facility that can handle that growth seamlessly.

What are the threats of a colocation facility?

The threats of a colocation facility may not be apparent, but they should be considered because of the required investment in a colocation facility, and the cost to you if you make a decision that is not right for you. Some of these threats include:

Safe data file document transfer concept.1. No plans for expansion

If a colocation facility isn’t planning for future expansions, then what it has now is all that will ever be available. If you know you are going to outgrow it, then you will have to find another colocation facility that can meet your needs. You will incur all the moving costs and initial facilities costs of moving to the new colocation facility. And you may have higher monthly costs that you didn’t budget for when you chose the first colocation facility.

2. Your applications need to move to the cloud

Colocation facilities are where your physical infrastructure lives. Either you physically maintain, update, and upgrade it, or the colocation facility’s staff carries out those activities.

However, if your applications need to move to the cloud, then you no longer need to keep the physical equipment you have in the colocation facilities. Cloud providers take care of the infrastructure (including dedicated servers, if you need them, which the cloud provider maintains, updates, and upgrades if necessary).

Migrating applications that were not written for the cloud (cloud-native) can be quite expensive. You will need to contract with a professional cloud development team to rewrite your applications to take advantage of what the cloud has to offer. Additionally, you will have a lot of physical equipment that you’ve paid for; you’ll never recoup the money you invested in it. And, colocation facilities are leased spaces, so if you need to move your applications to the cloud before your lease expires, you will still have to pay for the remaining time.

Is a Colocation Facility Right for Your Business?

Only you can answer that question. Our SWOT analysis gives you an objective way to evaluate whether it is the best option for you now or in the future. If you do decide to use a colocation facility, be sure you have the right tools for the job. Rent or purchase your own data center lift to make sure every piece of valuable hardware gets transported and installed safely. 

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