infrastructure//data center//colocation

Colocation is the renting of space, power and cooling inside someone else's data center while keeping your own servers, and it is how a company gets an industrial-grade building without building one. The operator runs the power chain, the cooling, the physical security and the connections to carriers; the customer brings and manages the hardware. It sits between owning the whole site (on-premises infrastructure in its purest form) and renting computation itself (cloud computing), where the provider owns the servers too.

Colocation is the renting of space, power and cooling inside someone else's data center while keeping your own servers, and it is how a company gets an industrial-grade building without building one. The operator runs the power chain, the cooling, the physical security and the connections to carriers; the customer brings and manages the hardware. It sits between owning the whole site (on-premises infrastructure in its purest form) and renting computation itself (cloud computing), where the provider owns the servers too.

The market splits by how much of the building one customer takes, and the split is worth knowing because each tier is bought differently:

Retail colocation sells by the rack or the cage, from a few kilowatts upward, in halls shared by many tenants. The customer pays for power and space at a premium and gets flexibility, carrier choice and a short contract; it suits a company that needs a few racks near an internet exchange.

Wholesale colocation leases whole halls or suites of roughly a megawatt and up, often for ten years or more, with the customer fitting out the room. The price per kilowatt is lower and the commitment much larger; cloud providers and large enterprises use it to grow faster than they can build.

Hyperscale data centers are campuses of tens to hundreds of megawatts built for one operator (a cloud provider or a large AI lab), either self-built or delivered by a developer on a long lease (hyperscaler).

The unit of sale is power.

A colocation contract is priced and limited by the kilowatts per rack or the megawatts per hall the operator can deliver and cool (power density), so an old hall with plenty of empty floor can still be useless for AI hardware that needs ten times the power per rack.

What the customer still owns is everything inside the rack: servers, their failures, spares and the staff (or the operator's paid remote hands) who swap them, which is why colocation keeps most of the total cost of ownership of hardware while removing the building from it.