Co-location is one of a range of services offered by most hosting providers. The most basic hosting account just hosts a web site on one of their standard configured servers, often with several other web services customers. This has the advantage of being inexpensive for you and simpler for the hosting provider to handle - they have a standardized server that they use, which makes it easy to back things up for all their clients.



If all the clients using standardized hosting packages are low bandwidth, or low CPU usage clients, this is all well and good…and it is cheaper for the hosting provider to handle, and they charge less for it accordingly.

The next step up is a dedicated server. In this configuration, you are paying for a single server that hosts your web site (or web sites) rather than sharing a standardized hosting package. It costs a bit more (and often times a fair bit more) because the cost of the hardware and how it runs isn't being spread over multiple clients. Dedicated servers are also pre-configured to whatever your hosting provider considers the "normal package" of software, whether it has got SQL database support or a CMS.

Where most people move on from dedicated servers to co-location arrangements is when they need software or support that goes beyond what the standards are for their hosting provider. The typical example of this is wanting to use a specific set of customer service related applications (such as a customer relations management package, or a specific type of software for handling shopping cart and secure shopping applications). The simplest solution for the hosting provider is to clearly differentiate between what the customer has installed, and what they will support, and let the customer have a nearly free reign to install software as needed within those boundaries.

This type of co-location package is typical for server virtualization needs, although advanced virtualization is making co-location of dedicated servers less and less necessary. (Server virtualization is software that allows multiple operating systems to run virtually on a server, either multiple copies of the same operating system running different dedicated apps, or, in some of the more dedicated and challenging systems, different operating systems running on the same platform. From the perspective of a remote user, multiple virtual servers are nearly impossible to distinguish from multiple dedicated hardware setups.

There are other benefits to co-location arrangements. In many cases, you will own the server directly (this was the original meaning of a co-location agreement; now, many times, the hardware is leased from your provider and configured to your needs, the better to take advantage of economies of scale in both hardware purchasing and service and maintenance packages). Owning the server directly gives you some additional legal rights, including the ability to take dedicated control of the server and its data.

The other benefits of a co-location agreement are mostly physical. In particular for small organizations, co-location of a server means that there will always be support staff on hand, which is a significant improvement over manning your own server IT staff department. On top of this, most hosting providers providing co-location services offer better fire protection and physical protection of the servers themselves; the buildings are more secure, they have better (and electronics friendly) fire suppression systems and dedicated climate control, along with centralized backups.