What is Colocation?

Colocation is a type of Internet hosting, often used by small businesses. It is a type of hosting that is useful for a company who wants something more than basic web hosting from a web hosting company, but doesn't have the requirements for hosting their own server.
Many web hosting companies offer rack space for colocation. Colocation works by hosting companies renting out this rack space within their data centres for other businesses to place their servers. These businesses will buy their own server, which they will configure and alter when necessary. This will then be placed in the rack space they have bought from the hosting company. The hosting company isn't actually involved with the server in any way; they just own the rack space which they rent out to businesses to do with as they please. This means that the business owns the server just as they would if they had the server at their own site, but they use certain resources provided by the hosting company.

The hosting company will provide the bandwidth, power and the right air and temperature conditions for the server to operate in. Responsibilities with regards to the server are completely in the hand of the business that owns it. Whenever maintenance needs to be done, the business that owns the server will have to go to the data centre and do this themselves.

Businesses that get the greatest benefit from colocation are those than need to run their own website, email and perhaps a database, while keeping complete control.

They will not have to rely on a hosting company; if they need something doing they just do it themselves. Colocation is a type of hosting that has increased fairly rapidly over the last few years. As more businesses have the demand for extra needs on top of basic web hosting, colocation is a good alternative to hosting their own server. Colocation is more expensive than web hosting, but can be significantly cheaper than some of the other options.

With colocation a business runs its own server. This gives them much more control over their server, and has many of the same strengths of hosting the server themselves. There is a lot less work and expertise needed though. This saves them both time and money. A disadvantage is that if something goes wrong or needs changing, they will have to do it themselves.

Colocation has many benefits over other types of hosting. If a business needs more control over their hosting than they currently have but does not want to host their own server, then colocation is one of the alternatives.
source: Andrew Marshall
Colocation