In-House Data Center vs. Colocation

Making the Right Decision for Your Data Center

There comes a time when each organization must make—or re-make—a decision about its data center(s).

In some cases, rapid expansion causes small company to outgrow the days of a server or two in a closet down the hall. The question becomes where and how to meet the new, more elaborate IT requirements.

In other cases, data centers are reaching the end of their functional lifespan, and the organization must decide whether to upgrade the facility or move to a colocation. In still other situations, strained budgets send the CIO in search of savings, and shared data center facilities can look attractive.

Notwithstanding the need for capacity and cost-savings, many a CIO prefers to retain ownership of the IT organization’s most valued assets. Here we look at two options to do that, each with its unique advantages.

In-House Data Center/Server Room

The in-house data center or server room is an on-site IT facility fully outfitted and managed by the enterprise’s IT department. It exists in space within the company’s or organization’s offices or campus and all cooling, power and backup, bandwidth, and security requirements are met by the company/organization itself.

In some cases, enterprises will lease surplus space in their own data center to third parties to help defray costs.


  • It’s all yours, to modify and expand as you see fit.
  • Hardware is on site, allowing staff convenient access for maintenance and troubleshooting.
  • Security and uptime are the full responsibility of the IT department, enabling the implementation of tailored measures.
  • In-house data centers provide full data access control appropriate for organizations with Sarbanes-Oxley, HIPAA, and other regulatory requirements.
  • There are no changeable licensing costs or SLAs to worry about.


  • The responsibilities for all aspects of infrastructure provisioning and data center management fall to the in-house staff.
  • Construction costs fall to the enterprise, and operations costs for in-house data centers can be higher than for colocations.
  • Redundancy can be more challenging. Small and mid-sized organizations and institutions may struggle to afford divergent internet connections and robust emergency backup facilities.
  • On-site disaster recovery facilities do not provide recourse in case of catastrophe.
  • In-house facilities can be a barrier to geographic expansion.


A colocation facility is generally defined as a shared data center space in which a business or other organization can rent space for servers and other hardware. Generally speaking, the colocation provides the building, HVAC, power, internet bandwidth, and physical security, and the customer supplies and maintains the hardware. Although there are different leasing arrangements and SLAs, space is often leased by the rack, cabinet, or room.

Sometimes additional management services are offered, but a colocation is not a public cloud or outsourced IT solution.


  • Shared colocation facilities can reduce costs. Cooling and power costs are spread across multiple customers, and colocation facilities tend to have the volume required to negotiate better contracts with internet providers than a single company can.
  • Redundant internet and power connections are generally offered and can help maximize uptime.
  • Colocation providers may offer mirrored data centers for disaster recovery purposes, so that a local outage or disaster will have minimal impact on operations
  • Many colocation providers offer high-end physical security features, which could be difficult to afford at an in-house data center.


  • IT equipment remains at some distance from the staff maintaining and troubleshooting it.
  • Initial set-up fees and licensing costs can be prohibitive, and the transition to colocation can be an expensive undertaking that entails some risk.
  • Depending on the contract, the client may not be able to schedule maintenance downtimes, and physical access can vary. 24/7 access should be stipulated if it’s expected.
  • Bandwidth between the company/organization and its equipment can decline and latency problems can arise.
  • The company or organization remains responsible for compliance with regulations, such as Sarbanes-Oxley, even if the colocation provider is the source of the problem.

The Bottom Line

Colocation providers vary in quality, and the contracts run the gamut in terms of services at what cost. The existing investment in an on-site data center facility versus the costs associated with moving to a colocation can also come into play.

What does not change is the need for a high-quality hardware maintenance and support solution. Park Place Technologies can provide robust support for a wide range of IT hardware, whether located at a client facility or housed in a colocation center. And we can save customers up to 60% off the costs of OEM contracts. We can even assist in the transition from in-house to colocation, as needed. Contact us for more information.