Colocation

Large computers that provide data for others around the clock are called servers. They need a lot of power, generate a lot of heat, and must never fail. A normal office building is unsuitable for this. That’s why many companies rent space in a building that was built exactly for this purpose: with strong power supply, cooling, fast connections, and access control. This renting of space for one’s own equipment is called colocation. The company continues to own the machines; they simply stand somewhere else.

Why companies don’t leave their servers in their own basement

A company’s own server room is expensive, and permanently so. You need air conditioning, emergency power in case of a power outage, a fire alarm system, and technicians. These costs arise regardless of whether ten or a thousand devices are housed there. A colocation provider builds this once for hundreds of customers and spreads the costs. This makes it significantly cheaper for the individual company.

The second reason is connectivity. In large colocation facilities, many internet providers come together under one roof. Data then doesn’t have to travel across the country, just one cable further. This reduces latency, meaning the time between request and response. For online gaming, video streaming, and stock trading, this is the decisive factor.

It’s important to distinguish this from the cloud. With the cloud, you rent computing power on someone else’s devices and own no hardware yourself. With colocation, the equipment continues to belong to the company. You only rent the surrounding infrastructure. Anyone who needs special hardware or, for legal reasons, needs to know exactly where their data is located, often chooses colocation.

Racks, power, and cooling: what you actually rent

Servers are flat boxes that are slid into metal frames. These frames are called racks and are about two meters tall. What is rented is either part of a rack, a whole rack, or an enclosed cage with several racks. Billing, however, is rarely based on floor space. The actual measure is the amount of power you’re allowed to draw, measured in kilowatts.

That sounds strange, but there’s a simple reason for it. Every watt a server consumes ultimately turns into heat. This heat must be cooled away, or the devices shut down. Cooling is therefore the actual limit of a data center, not space. So a provider essentially sells power and the ability to remove the resulting heat.

On top of that comes security on two levels. Physically, there are fences, cameras, mantrap systems, and lockable racks. Technically, there are dual power paths, batteries for the first few minutes, and diesel generators for longer outages. Providers promise availability of often 99.99 percent per year for this. That corresponds to roughly one hour of downtime per year.

AI boom, stock prices, and a look at the neighborhood

Colocation providers currently appear constantly in business news. The reason is the demand for computing power for artificial intelligence. The specialized chips used for this consume many times more per rack than conventional servers. Old data centers can’t handle this power density, and new ones are being built at record pace. Increasingly, the bottleneck is the connection to the power grid, not the building site.

A second area is stock trading. Trading venues offer companies space directly next to their own trading system. A few fewer meters of cable mean microseconds of advantage. This practice is controversial because it makes speed something that can be bought.

In everyday life, you don’t notice colocation, but you use it constantly. A video stream starts quickly because copies of the film are stored in a data center nearby. Frankfurt also plays a role here: one of the world’s largest internet exchange points is located there, surrounded by many colocation facilities. Anyone reading news about locations, electricity prices, or data center floor space is almost always reading about this business.