Hyperscale vs. Colocation

Editor’s Note: This blog was originally published in August 2020. It has been updated to include the latest information.

Hyperscale data centers are on the rise: At the end of 2021, there were more than 700 of these large-scale facilities in operation globally, about 40% more than in 2018.[1] This rapid growth is expected to continue during the next few years, and it’s leading many enterprises to reevaluate their data center options to find the best model for their current and future needs.

In this blog post, we aim to help simplify that reevaluation for our readers by answering a few key questions:

• What is a hyperscale data center?
• What makes a hyperscale data center different from a standard colocation data center?
• Which use cases are best suited for hyperscale and colocation data centers?
• How can businesses use hyperscale and colocation data centers together to power a distributed, interconnected digital infrastructure?

What is colocation?

Colocation data centers allow businesses to quickly scale up their IT infrastructure using an as-a-service model. They’re typically used by companies that have outstripped the capabilities of their private enterprise data centers. Partnering with the right colocation provider can help a customer create an infrastructure deployment that’s customized to the exact needs of the business. In addition, customers can interconnect with other companies and service providers housed in the same facilities to scale their digital ecosystems and unlock new services and capabilities.

The two traditional approaches to colocation are retail and wholesale. The option that’s right for you will depend on the requirements of your business. To put things simply, retail colocation is when you’re one customer out of many housed in a data center, whereas wholesale colocation is when you have a significant amount of space within a data center that’s dedicated specifically to your business.

What is retail colocation?

In retail colocation, customers rent space in racks, cages or cabinets to deploy their own IT equipment. In this model, companies typically aren’t able to customize the space they acquire, but they do get instant access to many of the features they need to support their equipment, including cables, racks, power, cooling, fire suppression systems and physical security. You can think of it like staying at a hotel: You won’t be able to design your own room, but you will have access to the spa, the gym, the convention center, and various other amenities.

Retail colocation is a great fit for businesses on a digital transformation journey, as it can provide the flexibility needed to keep up with rapidly evolving IT requirements.

What is wholesale colocation?

Wholesale colocation may be the better option for businesses that expect their IT requirements to be more stable over time. If a company plans to store large volumes of data and run core business applications in the same place for the next 5 years or longer, wholesale colocation allows them to do that while also maintaining greater control over how the space is designed and built.

Wholesale colocation also requires companies to commit to lease much bigger chunks of space and power within the data center. Usually, they also need to provide their own resources to design and construct the space—including racks, cabinets, cables, and more—and the staff to run and maintain it.

Instead of reserving a hotel room, wholesale colocation is more like leasing property to build your own hotel; you have more control, but you’ll also have to dedicate significantly more time and resources. Wholesale colocation customers often include larger enterprises, content and media providers, cloud service providers, and hosting, managed services and telecommunications companies.

Many companies also combine the two approaches: leasing wholesale colocation space in locations where business growth warrants it and using retail colocation in areas with limited growth or evolving needs.

Colocation vs. hyperscale data centers

Now that we’ve made the distinction between the two colocation models, we can discuss what makes hyperscale data centers different from traditional colocation data centers. At the most basic level, it all comes down to size: Hyperscale data centers are typically 10,000 square feet or larger, while anything smaller than that would be considered a standard colocation data center.

However, it’s also important to consider the different types of customers that use these data centers, and how they use them. The thing that may be confusing for some is that hyperscale data centers do offer colocation services of a sort. The difference is that traditional colocation data centers support both retail and wholesale colocation, while hyperscale data centers only support the very largest wholesale colocation workloads.

What is a colocation data center?

Colocation data centers house many different customers that can acquire space using either the retail or wholesale model. Retail colocation space, including power and cooling, is offered as a monthly service contract, similar to how cloud services are offered. These contracts are typically measured in increments of 12, 24 or 36 months. Wholesale colocation space requires a longer lease, generally between 5 and 20 years.

As a vendor-neutral platform, our 240+ Equinix IBX® colocation data centers are interconnected across 70+ metros. Our IBX data centers are also home to dense ecosystems of networks, cloud providers, content providers, systems integrators and others, providing unique opportunities for businesses to collaborate, exchange services and data, and innovate together.

What is a hyperscale data center?

A hyperscale data center offers a specific type of wholesale colocation designed to meet the technical, operational and pricing requirements of hyperscale companies like Amazon, Alibaba, Meta, Google, IBM and Microsoft. These “hyperscalers” require massive amounts of space and power to support scaling across thousands of servers for cloud computing, big data analytics and storage tasks.

Hyperscale customers may choose to lease a dedicated floor within a data center or even an entire building. This dedicated space may provide up to 50 megawatts of power in one deployment. User-specific design criteria for things like power and cooling redundancy are also critical requirements. For instance, hyperscalers may want to work with data center operators that can provide renewable energy, thus helping them meet their sustainability goals.

Typically, a hyperscaler won’t allow other companies to connect inside its data centers. Instead, it places a network extension or network node into a nearby colocation data center, thus allowing all the companies in that facility to connect to the hyperscaler.

Equinix xScale™ hyperscale data centers are located near Equinix IBX colocation facilities, enabling hyperscalers to add core deployments to their existing footprint of access points on Platform Equinix®. This supports their growth on a single platform that can immediately span 70+ global metros while offering connectivity to customers and strategic business partners across a vibrant set of digital ecosystems. In many cases, the hyperscaler’s access point will be within an Equinix IBX data center, giving customers in those facilities low-latency access to the hyperscaler’s services.

In 2021, we announced a $3.9 billion joint venture with GIC, the sovereign wealth fund of Singapore, to support the growth of hyperscale facilities around the world. With the help of GIC and similar joint ventures, we’ve expanded the xScale portfolio into new markets:

• Latin America: In October 2021, we opened SP5x in São Paulo, the first xScale data center in the Americas.
• Asia-Pacific: In June 2022, we opened SY9x in Sydney, the first xScale data center in Australia.
• Europe: In September 2022, we opened MD6 in Madrid, the first xScale data center outside of the core FLAP markets (Frankfurt, London, Amsterdam and Paris) in Europe.

When our current xScale expansion plan is fully built out, we expect to have a total of 36 facilities delivering more than 720 megawatts of power capacity.

What’s next for data center design?

Data center design is becoming more modular and flexible to accommodate every level of need from the very largest (hyperscale data centers) to the smallest requirements at the edge (edge data centers). Platform Equinix, the world’s leading digital infrastructure and interconnection platform, enables any business to take a simple, repeatable approach to deploying in relevant locations around the world, regardless of which data center model they need.

Platform Equinix shortens the distance between companies and their users, customers and partners by providing a global footprint, fast interconnection services, and dense business, network and cloud ecosystems. With Platform Equinix, companies have a simpler and safer path to scaling their IT infrastructure and accessing the IT and business services they need, all on a reliable and secure global interconnection platform.

We’re also dedicated to helping our customers run their digital infrastructure in a sustainable manner, regardless of the amount of space and power they need for their deployment. That’s why we believe the data center of the future should be both clean and efficient. We’re achieving that by integrating the latest in sustainable data center innovations, including low-carbon fuel cells, high-density liquid cooling, and intelligent power management.

To learn more about data centers and how they can help meet your evolving digital infrastructure needs, read the Gartner report “How to Evolve Your Physical Data Center to a Modern Operating Model.”[2]

[1] Ray Le Maistre, “How many hyperscale data centres does the world need? Hundreds more, it seems,” TelecomTV, March 24, 2022.

[2] Jason Donham and Jonathan Forest, “How to Evolve Your Physical Data Center to a Modern Operating Model,” Gartner, March 29, 2022.