Hyperscale vs. Colocation

Choosing the right digital infrastructure model for your business

Michael Winterson
Hyperscale vs. Colocation

Hyperscale data centers are on the rise – in 2019, there were more than 500 of these large-scale facilities, nearly 30% more than 2017.[i] The rapid growth in these massive data centers has many clients reevaluating their data center space options to find the best model for their current and future needs.

Trends Driving the Multi-tenant Data Center and Services Industry 2020

This 451 Research analyst report looks at the growth in the industry, expected trends and how data center providers are responding to the growing requirements from customers as they accelerate their cloud and edge strategies.

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To help with these considerations, we’ll review what a hyperscale data center is, how it differs from a colocation data center, the use cases these options support, and how they can work together to power a digital infrastructure. We’ll also look at the future of the data center and the role virtualization will play.

Retail vs. wholesale colocation

When a company’s IT requirements scale beyond their on-premises capabilities, many choose to deploy infrastructure into one or more colocation facilities and interconnect with other companies and service providers housed in the same facilities to meet their needs. The two traditional approaches to colocation are retail and wholesale. The optimal colocation model depends on a company’s requirements. Retail typically offers more flexibility while wholesale provides more control.

Retail colocation

In retail colocation, companies rent rack, cage or cabinet space for deploying their own IT equipment. In this model, companies have limited control over the space, but the cabling, racks, power, cooling, fire suppression systems, physical security and other amenities are immediately available. Think of it as reserving a hotel room. There are only a certain number of room designs, but you can take advantage of all the existing amenities: spa, gym, restaurant, convention center, etc. Retail colocation makes sense if you’re on a digital transformation journey, and you need maximum flexibility for evolving IT requirements.


In 2019, there were more than 500 hyperscale data centers, nearly 30% more than 2017

Wholesale colocation

In some cases, a company’s requirements may be more stable – for example, if it plans to store large volumes of data and run core business applications in the same location for the next ten years. In this scenario, a wholesale colocation approach might work better as it can provide more control at an optimal cost. A wholesale model allows companies to determine how the space is designed and built, but it also requires a commitment to lease much bigger chunks of space and power, commonly based on one or more discrete power distribution units, such as a 2 MW generator.  Usually they also need to bring all their own resources to design and construct the space: racks, cabinets, power, etc., as well as the staff to run and maintain the space. Instead of simply reserving a hotel room, this is more like leasing property to build your own hotel – more control but also more time and expense. Wholesale colocation customers often include larger enterprises, large content and media providers, large cloud service providers, as well as hosting, IT managed services and telecommunications companies.

Many companies also combine these approaches, leasing wholesale data center space in locations around the world where their business growth warrants, while using retail colocation in areas with limited growth or evolving needs.

To see how interconnecting with companies and service providers in a colocation facility can help you achieve an ROI of 328%, read this Forrester report.

Retail vs. hyperscale data centers

With the distinction between retail and wholesale colocation clear, we can now discuss the differences between retail and hyperscale data centers.

Retail data centers

Retail data centers house hundreds or thousands of client companies that can acquire colocation space using either the retail or wholesale model. Retail colocation space, including power and cooling, is offered as a monthly service contract, similar to the way managed services and cloud services are offered. These contracts are typically measured in 12, 24, or 36-month increments. Wholesale colocation space always requires a lease, generally 5 to 20-year contracts.

Equinix was recognized as a leader in the recent IDC MarketScape report on Worldwide Colocation and Interconnection Services. According to the report, the best colocation providers “will offer a wide range of network providers, internet exchange (IX) facilities, and access to major cloud providers.” As a vendor-neutral platform, our 210+ Equinix International Business Exchange™ (IBX®) data centers are interconnected physically and virtually across 55 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.

Retail colocation is like reserving a hotel room – you don’t get to choose the room design, but you get access to all the amenities. By contrast, wholesale colocation is more like leasing property to build your own hotel.

Hyperscale data centers

A hyperscale data center is a type of wholesale colocation engineered to meet the technical, operational and pricing requirements of hyperscale companies, such as Amazon, Alibaba, Facebook, Google, IBM, Microsoft and a handful of others. These “hyperscalers” require huge amounts of space and power to support massive scaling across thousands of servers for cloud, big data analytics or storage tasks – for example, an entire floor of a building or even an entire building, with 10, 20, 50 megawatts of power. User-specific, tailored design criteria such as specific power and cooling redundancy are also critical requirements.

Typically, a hyperscaler doesn’t allow other companies to connect inside its data centers. Instead it places a network extension or network node into a retail facility, allowing all the companies in the retail facility to connect to the hyperscaler. Equinix xScale™ hyperscale data centers in Europe and Japan are located near existing Equinix retail facilities, enabling hyperscalers to add core deployments to their existing access points footprints on Platform Equinix®. This supports their growth on a single platform that can immediately span 55+ global metros and offers direct interconnection – within a vibrant set of ecosystems – to their customers and strategic business partners. In addition, since in many cases, the hyperscaler’s access point will be within an Equinix IBX data center, all colocators in those facilities can benefit from high-performance, low-latency access to the hyperscaler’s services.

Looking ahead

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 edge requirements (edge data center). Platform Equinix, the world’s leading interconnection platform, enables any business to take a simple, repeatable approach to creating points of presence (POPs) 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 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.

To learn more about the trends driving the data center industry, download the white paper.

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[i] Analysts: There are Now More than 500 Hyperscale Data Centers in the World

A hyperscale data center is a type of wholesale colocation engineered to meet the technical, operational and pricing requirements of hyperscale companies that require huge amounts of space and power.