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What Is Colocation? How Does it Enable Modern Digital Infrastructure?

Beyond space and power, modern colocation provides access to powerful digital infrastructure services and ecosystems

What Is Colocation? How Does it Enable Modern Digital Infrastructure?

In the digital economy, the companies that best manage their data will be the ones that thrive. That said, modern data management is a complex, multifaceted endeavor. Businesses must account for:

  • Acquiring the right data—from internal systems, business partners and customers
  • Segmenting and prioritizing data based on latency and security requirements
  • Moving the right data at the right speed to balance performance and costs
  • Storing data in the right locations—securely and cost-efficiently
  • Processing data in the right locations
  • Keeping data protected, whether it’s in use, in transit or at rest

These points illustrate why business leaders often consider their data strategy a core element of their future success. Colocation data centers have become a pivotal component in the evolution of data and its role in business. By enabling enterprises to deploy at the crossroads of their network backbones, digital ecosystems, and edge networks, colocation services have become an important part of many companies’ data management strategies.

Modern colocation services have adapted to a changing world

Traditionally, colocation meant a business deploying its own hardware inside a physical data center owned and operated by a third party. This was a valuable alternative to the private data centers that were the standard in the early days of enterprise IT. Companies no longer had to worry about acquiring space and power for their equipment, which freed them to focus on more important things—like developing new products and serving customers better.

The way companies use data has changed, and the way they use colocation services must change accordingly. In the past, most colocation users were primarily concerned with getting the space and power they needed while keeping costs low. Now, businesses are handling more data from more sources and using it to enable advanced applications, and their priorities are changing.

Today, colocation is often the foundation for a business’ global digital infrastructure strategy, from which they can access on-demand services such as virtual networking and automated bare metal. Colocation data centers have also become the neutral gathering place of the digital economy, helping enterprises unlock more value by interconnecting easily with service providers and business partners.

There are three main factors that help explain the shift in how and why enterprises are consuming colocation data center services:

  • The importance of distributed applications at the digital edge
  • The prevalence of hybrid IT infrastructure
  • The growing demand for sustainable IT operations

New digital applications drive the need for distributed infrastructure

New technologies like generative AI have gone from science fiction to everyday reality in just a few short years. The common factor behind all these new applications is that they consume a lot of data, and they need that data processed without delay.

Consider the Internet of Things (IoT): There are now billions of connected devices across industries, from manufacturing to logistics to retail. These devices all exist to help businesses gain greater visibility and optimize their operations. They produce a constant stream of data that must be processed in near real-time to capitalize on the business insights found in that data. For this reason, IoT devices are extremely sensitive to all forms of latency.

There’s an upper limit to how quickly data can move from source to processing location, which means that moving data long distances will inevitably create network latency. This explains why businesses can no longer rely solely on data centers in one or two core locations. They need access to data centers distributed at the digital edge, so that they can process data closer to the source.

Working with a colocation provider that has a global data center footprint can help address this need. For instance, Equinix IBX® colocation data centers can be found in 70+ markets on six continents, including many important edge metros.

Hybrid infrastructure presents new opportunities—and new challenges

The value that cloud services offer is now widely recognized, but there’s no simple, one-size-fits-all approach to acquiring those services. Working with more than one cloud provider can help optimize costs and ensure flexibility. Also, savvy business leaders recognize that cloud should be a supplement to colocation, not a replacement. In short, a hybrid multicloud architecture generally delivers the best results for most businesses.

However, this creates a new challenge: interconnecting the components of the hybrid multicloud environment to keep them working well together. Ensuring secure, high-performance multicloud networking is often extremely difficult, especially when organizations rely on the public internet and/or proprietary networking tools from the cloud providers themselves. Instead, a dedicated multicloud routing solution such as Equinix Fabric® Cloud Router can help avoid bottlenecks and keep data moving between all your different cloud and on-premises environments.

Many enterprises also struggle to use cloud services without sacrificing control over their data. Placing data in cloud native storage can lead to higher costs and limited flexibility, as businesses may not be able to easily move data out of the cloud when the need arises. This is where cloud adjacent storage can help. Essentially, this means storing your data near multiple clouds, but not in any particular cloud. This allows you to access cloud services on demand, while maintaining your data in a secure, neutral environment. Equinix customers can deploy cloud adjacent storage using our colocation services or Equinix Metal®, our dedicated bare metal solution.

Colocation and digital services can help meet sustainability goals

One function of early colocation services was to provide reliable energy wherever businesses needed it to power their IT equipment.  We still provide energy on behalf of our customers, but we’re increasingly focused on making sure it’s the right energy. That is, we know our customers want renewable energy to help meet their decarbonization goals, so we’re working to help give it to them.

We’ve pledged to achieve 100% renewable energy coverage globally by 2030. Our most recent annual sustainability report shows that we’ve reached 96% coverage across our global operations. We’ve made progress via a multifaceted strategy that includes signing power purchase agreements to support renewable energy projects across the globe.

In addition, modern colocation customers want to work with providers that offer efficiency innovations. This is largely because high-density applications like AI will place new demands on data center cooling systems. To support these new applications while ensuring energy efficiency, colocation providers will offer new liquid cooling techniques. Equinix has tested liquid cooling extensively in our data centers, and we’ve begun using it to support production servers.

The future of colocation is today

Whether it’s enabling distributed infrastructure, hybrid multicloud or efficiency innovations, businesses are asking more from colocation providers than ever before. At Equinix, we’re committed to meeting those expectations via our global footprint of Equinix IBX colocation data centers, our advanced digital services like Equinix Fabric and Equinix Metal, and our documented sustainability leadership.

To learn more about how colocation and digital infrastructure services are evolving to keep up with a changing business world, read our vision paper The future of digital leadership.

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