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Locating customer equipment in a third-party datacenter. Colocation often refers to Internet service providers (ISPs) or cloud computing providers that furnish the floor space, electrical power and high-speed links to the Internet for a customer's Web servers. Colocation eliminates having to build a secure facility that provides power and air conditioning for company-owned servers. In addition, colocation centers are often located near major Internet connecting points and can provide access to multiple Tier 1 Internet backbones. Although most equipment monitoring is performed remotely by the customer, a colocation datacenter may offer equipment maintenance and troubleshooting arrangements.

Other Colocation Scenarios
The term stems from the telephone industry when one telco would house the equipment of another to facilitate interconnections. Another type of colocation could be a computer distributor or online retailer who locates its warehouse within a PC manufacturer's facility to improve turnaround time to customers. Contrast with managed services. See cloud computing and ping power pipe.

Colocation Earns Millions

High-frequency trading firms are able to colocate their servers next to the servers on the stock exchange floors to reduce travel time in executing orders. According to the July 2, 2010 issue of "THE WEEK" magazine, and as extraordinary as it may seem, studies revealed that shaving one millisecond from every trade could be worth USD $100 million to a high-speed trading firm over the course of a year.
References in periodicals archive ?
Lightower Fiber Networks, the premier provider of all-fiber, high-performance networking solutions delivered over its own network, has broadened its data center infrastructure footprint with a new 30,000 square foot colocation facility located at 1309 Noble Street in Philadelphia, the company said.
Coriant, a global supplier of SDN-enabled end-to-end packet optical networking solutions, today announced that the Coriant Groove G30 DCI Platform is being deployed to light the first high-speed connections in the New Jersey Fiber Exchange's (NJFX) innovative carrier-neutral colocation facility, which celebrates its Phase II Launch on September 21, 2016 in Wall Township, New Jersey.
CRG West, one of the largest managers of network-neutral data centers in the United States, will soon open its first New York City colocation facility at 32 Avenue of the Americas, the high-tech Tribeca office building owned by the Rudin family.
Moving servers and related equipment off-site to a colocation facility can solve both of these problems.
the pan-European operator of carrier-neutral Information Technology (IT) MegaPlexes, has launched its fourth IT MegaPlex colocation facility, located in Milan, Italy.
Additionally, the company said it has bought a colocation facility at 210 North Tucker from 365 Data Centers.
DataMatters has put its live IT systems within Zen's colocation facility, which means it was able to reduce data network traffic bottlenecks at its main site which is designed to improve performance.
Under the terms of the agreement, Level 3 will continue to provide private line and Ethernet-based high-speed Internet services to i/o Data Centers' Scottsdale ONE colocation facility.
Proserve needed to relocate to a new higher power density colocation facility from which they could deliver their services, and euNetworks' Amsterdam Datacenter was able to deliver the necessary power and cooling.