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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 ?
Co-location facility built to meet high availability enterprise data center requirements
a premier Silicon Valley Co-Location and Managed IT Solutions Provider, announced today it has completed its SAS70 Type II audit and has achieved the compliance for its Co-location facility in Santa Clara, CA.
In a co-location facility, or Web server farm, your server is stored in an environment with other companies' servers.
MegaWorld will deploy the first BypaSS7 systems at its New York City Co-Location facility, with a total network build out scheduled for completion in 2001.
KVH"), Asia's leading information delivery platform providing integrated cloud and network solutions, today announced that CME Group has approved KVH as a provider of connectivity services into and out of the new CME Co-Location facility.
a leading provider of integrated communications services, has opened a co-location facility in its Cherry Hill, New Jersey office.
Over the years, we've invested more than $30 million into developing a solid foundation for a well-engineered co-location facility with redundant power, cooling and large variety of network feeds.
Southern Telecom's highly secure co-location facility in Birmingham, Ala.
The company's business packages are all custom-designed and include high-speed Internet access over dedicated SDSL, T1, or fiber running straight from the customer's premise to VoiceLift's co-location facility.
The new Toronto facility is the third Peer 1 Network co-location facility in the city and the second one located at 151 Front Street, the largest Telco hub in Canada.
The project entailed moving the company's data center to a co-location facility managed by Equinix in Silicon Valley, thus improving the reliability and security of information that InfoLink maintains for its subscribers.