Today we are going to be talking about colocation pricing.

We have been been in the IT and colocation service industry for more than 30 years and we would love to share our expertise and knowledge with you.

In this guide, we’ll clear up any confusion you might be feeling about all the terms and choices in colocation pricing – and we’ll show you how to get the best price too. So, let’s get started.

Colocation Pricing Chapters

1. What Impacts Colocation Pricing
2. How Does Rack Pricing Work
3. How to Lower Colocation Costs
4. Cost of Colocation in Atlanta
5. Cost of Colocation by City
6. Pros and Cons of Colocation by City
7. Colocation vs. Dedicated Server
8. Difference Between Hosting Methods
9. Difference Between Tier 1, Tier 2, Tier 3, Tier 4 Data Centers
10. What Features to Look for in a Data Center
11. How to Look for Hidden Colocation Fees
12. How to Negotiate Colocation Pricing Contracts
13. How to Get Quotes Quickly
14. How to Compare Colocation Quotes
15. Colocation Tips For Businesses
16. DSC Colocation Services

1. What Impacts Colocation Pricing?

Colocation Pricing – an overview

Colocation hosting is quickly becoming more common as businesses find themselves dependent on their IT equipment and the necessity of having their data secure and available at all times. Many companies don’t want the hassle of constantly maintaining and monitoring their equipment, and others don’t have the infrastructure or expertise to do it themselves.

This is because your equipment needs to be housed in a reliably regulated, temperature-controlled facility that is secure while at the same time relatively accessible. 

One of the best alternatives to housing and maintaining your own servers and equipment is to choose colocation hosting, where you rent space for your own servers in a data center that is specifically designed to keep computer equipment operating in an optimal environment. But how much does colocation cost?

data center technician

Colocation hosting is becoming more popular – Source:  Photo by Jesse Orrico on Unsplash

Your business is unique and your requirements will vary from other businesses and so will your colocation pricing. There are a few main factors that determine the price you will pay for colocation hosting. These include:

Rack Space:

Data centers are equipped with racks that are designed to hold servers and other IT equipment. Rack space refers to the physical amount of space that your server(s) will take up on a rack.


You will find that you will need to pay an initial set up fee when you begin colocation hosting. Your equipment will need to be physically moved to the data center and then installed. This setup requires time to perform and may be done by the internal team at the data center or someone in your IT department.


You will also require an Internet-based VPN connection, which will be the way that you can access your equipment at the data center from your office. Often, you will need an above-average bandwidth to compensate for the distance between the two locations so that your software can operate at high enough speeds. You may also need to purchase dedicated IP addresses as your current Internet Service Provider may not service the data center that you are going to use.


Colocation is not a managed service, however, some data centers may provide this service for an additional fee. You will need to determine who will be responsible for monitoring and maintaining your equipment at the data center. If you are going to be doing that yourself, you will need to make sure that you send someone to the data center on a regular basis. Another option is to pay for an outsourced provider to be responsible for monitoring your equipment on a regular basis.


You need to decide if you will monitor your equipment or pay for that to be done for you – Source: By Bill Branson (Photographer) [Public domain or Public domain], via Wikimedia Commons.

2. How Does Rack Pricing Work?

Colocation pricing is largely determined by the amount of space your equipment takes up. In order to understand how colocation pricing works, it is helpful to learn some of the terms used when figuring out the cost and what those terms refer to.


The unit of measurement used when talking about rack space is “U,” which is equal to 1.75 inches in height. For example, a piece of equipment that is 3.5 inches high would take up 2U of rack space.

Full Rack:

In data centres, a typical full-sized rack cage is 42U high and either 19 or 23 inches wide. The individual pieces of equipment held on these racks are usually anywhere from 1U to 4U high. Most rack-mount servers take up 1-2 Us of space.

Half Rack:

The term half rack can be used to refer to:

  • A piece of equipment that only takes up half the width of a rack frame – two such pieces of equipment can be placed side by side on a rack.
  • A piece of equipment that only takes up half the depth of a rack frame – two such pieces of equipment can be placed on the same rack, one in the front and one at the back.
  • A rack enclosure that is half the height of a full rack (22U tall).

Rack space diagram –  The following image shows a rack with sample component sizes including an A/V half-rack unit.

Rack Space

Colocation pricing is based on how much rack space you use – Source: Wikipedia

3. How to Lower Colocation Costs

Choose a Smaller Data Center

In general, larger data centers will charge higher fees. By choosing a smaller data center, you will probably not only enjoy more cost-effective prices, but you can also take advantage of the great benefits of working with a smaller company.

First of all, you will be able to get to know their staff and they will know you as well. You won’t be just another number to them. This means better and more customized customer service, as the staff of the smaller data center will be familiar with what your business is about and your special requirements.

Secondly, each client is vital to a smaller business. The larger the business, the less important it is to lose one or two customers along the way. Therefore, you may find that the customer service at a larger business is less attentive than that of a smaller one.

Choose a Data Center Located in the Suburbs

Data centers located in the suburbs are also usually less expensive than those located in a downtown core. This is because rental and real estate prices are higher in city centers than they are outside of the city. The data centers in large cities have to charge more to make up for their higher costs.

In addition, if you have to visit your colocation provider in a downtown location, you will also have to pay large parking fees or even have difficulty finding parking at all. In contrast, the data centers in the suburbs usually have lots of free parking!

smaller data center

A smaller data center located in the suburbs will usually cost less

4. Cost of Colocation in Atlanta

Atlanta is one of the best places for colocation services as it offers reliable connectivity, abundant power, a low risk of natural disasters, great transportation, and lots of opportunity for expansion. Because of its great colocation environment, there are many data centers already in Atlanta.

This is good news for businesses looking for the best colocation pricing, as these centers are competing for your business. The high degree of competition means that you should be able to get the best deal possible for your colocation needs.

If you choose a smaller data center located outside of Atlanta, such as Digital Service Consultants, then you will enjoy all of the benefits of a data center in Atlanta with even more savings and convenience. DSC is a lower cost alternative to the larger data centers in Atlanta.

DSC is locally owned and operated, so we know Atlanta much better than the large corporations that are based outside of Georgia. We can offer you the personal service that you need at a price you can afford! We will customize a colocation pricing package that will suit your needs and budget perfectly. Contact DSC today for a free quote.

Atlanta is a great place for colocation services

5. Cost of Colocation by City

Data centers usually charge a monthly fee for their colocation hosting that includes a set amount of bandwidth and IP addresses. 

Average monthly fees can range anywhere from $45 to $300 per U per month. The following are average price ranges for some of the top data center cities in the United States. These ranges are per U per month.

  • Boston: $50 to $200 per U per month
  • New York City: $75 to $300 per U per month
  • New Jersey: $100 to $300
  • Washington DC: $79 to $150 per U per month
  • Atlanta: $45 to $100 per U per month
  • Miami: $40 to $100 per U per month
Data Center

Colocation Pricing will vary by city

6. Pros and Cons of Colocation by City

The following are some pros and cons to choosing a colocation provider in some of the most popular cities for this service in the United States.

New York

Pros: One of the largest cities in the world and known world-wide for its data centers, large choice of providers could mean more competition for your business

Cons: Very little room for expansion and the higher real estate and power costs mean higher colocation pricing. In addition, the outskirts of Manhattan are a flood zone. There is also a higher risk of terrorist attacks.

New Jersey

Pros: Lower power costs than in New York City but still close to New York City and more room for growth than in NYC

Cons: Prices are still higher than other cities in the U.S and there is a higher risk of natural disasters on the coast as well as terrorist attacks


Pros: Less expensive than New York, close to government services

Cons: Higher risks of terrorist attacks, higher cost of real estate, which could raise the cost of expansion


Pros: One of the most cost-effective areas for data centers, has little risk of natural disasters and terrorist attacks, great transportation services, and low cost of real estate especially in the suburbs

Cons: Not one of the largest cities in the United States

atlanta real estate

Atlanta is one of the most cost-effective cities for colocation

7. Colocation vs. Dedicated Server

Dedicated server hosting means that you lease an entire server from your hosting company. This server is totally “dedicated” for your company’s use alone, and you are given complete control over your hosting environment so you are able to:

  • Modify all of your server settings
  • Install your own operating systems
  • Install other software components

Unlike colocation hosting, where you place your own equipment on rented rack space in a data center, with a dedicated server you don’t actually own the server. Instead, you lease it and you are the only one who is using it.

In addition, with dedicated server hosting, you do not share any critical resources with other domain owners. As a result, your server will give you top performance because you are not sharing:


With a dedicated server service, you lease your equipment from your provider

A dedicated server is usually a service that medium to large businesses choose. This is mainly due to the cost of the service. A dedicated server is a good choice if you have:

Mission-Critical Operations: A dedicated server is great for businesses that perform mission-critical operations. That means that if your business would grind to a halt if your network system failed or was disrupted, then having a dedicated server would be a great benefit.

Large Volume of Traffic: In addition, a dedicated server is great if your business experiences large volumes of traffic over its network. Because the resources are not shared on a dedicated server, it can better handle large volumes of traffic with faster speeds. So if you have a large website, then dedicated server hosting would be a good choice.

Which is cheaper? Some businesses choose to use a dedicated server as their IT solution. This means that they lease a dedicated server that isn’t shared with anyone else. Over the long term, paying for a 1U server colocation is actually cheaper. A mid-range dedicated server provider usually costs about $200 per month whereas a 1U colocation hosting service will cost about $50 per month. When you spread that cost over an entire year, you will save about $1,800 a year with colocation!

colocation facility

Colocation hosting is generally cheaper than having a dedicated server over time

8. Difference Between Hosting Methods

Server Colocation

What Is It?: With server colocation you supply the server or servers and you rent rack space to store it at a data center. The data center provides you with redundant power and internet connectivity and bandwidth.

Pricing: Colocation pricing is usually charged monthly or yearly and is determined by a number of factors, including the rack space you use, power, and internet usage.

Who Is It for?: All types of companies, but usually those that have technical experts on staff who want the ability to manage their own equipment but don’t want to spend the time and money necessary to run their own data center room.

Types: There are several different types of server colocation including:

  • Single server colocation where you have one server
  • Partial racks where your servers take up 1/4, 1/2, or other portions of a rack
  • Full racks where you rent an entire rack
  • Private cage where you rent more than one rack in your own cage
  • Custom suites for larger companies who need even more space



With colocation, you own your own servers

Dedicated Servers

What Is It?: Unlike colocation where you own your own servers, with dedicated servers, you lease the actual server or hardware from your hosting company. Your server is dedicated only to your company and the leasing company does not use part of it for another company. This gives you better performance and higher security.

Who Is It for?: Companies that do not have a large IT staff that are able to manage a complicated server. Companies will also use dedicated servers to improve their network performance. For example, if your main network is located on the east coast, you may want a dedicated server on the west coast to give you  faster connections.

Types: There are two main types of dedicated servers. The first is self-managed, where you are responsible for the server management, operating system, software and applications and your host manages the server hardware, uptime, and network.

The second type is fully managed, where you are only responsible for the content on your server and your host provider looks after everything else.

Managed Hosting

What Is It?: There are different ideas about what managed hosting actually is, but the most common definition is that it’s when your data center manages everything for you including your servers, operating systems, software, applications, and data center network.

Who Is It for?: Managed hosting can work well for all sizes and types of business. Smaller companies use it because they don’t have the time to manage their own servers. Larger companies use it to to keep parts of their more sensitive data off-site, or when they downsize and no longer have the IT staff to manage their systems themselves.

Types: There are two main types of managed hosting. The first is managed colocation, where you own your servers and the data center manages them for you. The second is managed hosting, where the data center supplies the hardware and manages it for you.

remote hands service

With managed hosting, your service provider looks after everything for you

Cloud Hosting

What Is It?: Cloud hosting is a lot like dedicated and managed hosting, where clients do not own their own servers but use the servers and hardware provided by the cloud host. A cloud host is a data center. What makes a cloud host different is that they provide scalability where you can increase your hard drive space and processor ram in seconds, and it offers pay-as-you-go options where you pay for what you use.

Who Is It for?: All sized companies use cloud hosting. Many smaller and start-up businesses like the versatility of the pay-as-you-go model.

Types: There are 3 types of cloud hosting. Public hosting means that you are sharing computer resources with other customers from public hosting providers such as Amazon, Google or Rack Space. This is the most economical option. 

Private cloud hosting means that you are using a private server that is dedicated to only your company’s use. A hybrid solution means that you are using a combination of both private and public cloud. Usually you will keep your more sensitive data on the more expensive private cloud and keep your other data on the cheaper public cloud.

Data centers are categorized as either Tier 1, 2, 3, or 4

9. Difference Between Tier 1, Tier 2, Tier 3, & Tier 4 Data Centers

The terms Tier 1 to Tier 4 are used to describe the amount of uptime that a data center will have. Tier 4 data centers are considered to be the most reliable because they are equipped with fully redundant subsystems including:

  • Cooling
  • Power
  • Network Links
  • Storage

The term “fully redundant” means that these subsystems all have backup systems that are ready to immediately take over the instant that one of these systems should fail. As a result, Tier 4 data centers will give you the closest to 100% uptime as possible.

In addition, Tier 4s also have “compartmentalized security zones” that are controlled by biometric access.

Tier 1 data centers on the other hand have the simplest set-ups and as a result, have the lowest up-times. The following is a comparison of the four Tiers:

Tier 1:

  • Non-redundant systems (no backups for power, network, etc.)
  • 99.671% Uptime
  • 28.8 hours of downtime per year

Tier 2:

  • Partial redundancy for power and cooling
  • 99.749% Uptime
  • 22 hours of downtime per year

Tier 3:

  • N+1 fault tolerant providing at least 72 hour power outage protection
  • 99.982% Uptime
  • Maximum of 1.6 hours of downtime per year

Tier 4:

  • 2N+1 fully redundant infrastructure with 96 hour power outage protection
  • 99.995% Uptime per year
  • Maximum 26.3 minutes of annual downtime

Tier 4 data centers are the most reliable because they have fully redundant subsystems

10. What Features to Look for in a Data Center


Power to run your servers and IT equipment:

A data center will either charge you a flat rate for your consumption, or they will meter your usage. If you use more than 300kW, then you probably would be better paying the metered rate.


Power to run the HVAC to cool your equipment, lighting, etc:

You will also be charged for the power that the HVAC system uses as well as other power charges such as lighting. It is more difficult to determine exactly how much power this will be.

You can, however, find out how efficient your data center is. Ask them to let you know what their Power Use Effectiveness (PUE) is. The PUE is a widely accepted bench-marking standard developed by the Green Grid, an affiliate membership that works to improve IT and data center energy efficiency and eco-design around the world. 

It helps IT professionals to find out how efficiently data centers use their power. The closer the PUE number is to 1.0, the more efficient it is.

Data centers need to have special HVAC systems to keep your equipment at the proper temperature

Internet Access:

Your internet access is usually charged per megabytes used. In most cases, you will be charged a fixed consumption rate such as 250Mb, 500Mb, 1,000Mb or even 10 Gb depending on your requirements.


Cross-connects are any connections “between facilities provided as separate units by the data center.” For example, the uplink that runs from your equipment in the data center to the network provider is considered a cross-connect. Cables that run between your racks in the data center, however, are not cross-connects. The amount you pay will depend on how many cross-connects you have and the type and speed of the lines.

Remote Technical Support:

There are some technical tasks that you won’t be able to do from your location and will, therefore, need a pair of “remote hands” – someone physically at the data center who can do these tasks for you. These are usually visual and manual tasks such as flipping switches.

Remote technical support can be offered in a pre-purchased package such as 15 minutes or more, or on an as-needed basis. Some data centers will include these small tasks at no extra charge, whereas others will charge for this service in their data center pricing.

cloud backup

There will be times when you will probably need remote technical support

11. How to Look for Hidden Colocation Fees

Knowing how to look for hidden fees can really help you effectively compare colocation costs between companies. An advertised colocation special price of $800 per month may actually end up costing you $1,500 with all of the extra hidden costs. Here are some extra costs that you can watch out for:

Bandwidth: Often the cost of Bandwidth is not included in a colocation special. For example, if you need a 25-Mbps connection, you may end up paying on average an extra $225 per month.

Cross Connections: A cross connection that you may end up paying extra for would be the link to the network provider for your internet connection. You may need to pay a one-time set-up fee for this connection and then a monthly fee on top of that.

Technical Support: Sometimes you are required to pay for a minimum amount of monthly “remote hands” support whether you want or need it in order to qualify for the special price.

Power Distribution Unit: You need to buy your own or lease a power distribution unit from your colocation hosting provider. If you are leasing one, you may need to pay on average about $50 extra per month.

Learn more about power distribution units

12. How to Negotiate Colocation Pricing Contracts

1. Negotiate your colocation pricing contract in parts

Don’t take an “all or nothing” approach to your negotiations. Break your talks into parts and get an agreement on each section separately. This will make the negotiations more positive and you will feel like you are getting a number of solutions instead of fighting one big war.

2. Know what is a fair price and ask for it

Take a look at what other colocation companies are charging for the same service and point out that you are only asking for something that is fair or what is standard. This will make the provider have to justify why their price is higher or give you something additional to make the extra cost seem right.

3. Avoid getting emotional

Don’t let your emotions cloud your decisions. Remove emotion from the negotiations and create an atmosphere of problem solving, not one of personal offence if you don’t get the price or what you want immediately.

4. Prioritize

Know what is most important to you and make sure that you get and avoid getting caught up with the little details that aren’t as important.

5. Ask Questions

Instead of arguing, ask lots of questions to understand the pricing. Questions will keep communication open while arguing will shut it down.

13. How to Get Quotes Quickly

As a business owner, time is money, so you don’t want to have to waste your time waiting for a colocation provider to get back to you with a quote. Here are some tips to get your quotes quickly:

Let the company you are considering know that you are on a tight timeline. Ask them for a specific date when you should be able to hear back from them with the quote. If you think that it is too long, then request an earlier date.

Let the company know that you are asking for quotes from other companies. This will give them the sense of competition and it might also get you a better price.

Work with companies that answer your requests by email, contact form, or phone immediately. If they are quick to respond when you contact them, they probably will be quick to give you a quote.

Avoid using a company that doesn’t get back to you right away. This is a good indicator that they already have enough business and that yours probably won’t be a priority for them.

personal customer support

Choose a colocation provider that will answer your call immediately

14. How to Compare Colocation Quotes

You may find it difficult to compare colocation quotes because data centers don’t have a standard way to break down their costs, so as a result, it is difficult to compare one quote to another.

Different companies take different approaches to data center pricing. They may combine or separate their various services. The following is a breakdown of the different things that you should expect to be charged for so that you can look for these in your quote:

  • Power to run your servers and IT equipment
  • Power to run the HVAC to cool your equipment, light, etc.
  • Internet access
  • Cross Connects
  • Space to store your equipment
  • Technical support

Some quotes will combine these services and give you a price that includes one or more of them together such as:

  • Charging for power and network use
  • Charging for power, space, and network use
  • Charging different rates for cooling power (the power to keep your equipment cool) as opposed to cabinet power (the power to run your equipment)

For a detailed explanation of each of these components check out our post “Data Center Pricing: Here’s What You Can Expect.”

1u colocation rack

Some colocation pricing packages will include technical support and others will charge extra for this service

15. Colocation Tips For Businesses

Choose a colocation provider with a great location: Location is one of the most important factors in choosing a data center. You need to find a center that is easily accessible for someone in your company to get to. Make sure the area is not prone to natural disasters or terrorist threats.

Make sure there is plenty of reliable power: One of your next most important considerations is the availability of reliable and sufficient power so that you can be assured of as close to 100% up-time as possible

Find out if there is room for expansion: Your goal as a business owner is to grow your business, so make sure that the colocation facility you choose has the capability to provide you with space to grow especially if you need it quickly.

Look for experience: Choose a provider that has been in the industry for a substantial number of years. That way you won’t have to worry about them closing down unexpectedly and you will feel confident that they know what they are doing.

16. DSC Colocation Services

– For the Most Competitive Colocation Pricing in Atlanta

If you are looking for the best colocation pricing in Atlanta, Digital Service Consultants can help. At DSC, we offer fast, safe, secure, and reliable managed and colocation services at incredibly competitive rates.

We know how to help you get the most out of your system and we offer 24/7/365 technical support so you will always be up and running. DSC has been a trusted name in the IT industry in Atlanta for more than 30 years.

We also provide a full range of internet- related services including cloud backup, system monitoring, software hosting, dedicated email, website development and implementation, web hosting, e-commerce, security, and a variety of related products and services. 

We also provide network support for Linus, Microsoft server and workstation platforms, Fortinet firewalls, and Cisco Systems. Contact us today for all of your internet-related requirements.