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Why Choose a Dedicated Server Over Colocation Services

By: Chris Wade of digitalNATION

As the Internet server hosting market has developed, two divergent areas have emerged in the server hosting arena: dedicated servers and colocation. At first glance, many corporations and resellers think that colocation will save on costs. In addition, they feel the level of service they receive will be similar. However, when analyzing the numbers in detail, the service provided and the growth trends of the Internet, dedicated servers offer numerous cost and service advantages over colocation.

In a colocation scenario, the client must budget for the hardware, rack space, bandwidth and network equipment. The initial cash outlay in this setup is much higher than with a dedicated server. An initial investment of $4,000 is needed to purchase a low-mid range server system and an initial investment of $9,000 is needed for a mid-range server solution. A half-rack of space at a colocation facility will cost between $500-$700 startup and monthly. Lastly, the client must purchase a switch or a router. On the low-end, these products will cost between $1500- $2000. If we assume that the client invests in a low-end server and router, the total initial outlay would be at least $7,500. This figure does not even include the costs of staff time for setup and configuration as well as the equipment depreciation costs, insurance and the costs of standby equipment.

In a dedicated server environment, the hosting company supplies the server, rack space, bandwidth, connection to the Internet, hardware maintenance, uninterruptible power supply and 24/7 server monitoring. The cost for a similar server in a dedicated hosting solution would be roughly $900 startup and $900 monthly. This price includes the cost for the network equipment and installation of the operating system.

A dedicated server also provides the customer with a level of flexibility that colocation simply cannot match. Since the dedicated server company provides the system, they also maintain the hardware and replace it in the event of a hardware failure.

Furthermore, upgrading the system or adding new systems is easier and more cost-effective with dedicated servers. We estimate that processing power doubles every 12 months. If you purchase the hardware yourself (colocation), you could invest in a new processor and replace the old one but in most cases, you would probably have to purchase a new motherboard because new processors are usually not compatible with older motherboards. The cost for such an upgrade can range between $1500- $2000, not including labor. If you have a dedicated server, you simply pay the difference in the startup and the monthly fee between the present system and the new system. Thus, if you were paying $900 and the new system was $1100 startup and $1100 monthly then you would pay $200 startup and your monthly bill would be adjusted to $1100.

The advantage of dedicated servers is even more pronounced when you want to quickly add unplanned systems. For instance, there have been numerous instances where a company will run a promotion or have a press release, which draws a lot of unexpected traffic to their web site. If you colocated, you would have to quickly buy a new system and implement it. Your company would incur thousands of dollars in unbudgeted costs. If you hosted in a dedicated server facility, your costs would be only a few hundred dollars. Moreover, if the traffic subsided, you could always cancel the use of the server in a dedicated environment whereas if your company colocated, you would now own an unused, depreciating asset. The ability to add web servers quickly and cost-effectively should not be underestimated. As the number of Internet users continue to soar, companies must be prepared to quickly deploy new systems. Under these conditions, the advantages of a dedicated server cannot be ignored.

The level of service in a dedicated server facility is better as well. When you get a dedicated server, you also are receiving 24/7 monitoring and generator power backup. Thus, if your server goes down in the middle of the night, you know that the problem will be addressed. This is not to say that you cannot receive this level of service in a colocation facility. However, you are charged a substantial fee for many services, which are standard in a dedicated solution.

And when a colocation server goes down, it will be up to you and/or your team to get in there to fix the equipment in a timely manner or compensate someone to fix it for you. Would you want to be up at 3:00 a.m. to travel and to coordinate logistics of getting access to your server? Doubtful.

So, while colocation may appear to have cost savings, it really doesn't. If anything it creates more stress and counter-productivity that could be better spent on other projects that move your firm forward. That in itself is a huge cost.