Expense Comparison of Colocation and Dedicated Hosting

[rocketgirl]

If I understand this right, in colocation hosting you own your server but lease space to store it, and in dedicated you lease the server and the space. Assuming the same server and space, which is more expensive to do?

 

[XeHSean]

Renting would be more expensive

 

[SenseiSteve]

Colocation Pros:

If you’re in close geographical proximity to your data center, you can work on your own equipment (upgrades, etc.) avoiding the cost of outsourced parts and labor.

As you grow, savings from colocation grow as well.

As a rule, it’s generally less expensive when compared to unmanaged dedicated.

Your fixed assets show on your balance sheet, indicating higher net worth (important to banks and potential customers).

If you’re using accrual accounting, you’ll be able to show profitability on your income statement by spreading expenses over three to five years (depreciation).

Dedicated Servers

Dedicated hosting offers customers the option to lease pre-configured servers and Internet connectivity for their exclusive use versus VPS or Shared, where other customers share the host server.

Why lease a dedicated server?

A broad range of managed services are normally available.

The server belongs to the hosting provider and it’s their responsibility to maintain and keep it running.

Entry costs are lower and scalability is enhanced.

It allows you to outsource IT expertise so you can do what you do best – drive your business

 

[othellotech]

Assuming the same server and space, which is more expensive to do?

Depends on a lot of factors.

* Power cost
With a dedicated-server the provider knows the hardware specification/design/manufacturer and should predict the power-draw, cooling requirement etc

With colo only the user really knows, and a *LOT* of people try and colo cheap-o-cr@p boxes which draw 3 times the power of a propeerly designed rackmount server

* Transfer cost
Many providers oversell their bandwidth capabilities, hoping that clients dont use it all (or cant based on the server-nic/switc/firewall/etc)

Whereas colo clients tend to use all (or more) than their allocations on a regular basis

* Support cost
Time spent on issues with colo boxes can be significantly higher - they dont come back after a reboot, they dont auto-start, the nic's go to sleep etc

The converse side is colo clients *tend* to be a lot more aware of the o/s and setup so those issues are less.

So the simple answer is that there is no answer - it's like asking which uses more fuel a leased car or an owned car - it all depends on who's driving, where, how and why

On a like-for-like basis

 

[rocketgirl]

Haha, Othello, yeah I knew it was a wide-open question. I'm just trying to learn and open questions often yield more information even if there is not a clear answer. Thanks everyone!

 

[HostEase]

I know there is no definitive result for this question.Both of them own the advantages appealing to customers actually.

 

[AJKpeter]

Dedicated hosting is basically cheaper

 

[Hostigation]

Dedicated hosting is basically cheaper

Can you qualify that statement? I think it is case by case. If you can service the equipment yourself, colo may be a better choice, if you are using remote hands, colo still may be a better choice if the equipment needs little/no support physically. It's when you are paying for remote hands to help with equipment failures too often, dedicated servers start becoming more attractive. I have a rack of 20 servers/switches/router in a colo and remote hands are $90/hr billing at 1/2 hour minimum. I have been lucky with equipment failure and over 5 years time have paid for 5 hours of help. Spend a little more upfront for quality equipment, which was less then the potential cost of remote hands, and the few problems needing it made it an overall savings.

 

[VL-Adam]

In the long run, renting would be more expensive.

 

[jeff-ay]

colocation generally you own the hardware and need upgrade it regulary to compete in the market, whereas dedicated server you can easily signup any spec, and leave the old spec, more flexible.

 

[Christiano]

Considering from the investment point of view, for short term renting server and for long term co-location.

 

[handsonhosting]

Having run both, we went with the renting option (I still have dedicated servers here if you want some )

The reason we went back to renting dedicated machines was time, staff and infrastucture. While it was cheaper to own the machine and pay for the bandwidth used etc, with the rate the hardware is changing it actually cost us money as we were then left with obsolete machines on our hands within a year or two. Cost played a factor as we had to have 24x7 datacenter coverage, an office at (or near) the datacenter etc etc etc.

Simple math here:
Server: $2,000 * 40 machines = $80,000
Rack: $700/month x 12 months = $8400
PDU Remote Reboot units - 2 @ $1,000 each = $2,000
Bandwidth: 20Mbps Connection @ $800/month = $9,600

Costs about $100k for the first year (that's IF you can keep your 95th percentile bandwidth at 20Mbps and lower), and that doesn't include control panel software, server licences etc etc.

Compare this to 40 rented dedicated servers at say $150/month with bandwidth included - $6,000/month or $72k per year.

Where the advantage of OWNED equipment comes in is that on the 2nd year, you don't have that $80,000 expense on server hardware, and now your cost is only $20k/year in datacenter fees.


Granted, I'm looking at it with a number of machines and not just one machine, but you can extrapolate the numbers.

 

[hosthop]

I recommend you base your decision on what your needs are. Are you maintaining the equipment or is someone else. If you are then co locating - which also depends on your location. Just because your connected to the internet at 100MB doesn't mean there isn't a bottleneck somewhere. (You do not want to co-locate your server in the middle of the upper peninsula of Michigan). And there are many reasons if you are hosting to a world audience.

If you live far away from your equipment, I recommend you lease a dedicated server. Let the experts deal with the hardware and you worry about making your web presence big enough to need another server.

The internet is full of so many options you can get overwhelmed. Ask people who are doing what you want to do with the server. They will know what works or doesn't for them. You would be surprised how many people are willing to help if you just ask.

 

[SenseiSteve]

I recommend you base your decision on what your needs are.

Great advice

You do not want to co-locate your server in the middle of the upper peninsula of Michigan

Why not?

If you live far away from your equipment, I recommend you lease a dedicated server.

Data centers colocate servers for businesses around the globe - you don't need to be close to your equipment to run a successful business. Many prefer it, but it's not necessary.

Let the experts deal with the hardware and you worry about making your web presence big enough to need another server.

Good advice for most, but not all businesses.

 

[hosthop]

You do not want to co-locate your server in the middle of the upper peninsula of Michigan

Why not?.

Well the upper peninsula of Michigan is beautiful but it is not on a central backbone to the internet. There is going to be a bottleneck somewhere between you and the rest of the globe.

Data centers colocate servers for businesses around the globe - you don't need to be close to your equipment to run a successful business. Many prefer it, but it's not necessary.

No you do not need to be close to your equipment but if you have a problem you are relying on the co location facility to have the parts you need for your equipment or you need to have it on hand for them prior to an incident.

I also agree with you we have clients that own their equipment that we built to their specific needs they expect us to have spare parts here in case of an issue. We also have clients that have their equipment in our facility and live thousands of miles from us.

Good advice for most, but not all businesses.

There are exceptions to every rule. Like I said it depends on the needs of the client.

All of us hosting providers have a professional responsibility to our clients to make sure that we meet their needs. We have to be completely up front about the relationship before expectations are different than what is delivered.

 

[Hostigation]

handsonhosting makes a good case for leased equipment, although I've always owned all my equipment after the tech bubble burst in 2000. I have 1/2 of it 1100 miles away in St Louis and really have little trouble in the 5 years I've been at that colo.

The one size fits all idea just doesn't work for everyone. I like to build everything myself, and without owning it, I can't do that. I'm not a web designer, I can hire someone to do that, just like the designer is going to hire a hardware person to do that for them. Everyone is going to have to look at all their option to make the choice of which is best for them, and go from their, and we've presented a lot of good ideas to start making those choices.

 

[Crish Bronzs]

The big advantage that a dedicated server holds is that you do not face the same initial outlay. You don’t purchase a server and you don’t need to pay for suitable premises. Typically you should expect to pay anything from $100 per month for a lower end server, up to $300 or $400 for a server with high specifications.

Colocation enables you to purchase a server, so it becomes an asset to you or your company, and use somebody else’s data center. As soon as you purchase the server it will reduce in value and when it comes time to upgrade to a new server you will have to make full payment for a new server with very little return on your old one.

 

[alnitech]

It depends on datacenter. Some high-end DC do not welcome small colocation customers and have extremely high colo prices up to 150$ per 1U rack space. No doubt you could rent entire server in same datacenter for the same price, but from somebody who renting entire rack or even more... Personally me, i do not see any reasons to have one or two servers for colocation if you have no super-rare requirments for hardware.

 

[alnitech]

Colocation Pros:

.....
As a rule, it’s generally less expensive when compared to unmanaged dedicated.
....

Not always true. It depends on DC level and type of space you need (rack or not). Big dedicated servers providers have huge discount on space due to high volume and sometimes they could offer dedicated server for lower price than 1U of space cost.

 

[othellotech]

in colocation hosting you own your server but lease space to store it

With colocation you pay a datacentre (or one of their customers) for space for the server, power (hopefully with UPS and filtering), Internet connectivity, support etc.

Assuming the same server and space, which is more expensive to do?

For a limited number of servers, colo will *often* be more expensive - this is largely down to colo clients knowing what they want, actually using the bandwidth they request etc, whereas the majority of dedicated server users only utilise a small subset of the resources allocated.