Enterprises are increasingly opting for colocation data centers to manage AI applications, deploy hybrid cloud models, and enhance connectivity while keeping costs down. Traditional corporate data centers often struggle with the higher cabinet densities required for AI inference computing. Modern colocation facilities can accommodate cabinets ranging from 35 kW with air cooling to 70-150 kW with optional liquid cooling. The flexibility of this "pay-as-you-go" model is appealing, especially for enterprises unable to predict their future densification needs.
AI inference computing is an iterative process, necessitating quick, ongoing interaction with significant volumes of corporate data. To maximize performance, enterprises benefit from positioning AI capabilities close to other data centers to reduce telecom latency. Additionally, edge colocation data centers can house AI applications near specific data sources, such as factories or financial data feeds.
Colocation also enhances cybersecurity for AI applications. Many enterprises, especially in regulated sectors like finance and healthcare, prefer to execute their inference computing internally in secured colocation environments rather than outsourcing to third-party providers where sensitive data could be at risk.
Hybrid Cloud Adoption and Rebalancing
Although public cloud adoption is robust—with 74% of enterprises accelerating cloud migrations—many are reconsidering sole reliance on the cloud due to soaring costs and notable outages. A significant percentage, 83%, plan to bring workloads back from the public cloud, as indicated by VMware’s Private Cloud Outlook. Enterprises are now mapping their workloads based on the most suitable delivery model for each application, often using public cloud for dynamic needs and colocation for stable or demanding workloads.
Capacity Expansion Without Long Build Cycles
Enterprises require scalable data center capacity for traditional corporate applications alongside AI. A substantial majority expect AI demands to increase overall capacity requirements significantly. Colocation facilities facilitate incremental capacity growth, allowing enterprises to quickly adapt to changing needs. This is often more favorable than expanding on-premises facilities, which can be costly and time-consuming.
Cost Predictability and Governance
Typically, colocation presents lower occupancy costs for stable workloads than public cloud environments. New colocation campuses generally feature economies of scale that smaller data centers lack. For enterprises looking for additional capacity, colocation significantly reduces costs compared to developing a new on-premises center.
Colocation mitigates the unexpected price surges often faced in public cloud setups, where variable usage can lead to unplanned expenses. Estimates suggest that a significant portion of cloud spending is wasted due to inefficiencies in monitoring and usage control.
Application Performance and Networking Enhancement
Colocation supports legacy applications that do not transition well into the cloud as they often underperform in public cloud scenarios. Furthermore, some applications require low-latency access that isn’t feasible with distant cloud setups.
Many enterprises enhance connectivity through dedicated networking capabilities in colocation facilities, enabling them to source competitive telecommunication services and cloud connections with ease.
International Operations and Data Sovereignty
Many U.S.-based multinational corporations manage domestic data centers while utilizing international colocation for better access to data governance, low-latency services to foreign customers, and compliance measures.
Test and Development Labs
Colocation environments are ideal for internal test and development labs, offering advanced technologies that legacy facilities do not provide. Features such as liquid coolants and AI-driven management systems are increasingly available, allowing enterprises to style projects under “try before you buy” conditions.
Audit and Compliance Controls
With added security and non-shared hardware placements, colocation supports rigorous audit and compliance measures. Many of these facilities enhance trust through extensive certifications.
Meeting Multiple Objectives with Colocation
Colocation allows enterprises to fulfill various objectives simultaneously. For instance, a major financial institution could use private colocation to supplement public cloud resources, ensuring compliance and security while optimizing costs and improving performance.
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