Sep 10, 2025
8-12 mins
The Ultimate Guide to Colocation Strategy and Key Considerations for AI, Edge, and Enterprise Data Center Deployments
Ever been stuck in bumper-to-bumper traffic, watching the minutes tick by while your GPS insists there’s no faster route? Maybe you’ve eyed that toll road on the map, a faster, more direct path that gets you where you need to go without the frustration.
In the digital world, workloads face the same challenge. Data has to move from where it’s created to where it’s processed, analyzed, and stored. Without the right routes or hubs to connect them, performance slows, costs rise, and opportunities pass by. That’s where colocation strategy comes in.
What Is Colocation and Why Does It Matter?
Colocation is a data center service where businesses rent space, power, and connectivity instead of building their own facilities. This approach allows organizations to place their servers in a professionally managed data center, benefiting from shared infrastructure, robust security, and direct connections to carriers and cloud providers. Colocation data centers act as digital hubs where workloads can move efficiently across networks.
What Are the Core Benefits of a Colocation Strategy?
The main benefits of colocation are reliability, scalability, connectivity, and cost efficiency. Colocation facilities provide redundant power and cooling systems, ensuring uptime even during outages. They also offer scalable space and power, dense interconnection ecosystems, and predictable OpEx instead of costly CapEx.
Far more than just space and power, a well-chosen data center colocation facility acts like a transport hub for your digital operations. It’s the place where networks converge, cloud connections are only a cross-connect away, and infrastructure can scale in lockstep with demand. Choosing the right colocation provider means your AI models train faster, your edge deployments run smoother, and your enterprise systems stay connected without bottlenecks.
For businesses handling AI training workloads or operating latency-sensitive services, the ability to expand capacity without building new facilities is revolutionary. A colocation provider offers the infrastructure to support growing demand while avoiding the delays and costs associated with greenfield construction. As a result, the global colocation data center market is projected to reach $202.71 billion by 2030, driven heavily by AI and HPC workloads.
Connectivity is another critical advantage. The right facility offers direct, low-latency access to multiple carriers, ISPs, and cloud providers, creating a dense network ecosystem where workloads are never more than a few milliseconds from the services they rely on. Reliability is equally important. With redundant power, cooling, and network systems backed by stringent SLAs, colocation ensures operations stay online even during unexpected disruptions.
Finally, colocation can offer cost efficiencies by converting unpredictable capital expenses into predictable operational costs. By leveraging shared infrastructure, organizations benefit from economies of scale without bearing the full financial burden of maintaining their own data center.
Top 3 Colocation Use Cases Driving Demand in 2025
The top three colocation use cases in 2025 are AI and high-performance computing, edge deployments, and enterprise hybrid IT strategies. These scenarios are driving the bulk of new demand because they require scalable infrastructure, dense connectivity, and compliance-ready environments that most on-premises data centers can’t provide. Together, they represent where enterprises, hyperscalers, and service providers are investing most heavily in colocation capacity.
How Does Colocation Support AI and High-Performance Computing?
AI workloads demand dense power, cooling innovation, and scalability. Colocation providers are now designing specifically for AI-ready deployments.
AI workloads are among the most demanding in terms of compute and power requirements. Training large language models, running complex simulations, or supporting real-time inference at scale calls for high-density racks, specialized cooling systems, and abundant power availability. High-performance computing colocation facilities are designed to handle these demands, often incorporating liquid cooling or rear-door heat exchangers to maintain optimal operating conditions.
Location also matters. Housing AI infrastructure closer to the data sources that feed it can significantly reduce latency, improving overall performance. For organizations with long-term AI strategies, selecting a colocation provider with the ability to scale power and space over time is critical to keeping pace with evolving needs.
What Is Edge Colocation and Why Is It Important?
Edge colocation places compute closer to users, devices, and data sources — reducing latency and improving real-time performance.
Edge computing moves workloads closer to end users to minimize latency and improve responsiveness. Whether it’s enabling autonomous vehicles, powering smart cities, or delivering high-quality streaming content, the edge relies on a network of strategically placed facilities. Edge colocation makes this possible by situating compute capacity where it can serve data and applications in near real-time.
By the end of this year, Gartner predicts that 75% of enterprise-managed data will be created and processed outside traditional data centers or the cloud, making an effective edge colocation strategy paramount.
A well-planned edge colocation strategy considers geographic diversity, ensuring that multiple locations can extend reach and resilience. Carrier diversity and strong peering relationships are equally important, as they provide the low-latency connections necessary for edge applications to thrive. Scalability is another factor, with modular or incremental expansion options allowing organizations to respond quickly to new market demands or emerging use cases.
Enterprise Colocation and Hybrid IT Strategy
Enterprise colocation bridges on-prem infrastructure with cloud ecosystems, supporting compliance-heavy workloads.
For many enterprises, colocation serves as the bridge between on-premises infrastructure and the cloud. It offers a secure, controlled environment for critical workloads while enabling seamless integration with public and private cloud services. This enterprise colocation approach is especially valuable for organizations managing compliance-heavy applications, core business systems, or workloads that require both high performance and strict security controls.
The latest Flexera State of the Cloud Report shows that nearly nine out of ten organizations are running multi-cloud strategies, marking steady year-over-year growth. At the same time, almost three-quarters are leveraging hybrid cloud, underscoring how enterprises are embracing flexibility and resilience in their IT environments.
Choosing the right facility often comes down to compliance and certifications. Standards such as HIPAA, SOC 2, ISO, and PCI DSS can be non-negotiable depending on the industry. Direct cloud interconnection simplifies hybrid operations, and migration support from the colocation provider can ease the transition from legacy infrastructure.
What Should You Consider When Choosing a Colocation Provider?
The best colocation partner balances location, sustainability, and ecosystem strength.
No matter the use case, certain factors apply across the board. Location strategy is at the top of the list, with proximity to customers, partners, and network hubs improving performance and reducing latency. Sustainability is also increasingly important, with many organizations prioritizing colocation providers that source renewable energy, implement energy-efficient systems, and explore innovations like heat reuse.
Future-proofing is essential. The right facility should be able to accommodate new workloads, evolving compliance requirements, and the physical infrastructure demands of emerging technologies. Risk management should also be a priority, with redundancy, disaster recovery options, and geographic diversification forming the foundation of a resilient colocation strategy.
Selecting the Right Colocation Provider
Finding the right colocation partner goes beyond just space and power. Here are the six critical factors to evaluate to ensure your colocation strategy is built for the long term.
Your 6-Point Checklist for Selecting the Right Provider
Geographic Risk Profile: Does the facility have a low risk of natural disasters? Pro Tip: Use FEMA's National Risk Index to get an objective score for any U.S. county.
Tax & Power Incentives: Does the state offer sales tax exemptions on equipment or energy incentives? In markets like Ashburn and Phoenix, this can save you millions in TCO.
The Connectivity Ecosystem: How many carriers are on-net? Can you get a direct, low-latency connection to AWS or Azure? Don't just ask about bandwidth; ask about the richness of the ecosystem.
On-Site & Remote Support: Does the provider offer 24/7 "remote hands" support? This is non-negotiable for managing infrastructure from a distance.
Compliance & Security: Can the provider supply recent audit reports for compliance standards like SOC 2, HIPAA, or PCI DSS? Don't take their word for it; verify their certifications.
Financial Stability & Track Record: Is the provider financially stable with a proven history of uptime? A great price from an unreliable provider is a business risk you can't afford.
Choosing the right partner isn’t just about who has racks and power, it’s about choosing an environment designed to support growth, mitigate risks, and simplify operations as your digital strategy evolves.
Equally important is the provider’s track record. Financial stability, operational excellence, and a history of meeting uptime commitments are all indicators of a reliable partner. In many cases, the strength of the provider’s ecosystem can be just as valuable as the physical infrastructure itself.
Conclusion and Next Steps
In an environment where workloads are multiplying, data volumes are surging, and user expectations are climbing, colocation offers a way to keep operations running smoothly. The right facility is not just a place to store hardware; it is a strategic hub that accelerates AI workloads, enhances edge services, and strengthens enterprise operations.
Your workloads don’t have time for delays. By mapping out your needs, selecting the right partner, and building a future-ready colocation strategy, you can keep your business firmly in the fast lane.
About the Author
Trevor Hopkins
Account Manager at Inflect
Trevor is an expert in the digital infrastructure industry with a proven track record of helping buyers navigate complex markets—whether building next-gen data centers, expanding global networks, or evaluating compliance-heavy workloads like blockchain. He shares insights and observations drawn from practical experience and real cases, writing at the intersection of technology, regulation, and the systems that keep the internet running.
Contact:
Email:
trevor.hopkins@inflect.com
https://www.linkedin.com/in/trevor-hopkins-2ab3ba201/