What Is Data Center Colocation? A Plain-English Guide for San Antonio Businesses
Data center colocation (commonly shortened to “colo”) is a service where a business houses its own servers and IT equipment inside a professional third-party facility. The facility provides the physical space, power, cooling, and internet connectivity. The customer owns and manages the equipment inside. For San Antonio businesses that need reliable, high-performance infrastructure without the cost and complexity of building and operating a private data center, colocation is frequently the most practical answer.
The Problem Colocation Solves
Most businesses that take their IT seriously eventually outgrow the server closet.
A server room tucked into a back office might be sufficient when the company is small. As the operation grows, the limitations become real: inconsistent power, inadequate cooling, no redundancy, no physical security, and nobody available to respond when something fails at 11 PM on a Friday.
Building and operating a dedicated private data center is the other end of the spectrum. The capital cost is significant, the ongoing operational overhead is substantial, and the expertise required to run it well is specialized.
Colocation fills the gap. You own the equipment, a professional facility provides everything else.
What a Colocation Facility Provides
The core deliverables from a quality colocation facility are consistent across the industry:
Physical space. Your servers live in a rack or cabinet measured in rack units (U). A 1U server takes up one unit of vertical rack space. A fully populated 42U cabinet holds significant computing capacity in a footprint roughly the size of a refrigerator.
Power. Data centers provide commercial-grade power with UPS (uninterruptible power supply) backup and, in most facilities, generator backup for extended outages. Power is measured in kilowatts drawn per cabinet. Your equipment’s power consumption determines your power allocation.
Cooling. Servers generate substantial heat. Data centers use precision air conditioning systems designed specifically for high-density heat loads. Consumer-grade cooling systems fail at data center densities.
Connectivity. Facilities provide high-speed internet access with redundant connections from multiple providers. Carrier-neutral facilities allow you to select your preferred network provider.
Physical security. Access to the facility is controlled and logged. Most facilities maintain camera coverage, and access to individual cages or cabinets can be further restricted.
Colocation vs. Cloud Hosting: The Actual Difference
This comparison trips up a lot of organizations.
With cloud hosting (AWS, Azure, Google Cloud), you rent computing resources from the provider. You own no hardware. You pay for what you use, and you can scale capacity up or down relatively quickly. The provider handles all infrastructure concerns.
With colocation, you own the hardware. You are responsible for purchasing, configuring, and maintaining your servers. The colo facility is the landlord for your equipment.
Cloud hosting wins when workloads are variable, you need to scale capacity quickly, or capital investment in hardware is not practical.
Colocation wins when workloads are predictable, data sovereignty or compliance requirements make cloud hosting complicated, latency to your own systems matters, or the total cost of cloud hosting at your usage level exceeds the cost of owning hardware.
Many organizations operate hybrid models, with some workloads in the cloud and latency-sensitive or regulated workloads on owned hardware in a colo.
Why San Antonio Is a Smart Colocation Market
San Antonio’s data center market has characteristics that make it an attractive choice compared to the major hyperscale markets like Northern Virginia, Dallas, or Phoenix.
Power costs in San Antonio average approximately $0.12 per kilowatt-hour, roughly 36% below the national average of $0.19 per kWh. Since power is the largest ongoing operating cost for a data center, that differential compounds meaningfully over multi-year cabinet commitments.
San Antonio also carries low natural disaster risk relative to coastal markets and sits along major fiber routes connecting Texas to national and international networks.
The San Antonio colocation market reported only 1.3% vacancy in 2023 according to CBRE, making it the second-tightest colocation market in the country at that time. Demand has consistently outpaced supply, which reflects the quality of the market fundamentals rather than a temporary spike.
On-Site Colocation at SATC: The Proximity Advantage
Most businesses that use colocation services house their servers in a separate facility from their office. Staff who need physical access to servers commute to the data center. The office network connects to the colo over a wide-area connection with the associated latency and bandwidth costs.
Bexar Datacenter operates an on-site data center inside San Antonio Technology Center. Tenants who lease office space in the building and house servers in the colocation facility operate in the same physical location.
The practical benefits of that arrangement are significant:
The latency between your office workstations and your servers is effectively zero. Operations that would consume internet bandwidth at a remote colo happen over the internal network. Physical access to your hardware is a walk down the corridor, not a drive across town.
The building’s fiber-to-suite connectivity extends through the same infrastructure connecting the office floors to the data center, creating a genuinely integrated computing environment.
What to Consider Before Choosing a Colocation Provider
Not all colo facilities are built to the same standard. Key factors to evaluate:
Power density per cabinet. Some older facilities are designed for 2-4 kW per cabinet. Modern compute-intensive workloads routinely require 10-20 kW or more. Confirm the facility can support your hardware’s actual power draw.
Redundancy ratings. Data centers are rated by Tier (I through IV) based on redundancy. A Tier III facility has no single point of failure and claims 99.982% uptime. Most enterprise-grade colocation facilities target Tier III or equivalent.
Connectivity options. Carrier-neutral facilities offer better network flexibility and leverage for pricing. Confirm which providers serve the facility.
Physical proximity. For organizations that need regular physical access to their hardware, the distance from their office to the colo facility affects operational efficiency.
On-site staff. Remote hands services (facility staff who can perform physical tasks on your equipment when you are not there) matter for organizations without local IT staff.
Colocation FAQs
What is data center colocation? Data center colocation (colo) is a service where businesses house their own servers and IT equipment in a third-party data center facility. The facility provides the physical space, power, cooling, and internet connectivity. The customer owns and manages the equipment inside.
What is the difference between colocation and cloud hosting? With cloud hosting, you rent computing resources from a provider like AWS or Azure. You own nothing physical. With colocation, you own your servers and house them in a professional facility. Colocation gives you more control over hardware and data, while cloud hosting offers greater flexibility for variable workloads.
Is San Antonio a good market for data center colocation? Yes. San Antonio has favorable power costs (averaging $0.12/kWh, roughly 36% below the national average), low natural disaster risk, and growing connectivity infrastructure. The San Antonio colocation market had only 1.3% vacancy in 2023 according to CBRE, reflecting strong demand and limited supply.
What does on-site colocation at SATC mean for tenants? Bexar Datacenter operates an on-site data center inside San Antonio Technology Center. Tenants whose offices are in the same building as the colocation facility benefit from near-zero latency to their own servers and the ability to access hardware physically without traveling to a separate facility.
How much does colocation cost? Colocation pricing depends on the space (measured in rack units or cabinets), power draw, and connectivity requirements. Contact SATC Colocation Services directly to discuss pricing for your specific equipment footprint and power needs.