Cloud services have enabled enterprises to access powerful computing resources, store data and control software without having to maintain on-premises infrastructure. But not all businesses are ready to make the leap. This is where colocations, or colos, come in.

Most companies now get their cloud connectivity from colocation facilities, which allow businesses to maintain control over IT infrastructure while enlisting partners for datacentre management. The global datacentre colocation market size was valued at more than $54 billion last year, and was on track to grow at a compound annual growth rate of 14% by 2030, according to a report by Grand View Research.

Demand for these facilities has increased as companies seek cloud-like features alongside regulatory compliance, cost savings, security and accessibility.

No longer an afterthought used for disaster recovery or data storage, colocations are becoming essential to business success — and there are steps organisations can take today to make the most of this new “middle cloud.”

Colocation facilities offer wide-ranging benefits to businesses, from faster connectivity to strengthened security and more sustainable operations. Some companies have turned to co-locations to handle the sheer quantity of data that has resulted from a hybrid and remote workforce, and the explosion of generative AI.

For other companies, including those in heavily regulated industries such as healthcare or finance, colocations can be essential. Through colocations, companies can keep data and applications on-premises to comply with regulations and still gain connectivity to public cloud platforms and integrate SaaS applications.

The Advantage to the "Middle Cloud"

Colocation providers offer a range of networking services that help businesses optimise their cloud networking. These services often include load balancing and traffic shaping.

By moving a company’s networking services to the cloud, also known as Network as a Service (NaaS), organisations move from a capital expenses (CapEx) operational model to flexible operating expense (OpEx) subscriptions.

The shift can reduce IT costs, free up capital for other investments and improve operational efficiency. By combining this approach with the value-added services of modern colocation facilities, businesses can tap internal IT resources while improving delivery speed and scalability.

The expansion of colocation facilities into the middle cloud has significant implications for the future of cloud computing. As more businesses adopt hybrid cloud strategies that combine public and private cloud services with on-premises infrastructure, colocation providers are well-positioned to play a key role in enabling these environments. This makes colocation facilities a natural hub for cloud networking.

To fully leverage the capabilities of modern colocation facilities, businesses should adhere to these 3 Key Strategies:

Prioritise Location

Ensure Elasticity

Think Sustainably

1. Prioritise location

When selecting a colocation facility, think beyond geography. Consider how to bring your services as close as possible to end users. Where you host your services can determine connection speed and overall performance, meaning location can and should be a key factor in choosing a facility.

2. Ensure elasticity

A colocation facility and design should allow for expansion and contraction, with flexibility built into a contract. Remember to build your services with pivot points and consider value-added services: connecting to a Network as a Service platform can enable your business to scale up and down without contract commitments and help bring services closer to end users.

3. Think sustainably

Datacentre operations can require significant energy and resources, and making environmentally conscious choices is a responsibility we all share. Look for colocation facilities with more sustainable options, including water cooling, renewable energy and geothermal power.

In the case of private data that cannot fully move to the cloud, colocations are king. We’ve already seen improvements in services, consoles and feature races — and this evolution will only continue.