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Dedicated Server or Co-Location?

As the Internet server hosting market has developed, two divergent areas have emerged in the server hosting arena: dedicated servers and co-location. At first glance, many corporations and resellers think that co-location will save on costs. In addition, they feel the level of service they receive will be similar.

However, when analyzing the numbers in detail, the service provided and the growth trends of the Internet, dedicated servers offer numerous cost and service advantages over co-location. In a co-location scenario, the client must budget for the hardware, rack space, bandwidth and network equipment.

The initial cash outlay in this setup is much higher than with a dedicated server. An initial investment of $2,000 is needed to purchase a low mid range server system and an initial investment of $7,000 is needed for a mid-range server solution. A half-rack of space at a co-location facility will cost between $100-$700 startup. The client must purchase a switch or a router. On the low-end, these products will cost between $500- $2000. If we assume that the client invests in a low-end server and router, the total initial outlay would be at least $2,500. This figure does not include the costs of staff time for setup and configuration as well as the equipment depreciation costs, insurance and the costs of standby equipment.

In a dedicated server environment, the hosting company supplies the server (or you buy, rent or lease one), rack space, bandwidth, connection to the Internet, hardware maintenance, uninterruptible power supply and 24/7 server monitoring. The cost for a similar server in a dedicated hosting solution would be from $250 startup and $500 monthly. This price includes the cost for the network equipment and installation of the operating system.

A dedicated server also provides the customer with a level of flexibility that co-location cannot match. Since the dedicated server company provides the system, they also maintain the hardware and replace it in the event of a hardware failure.

Furthermore, upgrading the system or adding new systems is easier and more cost-effective with dedicated servers. We estimate that processing power doubles every 12 months. If you purchase the hardware yourself (co-location), you could invest in a new processor and replace the old one but in most cases, you would probably have to purchase a new motherboard because new processors are usually not compatible with older motherboards. The cost for such an upgrade can range between $1000- $4000, not including labor. If you have a dedicated server, you simply pay the difference in the startup and the monthly fee between the present system and the new system.


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