If Business Is Booming, It May Be Time for Colocation
By Kevin Reichard

For most small businesses, this is a cost-effective approach: The only initial expense is the setup fee (which many ISPs waive for new customers), and the only effort needed is actually creating the Web pages. The ISP does all the heavy lifting: buying and configuring the hardware and software and purchasing a fast Internet connection. In theory, everyone is happy: All parties involved are sticking to their knitting and you can focus on growing your site rather than site management.

Success Changes Everything
However, success does pose its own set of challenges. As your site grows and you expand your Web-based busines, you'll want to take more control over your Web site. Maybe your ISP doesn't offer some specific software (like a database or scripting language) that you want to implement, or you may be running against some performance issues posed by the ISP's shared-server system. Or you may be in a better position to make a capital investment in server hardware. In any event, you may be looking to own your own server, thus increasing your control over your Web site.

However, owning your own server and managing your own server are two different things, which is why many SMBs look at colocating their server with their current or a new ISP. The idea behind colocation is simple, especially where an SMB is concerned: Chances are good that your small business lacks expertise in server management on the hardware side (managing Internet connections, buying bandwidth), so it makes sense to physically locate your server at your ISP's server room and hire them to handle the Internet connection and configuration.

There are a host of other reasons to consider colocation. ISPs are in the business of managing servers, so they have the infrastructure — as in backup power supplies, around-the-clock support staff and burstable connections to ensure adequate bandwidth — to keep your site up and running 24/7. (They're also available to physically reboot your server if needed.)

Good ISPs also run secure facilities, so you don't need to worry about an outsider or an employee stealing your hardware. (Yes, there are times when the hardware is more valuable than the data stored on it.) Instead of acquiring and managing IP addresses on your own, your ISP does the work. Most larger ISPs also have backup systems in place so you don't need to physically back up your server every night. Speaking of security: ISPs also have anti-virus measures in place at the edge of the network to deter potential intruders.

Bargaining for Bandwidth
If you do decide to colocate your server, be prepared to negotiate a new contract. Colocation fees are usually broken down into two categories: rental fees and connection charges. Most ISPs charge a monthly rental fee for placing your server in their datacenter, with the price depending on the size of your server. Some charge by the rack, while others charge by the square foot. Most SMBs will buy a 1U or 2U rackmount server.

The connection fees are based on actual usage, albeit in a slightly complicated way. It seems like every ISP computes connection charges a little differently, but most base fees on a connection average or the 95th percentile. Using a connection average, the ISP gives you a figure that you can average per second. The ISP will then take the amount of bandwidth actually used in a month, divide that by the number of seconds, and then determine the fee. (Some ISPs offer colocation deals with a bandwidth limit. Avoid this kind of deal.)

The 95th percentile is a little more complicated: Bandwidth measurements are take every so often, and at the end of the month the top five percent of readings are thrown out, with the highest remaining measurement serving at the measure for the monthly charge. This formula rewards sites that have a steady readership and penalizes sites that suffer through spikes in traffic; one spike can lead to a much larger monthly charge. (The rationalization from the ISP: A burst in traffic stresses their entire system and can conceivably force them to purchase additional bandwidth.)

And, of course, one essential clause in your contract should address uptime guarantees. Just because you're providing your own hardware doesn't mean the ISP has no responsibilities regarding uptime.

Whatever additional services you want depend on your in-house expertise. Some ISPs treat colocation as a bare-boned business, offering you little more than a physical connection, a spot on a rack and the willingness to reboot the system on demand. Others will provide additional services either for a fee or as part of an overall colocation deal.

Finding the Right Colocation
Colocation is not for everyone. You do need to configure your server for use in the colo facility (meaning operating system, Web server and mail must be set up correctly), and while setting up a Linux or Windows server is not an overwhelming task, it's not the easiest thing you to do without some experience. Before you take the great leap into colocation, make sure you have the expertise and finances to pull off a move and determine whether an investment in your own hardware makes business sense.