Colocation (also “collocation,” or “colo”) is to have several different companies’ equipment in one location. There are many benefits to this, including security, ease of maintenance, and the economy of scale. In terms of Voice over IP, colocation can refer to having a VoIP service provider’s servers and switches in the same location as their local internet service provider. Similarly, a business VoIP provider can have that same equipment in the same facility that houses PSTN trunks and switches.
Colocation is also a service offered by hosting companies. In what is known as “infrastructure as a service,” a hosting company rents out the use of servers, storage, and other network devices. The hosting company maintains the connection to the Internet and ensures the security of both the data and the equipment. The hosting company will keep the equipment at optimal temperature, protect against equipment failure, and guard against theft and sabotage. Different customers may use the same building or even the same equipment. In this way, bandwidth and computing power is also shared between many companies.
The opposite of collation is on-premises. For example, if your office has a PBX, you have all your equipment on-site, and you must maintain it yourself. The same can be said for any VoIP provider that owns and maintains its own equipment. For some providers, it is an advantage to take ownership of the equipment and maintenance. For other providers, the redundancies and scalability inherent in colocation work in favor of their customers.
– How VoIP, IP PBX, and SIP make Call Centers Better