LEVELS OF WEB HOSTING SERVICE - COLOCATED WEB HOSTING (COLOCATION)

The ultimate degree of flexibility is attained with colocation. This type of web hosting solution involves buying and installing your own server on the web hosting provider's premises.

In this set-up you control everything, including the hardware (the downside, of course, is that you have to buy it). Colocation is the ideal arrangement for businesses requiring very customized solutions (e.g. web sites with extensive attached storage, high-volume mail servers, systems with load balancing configurations, etc) as well as those who already invested in custom hardware.

The three key issues with colocation are:

How much rack space you get. As you probably know, most servers come in rack-optimized form - i.e. unlike most desktop towers, they are built as horizontally-oriented machines. They are measured in the number of "units" (U) they occupy - the slimmest servers being only 1U tall. 2U and 4U servers are among the most popular as they typically feature CD-ROMs, several hard drives, a floppy drive, etc.
How much bandwidth you get and how it's measured. Most providers will offer either "fixed" or "burstable" bandwidth. Make sure you understand what's included and whether there are over-use charges. You don't want to become the victim of your own success.
How you can physically access your servers. Most colocation providers allow physical access 24/7, but you need to make sure this is the case. If your provider doesn't offer physical access to servers, you will be responsible for paying hourly rates to the provider's own technicians in the event that any service work is required.

†Main Characteristics Of 'Colocation' Hosting

Cost: high to very high (typically more than $250/month)
Equipment investment: high (everything has to be bought)
Bandwidth: high/custom
Degree of control: highest