Data Center Colocation is where businesses can rent/lease equipment, space, and bandwidth at a reasonable cost. If businesses go around setting up their own infrastructure, they would be looking at a huge expenditure that can be completely avoided by tapping into colocation facilities since they can just rent what they need instead of creating the systems themselves.
Most data center colocation services are not just online, like server spacing and expansive bandwidth. Basically, they are physical structures that are based near major power hubs so they can tap into the available connectivity. When a business decides on colocation, they can follow two paths. The first is creating a server machine and customizing it according to their requirements. Then, they can go to a colocation center for installing their server. In the second, the business can just rent the server from the colocation center. In this case, the service provider would set the parameters of the server.