When companies place their servers on the premises of a third party, it is known as colocation hosting. The third party, or hosting company, also provides web connectivity. Dedicated hosting is suitable for those companies who want to have control over their website and its operations. There are others who require net connectivity services and hardware delivery, in which case they can opt for internal hosting. Here, the company only pays for the networking services. Companies that opt for collocation hosting own the server and ensure that all the required information is loaded onto it. Once this is taken care of, the server is ready to be placed on the premises of the third party. Such companies also assist their customers in building a server as per their requirements, i.e., they customize a server as per directions.

Colocation providers offer "Server Monitoring" contracts, wherein the norms for providing the service are stated. As such, they are required to keep a watch over the operations of the system. This ranges from facilities provided for placing the server, the accessibility/security aspect, the backup plan, troubleshooting devices and bandwidth. Hence, the contract should be signed taking into consideration all of the issues mentioned above. Servers have standard configurations of 1U or 2U. Those with a greater number of hard drives come with a capacity of 3U or 4U. The costs increase with server capacity. Typically, the costs for colocating a 1U server are less than those for a higher configuration.

There are companies that offer "cheap hosting services" with excellent performance and service. However, when opting for such hosts, care should be taken that the required contract documents contain all the important issues related to colocation hosting.

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