Colocation Cost Factors and How to Reduce Your Monthly Spend

In a world where data is growing faster than ever, companies of all sizes are trying to figure out how to store, process, and access this information efficiently. According to IDC, the global datasphere will grow to over 175 zettabytes by 2025. That’s not just storage — that’s power, cooling, network access, uptime, and physical security.

For businesses that don’t want to fully rely on the public cloud, colocation hosting has become a smart middle ground. It allows you to place your own servers in a third-party data center with the infrastructure already in place — power, cooling, bandwidth, and security — all managed by the colocation provider.

But here’s the catch: colocation cost structures can vary wildly depending on several factors. And if you’re not careful, your monthly bill could snowball beyond expectations.

This blog is your walkthrough guide to what truly drives colocation pricing, how leading providers in India structure their costs, and more importantly — how to optimize and reduce your monthly spend without sacrificing uptime or security.

What is Colocation, and Why Do Businesses Choose It?

Before diving into the numbers, let’s clarify what colocation hosting is.

With colocation (or colo), you:

Own your own physical server and hardware.

Rent space in a professional data center facility.

Pay for rack space, power, network bandwidth, and support.

Get 24/7 physical and virtual access to your machines.

Why not just go with the public cloud?

Well, for many companies — especially in BFSI, e-commerce, logistics, and tech startups handling large datasets — owning your servers provides greater performance control, cost predictability, and regulatory compliance. And co locating them in a data center saves you from building your own expensive IT facility.

Breaking Down Colocation Cost Components

So what does your colocation bill actually include each month? Let’s break it down:

1. Rack Space (The Real Estate)

This is your "rental" space in the data center. It’s often measured in:

RU (Rack Units): One server takes 1–2U typically.

Quarter Rack / Half Rack / Full Rack: Standard full rack is 42U.

Estimated Cost in India:

1U to 4U: ₹2,000 – ₹6,000/month

Quarter Rack: ₹8,000 – ₹12,000/month

Full Rack: ₹30,000 – ₹70,000/month (location dependent)

In India, providers like Cyfuture offer flexible rack configurations in Tier-III and Tier-IV facilities.

2. Power Consumption

Power is often billed separately, based on actual or committed usage (in kVA or kWh).

Standard draw: 0.5 kVA to 3 kVA per server

Charged on metered or flat rate basis

Estimated Price: ₹8,000 – ₹25,000/month per kVA depending on location and redundancy level (N+1 or 2N).

Pro tip: Choose energy-efficient servers to cut recurring costs.

3. Network Bandwidth

Colocation providers offer internet bandwidth or cross-connects to your preferred ISP.

Metered Bandwidth: You pay for GBs used.

Unmetered: Fixed price for unlimited traffic (subject to fair usage).

Estimated Cost:

₹500 – ₹1,500/month for 10 Mbps

₹4,000 – ₹10,000/month for 100 Mbps or more

If you’re streaming or hosting real-time services, this part of the bill can be significant.

4. Remote Hands & Support

Unless you have someone at the data center 24/7, you’ll rely on the provider’s engineers to:

Reboot servers

Swap drives

Check cables or connectivity

Some providers bundle a few hours of support into your plan; others charge hourly.

Hourly Rates: ₹500 – ₹1,500 depending on urgency or SLA.

Cyfuture includes 24/7 NOC access and managed services, making it easier for remote teams to scale operations.

5. Add-Ons: Backup Power, Firewalls, Security

Need a UPS backup? Firewalls? DDoS protection? These will add to your costs.

Basic firewall: ₹500 – ₹2,000/month

DDoS protection: ₹3,000+ (varies by sensitivity)

Compliance audits, ISO/SOC reports: Additional fees

These optional features are critical for regulated industries or high-availability platforms.

Hidden Costs That Often Surprise Clients

It’s easy to get misled by just the "per U" price on a colocation website. Here are some hidden charges to watch out for:

Cross-connect fees to ISPs or other vendors in the facility

Migration/setup fees (especially during onboarding)

Inbound shipping and installation charges

Overage penalties if you use more power bandwidth than allocated

Always read the fine print and request an all-inclusive monthly estimate.

How to Optimize and Reduce Your Colocation Spend

Yes, colocation can be expensive — but smart planning and strategy can help you reduce your monthly invoice significantly. Here’s how:

1. Consolidate Hardware

If you're still running underutilized 1U or 2U servers, it's time to consolidate. Fewer but more powerful machines consume less rack space and can also be more power-efficient.

Switch to:

Blade servers or multi-node servers

Virtualized environments for non-critical apps

2. Negotiate for Flat Power Rates

Some providers charge on peak usage, which can spike. Ask for a flat-rate power plan to simplify budgeting and prevent billing surprises.

3. Right-Size Bandwidth

Monitor your actual usage. Don’t commit to 100 Mbps if you only use 20 Mbps. Use tools or dashboards to measure traffic flow over time and downsize or negotiate bandwidth slabs.

4. Consider Remote Hands Packages

If you're constantly relying on NOC support, ask for bundled monthly hours instead of paying hourly.

Cyfuture, for instance, offers managed colocation plans that include proactive monitoring, OS patching, and alerts.

5. Choose the Right Location

Data centers in tier-1 cities like Mumbai or Bangalore are costlier than those in Noida, Jaipur, or Hyderabad. If ultra-low latency isn’t essential, placing your servers in a lower-cost city can slash your monthly bills.

6. Bundle Cloud & Colo

If you're hybridizing your infrastructure (part in cloud, part colocated), opt for a provider that offers both under one umbrella. This ensures better pricing, easier integration, and reduced complexity.

Cyfuture Cloud, for example, allows you to colocate your ERP backend while keeping your front-end on their cloud VMs — all managed through a single portal.

Real-World Example: Monthly Cost Estimation

Mid-sized E-commerce Business (4 Servers):

10U rack space: ₹9,000

2 kVA power: ₹18,000

50 Mbps bandwidth: ₹4,500

Remote hands + support: ₹2,000

Backup & firewall: ₹1,000
Total: ₹34,500/month

Compare this to public cloud alternatives, and colocation becomes more economical over the long term—especially for static workloads and licensed environments.

Conclusion: Control the Spend Without Compromising on Uptime

Colocation is not just a hosting choice—it’s a strategic move toward better control, predictable performance, and long-term savings. But like any infrastructure investment, it requires visibility into what you’re actually paying for.

By understanding the key colocation cost drivers—from power and rack units to bandwidth and add-ons—you can negotiate smarter, choose better locations, and avoid bill shock.

Providers like Cyfuture make this process even more seamless by offering transparent pricing, customizable plans, and bundled managed services to simplify your infrastructure footprint.

If you're scaling up, going hybrid, or simply want more control over your IT infrastructure — colocation might be your smartest monthly spend yet.