The term colocation refers to the process of locating a server physically in another site or area specifically designed to house it. It is another term for managed hosting. It enables customers to easily find devices such as server, storage, and network; and link them to network service providers and telecommunications network. It is a low cost option especially for web-based businesses who wish to secure their daily business operations without complexity. This is because managed hosting centers offer backup generators, fire detection, connection feeds, and superior security. At present, e-commerce business and web hosting is at its peak, creating a high demand for managed hosting.

A managed hosting site houses a server. A server acts as the main storage of data and files. Each server must have high speed capabilities to serve a number of computers in a network which are all used at the same time. The physical characteristic of the server must also be taken into account. Most centers include a feature like a fire protection and extinguishing system. A complete, functioning managed hosting center has installed smoke detectors and firewalls. Often, it has racks measuring 19 inches which stores data equipment and telecommunications equipment racks measuring 23 inches. It must be air conditioned to maintain the temperature to avoid malfunctioning and damage of components. Most of all, it must follow certain standards as determined by the Uptime Institute.

Colocation centers are run by electricity, and must have Uninterrupted Power Supply (UPS) or backup generators in case the facility has power interruptions. Power generators are usually run by batteries, while some utilize diesel engines. Popular centers are located in Los Angeles, San Francisco, New York, Chicago, New Jersey, and numerous other large, metropolitan centers of business.

Pertaining to internal operations, some facilities allow free exchange, while some collect fees. Most centers allow an internet exchange hosts inside.

The system of colocation has been widely used because it is a great option for companies which aim to cut their expenses and save time as well. Housing their servers in a secured place with high reliability give them ample time to focus on their business operations and facilitate efficient data exchange within the network of computers.

Another advantage of having a managed hosting center is to reduce the traffic within the network because it offers a larger bandwidth. Access to the internet is made faster. Companies which use these facilities are e-commerce companies, private companies and telecommunication networks.

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