can anyone tell me the advantages of outsourcing a web hosting business as opposed to managing or co-locating a server with a company like Alabanza or Verio ( the two companies I've seen mentioned the most)

Any comments would be appreciated.

Biggest thing I can see is cost, after awhile its cheaper to have everything in house.

I'm not sure that was one of the choices Charles? Just to clarify- are these the choices you are asking about aleks???

1) Outsource webhosting business
As in resell for a host, or affiliate/referral program?

2) Colo'ing a server at a company like Alabanza (type company)

3) Managing and leasing a server at Verio (type company)

Well what I'm trying to figure out is why do so many people decide to get managed or co-located servers rather then outsourcing their webhosting.

Is it cheaper?
Are there more benefits to running a server yourself?

Maybe Charles was right? I don't know. Maybe it is early but I'm confused (the wording?)...

Maybe i worded my question wrong. Why do so many people choose dedicated servers over outsourcing.

Is that a little more clear?

There are quite many reasons... (advantages and disavantages actually)
The main ones are:

dedicated / co-location:
- you have the full power on the server, can install anything that you need, when you need it. You are your own admin, thus don't have to wait after your host.
- once the server is running at a good capacity, it is cheaper than outsourcing
- harder to administrate

outsourcing:
- faster and easy to set up
- less control on your sites
- easier to administrate
- can be a bit more expensive

Now, when someone has an exceptionnaly popular web site, he cannot think of using shared hosting. No one will host him. Once a site go over 30 gb of transfer per month, it is usually required that the time has come to change to another type of hosting. The cheaper ones just won't do it any longer.

I hope this helps a bit :)