Control/options, cost. Those are the main reasons.
By control/options I mean you control your network, you control your infrastructure. You can have as little or as much redundancy as you want, pick your facilities, carriers, your own network setup/configuration, your own server hardware, etc. You know exactly what you have in place, no questions. This is especially helpful if you're needing to meet some sort of industry specs/guidelines or serving customers with such requirements, though can also just help you control and define your own product and maintain your own controls. One of the main things in business is to mitigate risk, if you control the entire chain, you can mitigate that risk a lot easier than just leaving everything up to a dedicated server facility you'll never step foot in.
Great explanation Karl. It just really depends on your unique situation imo. Both have pros/cons.
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I think even for the servers only you'll get better environment in case of colo services. Once you'll add other type of equipment - like routers, firewalls, switched, external drive subsystems I think you don't have a choice like do not go with colo - at least this is what I see with our customers happening.
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