Why Colocation Server Hosting Makes Sense: The Economy of Scale Effect

Everyone benefits from the economy of scale effect. For the lone individual to locate and dig out of the ground the iron ore and various alloy additives and then proceed to produce an alloyed steel cutting knife is cost prohibitive. It’s far easier to take advantage of the chains of businesses that produce the alloyed steel, manufacture the knives, and distribute them to nearby store outlets.

The knife’s low cost that you see at the store is due to the fact that each business in this supply chain is large enough to achieve a sufficient economy of scale to produce the steel, manufacture the knife from the steel, and warehouse and efficiently distribute the knives at a low enough cost to remain competitive as businesses.

In addition to being of sufficient size, each business for the most part specializes in either making metals, manufacturing consumer products with metal components, or in transport and distribution. Specialization allows each business in this chain to employ experts or at the very least, use employees who are highly proficient at the specific tasks necessary to produce their product or provide their service.

The economy of scale effect allows individuals to own comfortable homes, cars, computers, mobile devices, and the other possessions common in our society. In the same vein, businesses also benefit from this effect so that they can focus on their specific missions. There is no reason why companies, especially small and medium-sized, should not take advantage of the many business services and products such as off-the-shelf software. Why hire a staff of software engineers to create office productivity software when superior off-the-shelf versions are available for a fraction of the cost?

Colocation Server Hosting and the Economy of Scale Effect

Like the lone individual fabricating all of his needs from scratch, the business that spends money on server and related hardware as well as on staff to store their data fail to take advantage of the economy of scale benefits of outsourcing this need to colocation server hosting providers who specialize in this service.

These providers employ specialized staff with the skills to maintain the necessary hardware, and to keep the hardware and the data within safe from both online and offline threats. Protection from malware, hackers, viruses, power loss, extreme weather events, and theft are just a few of the security benefits that the colocation server hosting company can provide.

The business with their own servers have the choice of either shifting resources away from their core business to adequately maintain and protect this hardware and its data, or of running the hardware on a shoe string budget which places their data at risk. This resource usage vs risk balance places them at a competitive disadvantage with businesses that take advantage of the economy of scale benefits inherent in outsourcing one’s data storage. To learn about our colocation server hosting services, contact us today.

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