5 Key Roles of a Colocation and Interconnection Provider in Cloud Optimization

In the fast-paced world of financial services institutions (FSIs) are constantly striving to meet customer expectations for a seamless, full-service remote experience while remaining highly competitive. While the adoption of cloud technology appears to be a straightforward solution to these demands, FSIs face unique requirements related to risk, cost, compliance, and resilience. For them, the hybrid cloud model, striking the right balance between colocation and cloud resources, emerges as the ideal approach.

The Power of Colocation

Colocation offers FSIs the ability to relocate critical infrastructure, such as trading platforms, banking applications, and customer service operations, to high-performance data center facilities. These facilities are tailored to provide the low latency, scalability, reliability, and favorable total cost of ownership (TCO) that are paramount in the financial sector. Moreover, the ability to connect seamlessly to major cloud service providers (CSPs) through dedicated, private interconnections within these facilities amplifies the value of the hybrid model.

The direct connections to CSPs within colocation facilities are a game-changer for FSIs. They offer reduced latency, enhanced performance, cost savings, and reliability. For instance, Microsoft Azure ExpressRoute, a direct connection service, boasts an uptime SLA of 99.95%. This level of reliability is critical for FSIs that rely on cloud-based applications and services for their operations. Furthermore, reduced latency directly impacts trading performance, where even milliseconds matter, potentially resulting in significant financial gains or losses.

Colocation providers often adhere to industry-specific compliance standards such as PCI DSS and SOC 2. Achieving and maintaining compliance can be a resource-intensive task for FSIs. By colocating their infrastructure within compliant facilities, FSIs can leverage the provider’s compliance certifications and audits, thereby simplifying the compliance burden and ensuring adherence to regulatory requirements.

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Challenges in Embracing Cloud-First Strategies

Recent years have seen a growing trend of “cloud repatriation” among companies, including FSIs. Some that had wholeheartedly embraced a “cloud-first” strategy found themselves grappling with increased costs, decreased performance, and compliance challenges. Consequently, they are strategically relocating workloads and data from public cloud environments to alternative infrastructures. It’s important to note that this isn’t an outright abandonment of the cloud; instead, FSIs and their ecosystem of service providers are meticulously reevaluating their resource allocation. By crafting a business-specific blend of colocation, on-premises, and public cloud services, they aim to regain control over costs while offering an optimized, differentiating customer experience.

5 Key Roles of a Colocation and Interconnection Provider in Cloud Optimization

In the journey towards optimizing cloud strategies for financial services institutions (FSIs), the role of a colocation and interconnection provider is absolutely pivotal. These providers offer a range of invaluable services and features that directly impact the performance, security, and reliability of FSIs’ IT infrastructure.

1. Interoperability and Future-Proofing Cloud Operations

One of the key considerations when selecting a colocation and interconnection provider is their ability to offer seamless interoperability with CSPs. This becomes particularly critical given that CSP offerings can vary by region. A reputable provider will have a “native onramp” within the same facility, which means they directly connect to CSPs. This direct connection results in a lower-latency network, enhancing the overall performance of FSIs’ applications and services.

Moreover, the direct connection minimizes the need for routing traffic via third-party carriers or the public internet to reach CSPs. This reduction in network hops not only improves performance but also contributes to cost savings by reducing bandwidth costs.

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2. Uptime and Reliability

In the financial sector, downtime is not an option. FSIs require a rock-solid foundation of uninterrupted availability to ensure the seamless flow of critical financial operations. To achieve this, colocation and interconnection providers should offer a 100% uptime service level agreement (SLA) as a non-negotiable standard.

Furthermore, it’s imperative that this commitment to uptime is backed by a proven track record. Providers should be able to demonstrate a history of consistently meeting or exceeding their uptime SLAs. This reliability is essential for FSIs to maintain their competitive edge and safeguard against potential financial losses due to service interruptions.

3. Flexibility and Compliance

In an industry where regulatory compliance is paramount, FSIs require flexibility in how they address specific compliance requirements. Colocation providers play a pivotal role in this aspect by allowing FSIs to tailor their data center space according to their unique technical perspectives and compliance needs. Rather than imposing rigid corporate standards, the right colocation partner empowers FSIs to design their IT environment to meet regulatory obligations effectively.

This flexibility extends to legal and contractual terms, enabling FSIs to negotiate agreements that align with their compliance requirements. For instance, FSIs may need specific contractual provisions to ensure data sovereignty or meet industry-specific regulations. The ability to customize these terms is invaluable.

4. Physical Security

The physical security of data center facilities is a top priority for FSIs. Reputable colocation and interconnection providers recognize this and implement robust security measures to safeguard the sensitive financial data and critical infrastructure of their clients.

Security features may include 24×7 surveillance by qualified security professionals, biometric access control, strategically placed surveillance cameras, sensing gates, and the presence of trained security personnel on-site. The combination of these security layers ensures that the data center facility is well-guarded against unauthorized access and potential threats.

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5. Redundancy and Resiliency

Disaster recovery capabilities are paramount for FSIs. In the event of unforeseen disruptions, FSIs must have mechanisms in place to ensure business continuity and minimize downtime. Colocation providers should offer robust disaster recovery solutions that align with FSIs’ specific needs for redundancy and resiliency.

FSIs must work closely with their colocation partner to validate how these disaster recovery capabilities can be effectively implemented. This includes comprehensive testing and planning to ensure that in the face of adversity, critical financial operations can seamlessly transition to redundant systems and data centers.


In conclusion, the journey toward optimizing cloud strategies in the financial services sector involves careful consideration of the right balance between colocation and cloud resources. While the cloud remains an integral part of this equation, the role of a trusted colocation and interconnection provider cannot be overstated. Such providers empower FSIs to navigate the complex landscape of cloud resources, ensuring low latency, high availability, scalability, and robust security—all while maintaining compliance and cost-efficiency. In this ever-evolving industry, the hybrid cloud approach, guided by the right colocation partner, emerges as the key to achieving excellence in financial services.

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