Table of Contents
- Let’s answer the question… Is co-location right for you?
- The Economics!
- The cost of my co-location
- My hardware
- The Router Configuration
- My Colo Experience Over the Past 12 Months
- Do I Recommend Co-location?
- Bottom Line
Let’s answer the question… Is co-location right for you?
Over 12 months ago, I made the switch from cloud VMs to dedicated co-location hosting a Proxmox cluster, and it turned out to be one of the best decisions for my specific needs. This move has allowed me to maintain predictable costs while scaling my online services dynamically for users across my region. I’m running 50 VMs for the price of 6 Linode instances.
Before Co-location
Before transitioning, I spent several years hosting a mix of Fediverse services, personal websites, and the occasional on-demand gaming server for friends using different cloud hosting providers spread across various providers like Linode, DigitalOcean, and others. My hosting choices often depended on pricing promotions, jumping between platforms whenever the deal was right.
However, when Linode was acquired by Akamai, costs increased by roughly 20%. Combined with the unfavorable USD exchange rate, it became clear that I needed to reassess my options.
The Cloud Advantage
Cloud providers have undeniable benefits when it comes to operations and maintenance. They handle:
- Infrastructure: Power, bare metal (compute, memory, storage), and backups.
- Network: Bandwidth, load balancing, domain, dens, IP and routing.
- Management: Patching, firmware updates, hypervisors, and basic technical support.
They also offer value-added services like S3-compatible object storage, or managed Kubernetes clusters, which can simplify deployment for many users.
The Case for Co-location in Australia
If you’re based in regions with affordable providers like Hetzner, their business model—focused on bare metal servers with high bandwidth—might make them a better fit. However, in a market like Australia, where costs and infrastructure are notoriously challenging, exploring alternatives like co-location are likely more suitable.
Why Co-location?
With co-location, you move away from the shared responsibility model of cloud providers, where you pay month-to-month for individual VMs and only manage the operating system layer. By owning your hardware and hosting it in a data center, you can make a few smart decisions that drastically reduce costs while offering greater control over your setup at much higher risk of failure.
The Economics!
Based on following costs from Linode for the Syd region. I did a little calculation comparing the total CPU/memory of my unit1 server to the monthly cost of linode VMs
Note: The AMD EPYC 7713 is a Zen3 Milan class which is consider Premium by Linode. Your Linode Shared/Dedicated CPUs are older Zen2 Rome class.
My Unit1 Bare metal host has a capacity to run 62 of the Premium 4GB VMs… at a total comparison price of $2666 USD a month (or over $4095 AUD) when matching Linode.
The cost of my co-location
Australia is not a real country and our internet is horrible… translating to my cost for COLO being higher than your average American or European data center.
My COLO provider is currently Servers Australia.. I pay for 6U of rack space (using 5) with my router and 2 x 2U servers.
You’ll notice the 2TB of included bandwidth is VERY low. So I pay for additional bandwidth as required, but as usual Australian prices are quiet considerable.
https://docs.serversaustralia.com.au/docs/data-pack-pricing
I’m paying a base rate of $384 AUD + whatever bandwidth I need and this cost has settled at around $440 AUD flat for the last 6 months.
Based on these numbers.. If I’m running more than six x premium 4GB linode VMs, I pass the break even point for the monthly cost, and it’s now in the favor of my bare metal…
and to stress the point..VM 6 breaks even.. VM 7-62 is effectively free which allows for growth or over provisioning (Excluding network bandwidth costs).
Final calculation is the value of the hardware.. but this is generally a one time investment with a “2 year or more” expectation of use… so based on that. we can take an estimate of how much you want to spend on hardware.
- $5000 AUD of parts is $208 a month (24 months – including colo $648)
- $10,000 AUD of parts is $416 a month (24 months – including colo $856)
- $15,000 AUD of parts is $625 a month (24 months – including colo $1065)
These calculations change the VM break even point from 10 to 16 premium 4GB linode VM….
Bonus: I haven’t mentioned the cost of additional storage on these providers… I’ve got 5TB of unused ZFS storage which equals about $765 AUD a month (as a nice free bonus to use on demand)… depending on how much storage you use.. you could make an RAID of rusted metal with hundreds of TBs for “free”.
My hardware
If you can score some free hardware, or grab something from a second hand store, you’re golden, but I decided to mix between new and second hand hardware to build a DIY server.
- Power/Network cables
- Router: Mikrotik L009UiGS-RM $119.00USD
- Case: 2U with Rails.
- Redundant Power Supply are recommended for a little extra safety.
- Motherboard/CPU/RAM: Second hand AMD EYPCs/256GB DDR4 ECC/Supermicro motherboard combos can be found online.
- Make sure you test with memtest+ (I’ve received failed ram)
- Storage: Second hand Intel Enterprise DC S3500 SATA SSDs with low usage are very cheap.
- Make sure you upgrade the firmware and test the SMART/performance.
- plus a IT mode HDA/LSI storage card and some SFF cables.
- Recommend grabbing two Intel Optane PCIE devices for ZFS cache/SLOG/Special.
After that, you just need to put the server all together and get them installed.
Hint: If you’re going to builld more than one or two servers, consider having a NAS for all of the storage, and then simply running the servers as compute nodes running off NFS or something. This allows for growth and live migrations between hosts. (I didn’t do this to keep costs down)
The Router Configuration
I commissioned a MikroTik router setup tailored for a multi-VLAN Proxmox cluster. However, before sharing it publicly, I want to validate and consider my options.
My Colo Experience Over the Past 12 Months
The entire process of setting up my co-location environment took some time but was well worth the effort.
The preparation phase, including waiting for parts, took around 2–3 months. Installation of the hardware, setting up Proxmox, and verifying the network took two days. Moving my workloads from the cloud to the colo environment required a few additional days.
Since completing the setup, I’ve hardly needed to touch anything physically. The only exception was when I added a second server to enable live migrations between hosts, ensuring high availability (HA) on my Proxmox Cluster.
The Results
The experience has been nearly flawless. Here’s what stands out:
- No stress about increasing VM resources or adding VMs in batches, free from the “noisy neighbors” I often encountered on Linode.
- Over the past year, I’ve experienced no major outages. Zero network outages, hardware failures, or Proxmox hypervisor issues. Once set up, the environment has been remarkably stable, requiring minimal intervention.
Adding the second server was a decision driven by scalability and reliability, not necessity, which speaks volumes about the robustness of the initial setup.
Do I Recommend Co-location?
For anyone spending more than a few hundred monthly on cloud services (~$440 AUD in my case), especially if you’re expecting to scale further, co-location is a fantastic option to consider.
By purchasing affordable servers, you can avoid the unpredictable costs of cloud hosting.
Bonus: You can sell excess compute, memory, or storage to create a side business and offset costs… offering minecraft servers to your friends kids? if you can handle the regular DDOS that comes with that.
The real savings kick in after about 24 months, once the hardware has essentially “paid for itself.” At that point, your costs drop to minimal recurring fees for power, rack space, and network bandwidth.
Bottom Line
If you’re ready to take more control over your infrastructure and want predictable, scalable costs, co-location might be the right move for you. With the added benefits of higher performance, greater reliability, and potential for monetization, it’s worth serious consideration.
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