"Colocation is all about economies of scale, focusing on your core competencies as a business and letting someone else handle the data center aspect," says Joe Sullivan, senior director, colocation product management with Sungard Availability Services. "From a financial perspective, it allows you to take a large cash outlay or capital expense and convert that into an operating expense."

Smart Business spoke with Sullivan about how to decide if colocation is right for you, and what to look for in a colocation provider.