As businesses seek to reduce their in-house IT costs, IT managers are increasingly looking to downsize their on-site data centers. With their high costs and security liabilities, servers and related devices are more likely to move to colocation data centers as a cost-cutting measure for global enterprises. Defined as outsourcing the location of servers, colocation offers many benefits for companies both small and large.

Here are five reasons why companies are investing in colocation data centers:

1. Greater scalability

According to business consulting firm Grand View Research, demand for colocation is projected to rise 12% from 2015 through 2022 as vendors offer companies more opportunities for scalability. This is crucial for small companies that are looking to expand as well as large firms that are aiming to increase their market share. With physical servers occupying a separate off-site location, businesses are free to use their office space however they choose.

2. Increased flexibility

With colocation, data centers are able to provide a variety of services outside of typical data warehousing, including data analytics. Operators of these data centers are specialized in managing servers and other systems and IT can focus on office-specific issues. With off-site data centers taking on more services, IT teams can concentrate on the bigger picture of the company.

3. Improved data security

Sectors that are likely to invest in colocation include healthcare, information technology, and telecommunication. Small and medium size companies (SMBs) are also in the market for colocation, especially those that depend on retail services. Colocation is integral for companies that need extra security for their confidential or sensitive data.

A report from content security firm Trend Micro found the top five industries likely to experience data breaches were the healthcare, education, government, retail, and financial sectors. The physical security and loss prevention associated with colocation could save companies money and alleviate other issues associated with data breaches.

4. Lower risk of downtime

Since their servers are located off-site, businesses do not have to worry about the chance of downtime affecting their operations during a natural disaster, power outage, or other similar incident. With their servers safely placed in colocation data centers, employees can easily pick up where they left off to continue their work through cloud applications. With these protections against downtime, firms have a lower risk of revenue and productivity loss.

5. Optimized bandwidth

The average business has to pay for bandwidth used on-site. SMBs may be limited in their bandwidth due to cost, which could lead to lower productivity and frustration among employees. However, colocation offers a way to spread this cost throughout the data center, lowering bandwidth expenses.

Companies can rest assured that their servers and devices are not only secure in a professional data center, but that their infrastructure and bandwidth are running optimally to maintain business functions.

With the perks of off-site data warehousing and more, the market for colocation — and businesses that use these solutions — is likely on track for growth.