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What exactly is the difference between these two options?

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There are four basic options:

  • Basic "Hosting" (aka "shared hosting") is where the company runs your website or service on a server with other web sites or services. You generally get no control over the server itself; you get to upload files and administer the service, but the hardware and OS is the host's responsibility.

  • "Dedicated Server" hosting is where the host rents you a complete server in their data center. They provide the hardware and OS, internet connection and bandwidth. You are responsible for whatever else you choose to install and run.

  • "Virtual Private Server" (VPS) is a hybrid of these made possible by virtualization, where the company rents you a dedicated virtual server which will be on a big server that you effectively share with other VPS's. Amazon has a unique version of this called EC2 that is pretty good and quite inexpensive for most applications.

  • "Colocation" (aka "colo") is where you rent space in the data center, and they provide power, cooling, internet connection and bandwidth. You are responsible for the whole system and do everything, starting with taking your box to the facility and installing it. Most colo's do have techs onsite to help with emergency re-boots and diagnostics.

In most arrangements, you are responsible for backing up your system/data. The host generally is not liable for any data lost for any reason including their negligence. Don't neglect backups in your plans.

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Dedicated hosting you pay to rent servers in a data center. Colocation you rent space in the rack and install your own server.

Most people start off with a dedicated server until that single server can no longer handle to load/task. Then when you need multiple servers it can be cheaper to colocate (so long as there is a data center within 2 hour drive and you have IT staff)

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So with dedicated hosting could I install my own Windows Services? Basically I have total control over it? – Abe Miessler Jul 23 '10 at 14:51
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Most providers allow to install your own operating system from zero. Of course you can use apreinstalled OS, too. So, yes you are able to install your Windows services. But keep in mind, that your selected hoster has another understanding of the term "dedicated server". Ask them to be sure. By the way, on a dedicated server the provider will in most cases not update the software, etc. It's all your job – krissi Jul 23 '10 at 15:15
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