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Where I am in the market, the managed dedicated server is 10+ years old, so there's no capital cost there. More upscale, the host may have volume discounts with the OEM that you won't get, unless you've got other business (maybe you buy a lot of laptops for your staff, so you can get servers for less as well)

It's got to be cheaper to have me as a customer when I never show up in person, and don't even know precisely where the server is. For a colo, they need to provide me with access, and supervise me when I visit, and put up locking cabinets (and make sure they aren't all keyed alike!), they'd also need to be able to meter power, etc.

There's definitely reasons to colo instead as a customer, but usually it's lots of hardware, or specialized hardware, or sometimes if you have networking needs that the host won't accomidate in dedicated; maybe you want to run an ASN and have direct connections to other peers / transit / IX.