For a large website, server co-location can be the only solution to serving millions of pages. There are advantages to this web hosting package, and there are also a few disadvantages.
Serving web pages faster. Server co-location means that your server is in the web hosting company’s site. This means that there is a shorter distance between the computer and the internet backbone. This makes it faster to serve pages without the lag time due to the additional distance from your office to the web hosting site.
24 Hour Support. The cost of support and maintenance is part of the web hosting package. You do not need to hire your own person to watch over, support and maintain the server if it was located in the office.
Controlled Environment. Your server will be in a room which is temperature controlled throughout its lifetime. It will also have uninterrupted power supply while in service. It would cost you a lot of money to have the same environment if you had the server in your office.
Changing web hosts. When there is a need to change web hosting services providers, co-located servers have a distinct disadvantage: these are actual computers that you own. You would have to move them from one physical location to another. Besides that, you would still need to do some maintenance work to ensure that the servers are in perfect working condition.
Physical servers need to be replaced. At the end of the serviceable life of the server, these have to be replaced. When a server shows signs of giving up, it will have to be replaced before it totally dies in service. With a clean backup there should be no problem for business continuity.
All in all, once you already have a website with a large volume of traffic, there are only a few options for web hosting packages. If you have a continuing business, server co-location offer the best option. The only real disadvantages have more to do with necessary business decisions.