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When you get a dedicated server the host is responsible for the hardware, space, bandwidth, power, ANYTHING on that server. That is why dedicated cost more then colo - they provide everything and if something breaks they fix it for you at no additional cost to you.
When you colo a box you buy the hardware and "rent" space and bandwidth from the provider - so it is cheaper. But if something goes wrong on your server - you have to order the parts and replace it yourself which will cause a longer downtime in the event that something fails unless you buy spare parts from the get go. Not to mention you have to handle all of the initial set up and everything else.
Also when you go dedicated you can upgrade on the fly, and when newer and better stuff comes out you can just move servers rather then having to go out and buy all new servers.
My opinion dedicated is the way to go for anything under 10 servers even with load balancers and stuff. Most real hosts can give you anything you want.
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