The other thing is their billing system. We have ~30 servers with them and have to pay for each one of them separately. It's such a pain. I noticed something yesterday in the web console that I think solves this, but I'm not sure.
Shoot me an email anthony@makeropspro.com I am developing a service specifically for startups, that you may be interested in, I can probably help.
http://www.hetzner.de/en/hosting/produktmatrix/rootserver-pr...
With collocation you'll end up responsible for all of the hardware and still be dependent on remote hands so service could still suck and likely get much worse.
System Administration is hard and unless you have the $$ to pay one full time, rent the HW.
Most hosting companies will suck if you don't have much business with them. I worked for Rackspace years ago and bigger fish always get much more attention.
I do some consulting work now and find myself on calls with Hostway pretty often and they seem to know their stuff. You might check them out.
http://www.webhostingtalk.com/ is a nice board about hosting.
I'd say flip it around, think about what you're trying to achieve and do the math on all the options to solve it. Pre-framing it as a dedicated rental versus a self-managed purchased is unnecessarily narrow.
I've built a a lot co-lo solutions for clients. They end up being very expensive if you use a "name brand" provider. You are paying for rack space, power, A/C, security, bandwidth, etc, etc. And then anytime something breaks, you need to send somebody in to fix it. If the provider supplies "hands" then they charge heavily for that. Remote consoles are good, but not that good.
With so many providers out there, ranging from bare metal to VPS to PaaS - I find that hybrid solutions work the best. Not putting all your eggs in one basket, etc.
In my experience, the greater the lock-in the worse the service - of course YMMV. I tend towards pay-by-month and stay flexible. Whilst AWS is expensive if used continuously, I find it good for handling spikes. But you do need to architect you solution to move the workload around and that can end up being more bother than its worth.
Feel free to connect. I can speak to how I do it with about ~1.25 racks worth of servers for my company for ~5 years now. I've also done it for MUCH larger international companies. No, I am not trying to sell you something :)
There are lots of very, very good providers of servers out there. Sign up with one of them.