See the vXchnge Difference at Our National Colocation Data Centers

Schedule a Tour

Colocation vs. The Cloud: Which is Best For Your Business?

By: Kaylie Gyarmathy on August 9, 2019

In today’s fast-paced economy, many organizations live or die by their network infrastructure. Even if a company doesn’t deliver products or services over the internet, they still often rely upon it for marketing/sales efforts, administration, or mission-critical applications. Implementing a reliable and effective IT infrastructure is therefore vital to long-term business success. Whether a company is setting up its data systems for the first time or transitioning from an in-house solution, it must determine what approach will make the most sense for its anticipated needs.

In most cases, they have two options to choose from: colocation vs. cloud.

Colocation Services

What is Colocation?

Sometimes, organizations have already made a significant investment in physical IT infrastructure. This is usually in the form of servers, hard disks, and other computing resources. The problem with storing and operating this equipment in-house, either in a private data center facility or in a dedicated server room, is the tremendous power and cooling requirements that come with it. Even a modest IT solution requires a great deal of power to operate, to say nothing of the cooling equipment that must be installed and operated to keep everything running optimally. The cost of running these assets on a regular basis can add up very quickly. When a company colocates, it rents out space in a third-party data center and places its equipment in that facility. 

Pros: Benefits of Colocation

But they’re getting more than just space with colocation services; they’re also getting access to the data center’s power and cooling infrastructure, which is provided at a much lower cost due to economies of scale and better efficiency standards. Colocating assets also allows companies to utilize the data center’s extensive connectivity options to access a variety of services that would be much more difficult, if not impossible, to implement under an in-house solution. For companies that deploy edge computing strategies, colocating assets with a local data center can help them to deliver better services. For organizations that must adhere to strict compliance regulations (such as SSAE 18, ISO/IEC 27001:2013, or SOC 2 Type II)  for data protection purposes, colocation services ensure that they maintain total control over their equipment and data. 

A good colocation data center should also provide intelligent monitoring platforms (like vXchnge’s award-winning in\site) to allow clients to monitor their assets at all times, providing that extra peace of mind that comes from knowing they have total control over their physical infrastructure. Combined with 24x7x365 remote hands services, these monitoring tools offer the same visibility and access customers would expect from their own private data center (without the significant capital investment). Colocation services are also a good option for organizations looking to back up their data in the event of an emergency or disaster situation. Given these diverse needs, it’s no wonder that colocation data centers are helping to drive data center market growth.

Cons: Drawbacks of Colocation

Not all colocation providers are created equal. If a data center is not carrier-neutral, it may lack the connectivity options a business needs to deliver services effectively. Worse, it could create a vendor lock-in situation that limits future flexibility. Some data centers have poor track records of uptime reliability, which could end up costing a company quite a bit of revenue in the form of missed sales, lost opportunities, and brand damage.

Cloud Hosting Services

What is the Cloud?

While colocation makes sense for many companies, it isn’t an ideal solution for those that haven’t already made the investment in their own IT hardware. Even companies that do maintain their own physical network infrastructure may be tired of paying to keep pace with upgrades and replace failed components. If they have an in-house IT department, they may want those specialists to spend their time developing innovative ideas to drive better business results rather than troubleshooting server problems.

Cloud hosting services work similar to colocation, except the space companies are renting to run their operations is virtual, not physical. After choosing a cloud provider, an organization migrates its data and applications from its own physical servers into the cloud provider’s virtualized servers. They hand the day-to-day operations of infrastructure management over to the cloud provider, which frees up their IT departments to focus on more strategic priorities.

Pros: Benefits of the Cloud

Since the cloud isn’t a physical space, it’s far more flexible than a traditional IT infrastructure. When a company needs to increase its capacity to store data or boost its computing power to develop a new application, it simply purchases more of the appropriate services from its cloud provider. This makes it far easier for cloud-based organizations to scale operations quickly. And since most cloud providers offer “pay-as-you-go” models, customers only pay for the computing resources they actually use and can adjust their needs over time.

Cons: Drawbacks of the Cloud

The biggest challenge of shifting to cloud hosting services is the loss of control. While customers can still access the data and applications (at least when the cloud is up and running; customers should be sure to check their SLA uptime guarantee), they don’t actually own or manage the servers where those assets are stored. For some companies, this lack of total visibility and control is unacceptable. There are also security questions surrounding cloud services. Although cloud hosting services are careful to create distinct partitions between customers, there’s always the risk that a data breach involving one cloud customer could compromise the others. Customers also need to have a plan in place for how to react if their cloud provider goes out of business suddenly.

Colocation Costs vs Cloud Costs

Colocation services present higher upfront costs than a cloud-based solution. That’s because customers must purchase hardware themselves instead of migrating data to a cloud provider’s servers. However, the pricing structure of cloud hosting services will often tip the balance back toward colocation. Although cloud services are scalable and offer a lot of power and flexibility, getting access to those features can become very expensive, very quickly.

On the other hand, going the colocation route means having to maintain and replace equipment over time. With a cloud-based solution, all updates are handled by the provider. If an organization isn’t prepared to think about how it will manage the server refresh cycle of its IT infrastructure, the cloud may present an easier, if not always more cost-effective, solution.

Colocation vs. Cloud: A False Choice?

Although there are some clear differences between colocation and cloud solutions for IT infrastructure, the two options are not necessarily mutually exclusive. Increasingly, data centers are providing customers with the ability to have the best of both worlds through network architectures that integrate many aspects of the two services.

Security is a major concern with the cloud because the open nature of the platform makes it easy to infiltrate. While colocation provides better security measures, it lacks the cloud’s versatility. Building the physical infrastructure to both store massive amounts of customer data and run the processing-intensive analytics programs needed to deliver meaningful insights would be quite expensive. Data centers offer an ideal solution to this problem in the form of a hybrid cloud model and multi-cloud deployments.

Hybrid clouds integrate private servers, either physical or virtualized, with a public cloud platform. Sensitive data is stored on the private server side, safely behind firewalls and encryption protocols, while the public cloud is used to run the applications that make the most of that data. Multi-clouds work on a similar premise, offering the security benefits of a private server while integrating the functionality of several different cloud platforms, each one catered to a different service need.

While a purely colocation or cloud solution may be ideal for many companies, it’s important to remember that these approaches to IT infrastructure are not fundamentally incompatible. When implemented within a robust data center environment, hybrid cloud models and multi-cloud solutions can provide companies with the best features of each platform while minimizing their shortcomings.

Hi there! Speak to an Expert About Your Company's Specific Data Center Needs