Research Hub > Cloud vs. Colocation: What’s the Difference and How Do You Find the Right Mix?

February 09, 2023

5 min

Cloud vs. Colocation: What’s the Difference and How Do You Find the Right Mix?

You have options where you store your data. Find out which option makes sense for you.

CDW Expert CDW Expert

IT organizations are under pressure to innovate and drive business value. They are turning to the cloud and data center colocation to cut costs, gain efficiencies, deliver on-demand services, and provide the business with a competitive advantage.

Defining the Cloud and Colocation

If you’re considering the cloud or colocation, you will likely face misconceptions that can hold you back.

For example, some people in your company may think that “moving to the cloud” is just shifting your workloads from one spot to another.

However, the cloud is not a place. It’s a set of services, technologies and tools that can help you transform the way you do business.

On the other hand, colocation is a place. It’s the data center where your IT environment lives.

You can have both colocation and the cloud but having one doesn’t automatically mean that you have the capability to consume the other. For example, your colocation provider may not offer cloud, managed services or migration services. You can also use the cloud without being in a colocation facility.

You may need both cloud and colocation if you have traditional applications or specific security requirements but still need newer, faster and business-aligned technical strategies.

The key is to find the right mix that works for your company.

What Is Colocation?

Many people think that colocation is just a data center where you get floor space, electrical power and an internet connection. However, colocation is about more than just data center facilities.

Some of today’s colocation data centers offer a host of services — from managed IT to the hybrid cloud. They can also provide you with greater power density, which is key to quickly scaling and supporting new technologies. Some data center colocation providers even offer a direct connection to the top public cloud providers such as Google Cloud Platform, Amazon Web Services (AWS) and Microsoft Azure.

Traditional Colocation Models

When you look for a data center colocation provider, you’ll find the following traditional colocation models:

1. Wholesale: In this model, you lease data center space that is customized to meet your needs. This model is best if you have large power requirements and/or need more than 10,000 square feet of space.

2. Retail: In a retail model, you lease space inside a cage. Consider this option if you don’t require a lot of power and can fit your equipment into less than 2,500 square feet of space. Whichever model you choose, look for a data center solutions provider who offers more than just the basics. Find a partner who understands your business, can meet your power requirements, can help you quickly scale, and can possibly help you with a Retail+ model that bridges the gap between wholesale and retail.

What is the Cloud?

The term cloud means different things to different people.

For some people, cloud means virtualization or a public cloud. For others, it means containers or a private cloud. To some, it means a hybrid cloud of both public and private. For many, the cloud means risks to the business.

With so many definitions, it’s vital to define cloud within your company, get everyone on the same page and understand the business outcomes at stake.

Cloud Defined

The National Institute of Standards and Technology (NIST) defines the cloud as, “a model for enabling ubiquitous, convenient, on-demand network access to a shared pool of configurable computing resources (e.g., networks, servers, storage, applications, and services) that can be rapidly provisioned and released with minimal management effort or service provider interaction.”

According to NIST, cloud has the following five characteristics:

1. On demand

2. Broad network access

3. Resource pooling

4. Rapid elasticity

5. Measured

What is Managed Cloud?

Most public cloud providers such as AWS deliver services in accordance with the NIST definition of cloud, but they don’t manage your workloads, nor the interface into your existing IT functions.

Managed cloud combines the benefits of cloud with full-service operations management of the workloads hosted there. Managed cloud providers care about the entire IT service framework for your business.

Define Your Expected Business Outcomes with These 3 Questions

The cloud conversation is everywhere today as more companies move workloads to the cloud to achieve business transformation.

According to the RightScale 2019 State of the Cloud Report from Flexera, 84 percent of enterprises have a multicloud strategy. On average, respondents are using almost five clouds across both public and private and they are already running applications in 3.4 clouds and experimenting with 1.5 more.

Ask these three critical questions to determine how you want the cloud to impact your business:

1. What do we want to accomplish with the cloud?

2. What is the ecosystem that we need to enable for our cloud?

3. Do we have the skills, knowledge and resources to take this on?

Companies that are the most likely to succeed will transform their IT and embrace continuous integration and continuous delivery (CI/CD), while mastering the organizational processes needed to run applications in the cloud.

Colocation + Cloud = Enhanced Agility at Lower Costs

Building a data center takes both money and expertise. Even small data center buildings start at 10,000 square feet in total size, which could translate to a cost of $2 million or more to build even a small data center. A lot of companies are challenged with getting the capital expenditures (CAPEX) for new IT equipment, let alone the funds to update their aging facility or build a new one.

Since investment and reinvestment in data centers is difficult to forecast, companies are looking for more predictable and accurate ways to manage their infrastructure technology spend. The move to the cloud and colocation allows companies to get off the CAPEX roller coaster and move to a more linear, operating expenditure (OPEX) financial model.

When you combine colocation with the cloud, you can manage your workloads without the high costs of owning your own data center. This allows you to direct your funds toward innovation and growth, rather than basic infrastructure and operations.

Colocation and cloud providers have partnered to offer low-latency connectivity in a location that’s close to home. This gives you speed, so you can quickly scale, deploy applications faster, and meet new business demands.

Colocation also offers benefits that you can’t achieve with the cloud alone. For example, maintaining compliance can be difficult in the cloud. Many colocation providers meet strict compliance and security requirements to give you a secure path to the cloud.

To get the most benefits from the cloud, look for a colocation provider who offers managed services, managed hosting and migration services. When you transfer your day-to-day IT operations to your data center solutions provider, you can cut costs and free up your internal team to focus on innovation.

Your colocation provider should offer skills that you don’t have internally — whether it’s managing legacy equipment when your key personnel retire or leveraging new technologies that you can’t support in-house.

Choosing a Colocation Provider

If you want to get out of the data center business and take advantage of the cloud, here are some questions to ask:

  • What larger problem are you trying to solve?
  • What are your data center requirements?
  • What are your cloud requirements?
  • Does you colocation provider offer IT skills that you are missing in house?
  • What are your ideal center locations?
  • Can the colocation provider meet your security and compliance requirements?
  • What are the service level agreements (SLAs) for the cloud or colocation provider?
  • What is the colocation provider’s pricing model?

Getting to the Cloud the Right Way

A partner who understands colocation and the cloud will meet your needs and get you to the cloud the right way by helping you define your expected business outcomes. Whether you want to move everything to the cloud and revolutionize your IT or evolve slowly over time, the right partner will help you reach your goals.