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August 30, 2021 | Matt Pacheco

Cloud vs. Colocation – Which is Best for Your Business?

When it comes to cloud vs. colocation, what makes the most sense for you?

The past couple of years have demonstrated the immeasurable importance of reliable data maintenance. Between an increased reliance on remote work, a greater frequency of natural disasters, and an uptick in cybersecurity attacks, businesses need reliable data centers.  While cloud computing is perhaps more colloquially the go-to solution that comes to mind, colocation or hybrid environments may be a better fit for your needs. So, how do you know what makes sense for you? We’ll do a breakdown comparison of cloud vs. colocation to help you decide.  

What are the differences between cloud and colocation?

Cloud computing

With cloud computing, instead of using a personal computer or server, you’re accessing a remote computing resource over the internet, which may be a server, storage, data, or application. Born out of virtual machines and Software as a Service (SaaS), cloud technology rose to prominence in the early 2000s and continues to grow. The global cloud market is expected to hit $623.3 billion by 2023. 

Cloud computing comes with a lot of benefits, including the following: 

  • Improved cost-effectiveness, when it comes to infrastructure, real estate, and maintenance costs 
  • Improved speed to market 
  • Scalability to match the growing needs of businesses 
  • Increased productivity and performance because it frees up your IT resources to manage other tasks  
  • More security and disaster recovery protection, especially when working with a cloud provider with additional managed services 

Also read: 9 Reasons Businesses Choose Cloud Computing 

Businesses that choose to manage their data via cloud hosting have public, private, and hybrid options. Public cloud services are a cost-effective cloud option for businesses that don’t want to maintain, purchase, or manage on-premise physical hardware. 

private cloud can be an on-premises solution or managed via a third-party provider and can be hosted near your office or closer to customers. It’s good for companies that need more control over their workloads and legacy applications that can’t be migrated to the public cloud. We’ll go more into hybrid cloud solutions later on. 


Not all workloads are ready for the cloud for various reasons. With colocation, your business operates its own IT equipment in a third-party data center.  

The global colocation data center market is big and will only be getting bigger. The market is expected to grow nearly 13% annually with an estimated worth in 2022 projected at $51 billion. Plus, for businesses that rely on digital data centers, it may be time to shift that thinking – 80% of enterprises say they will be shutting down their traditional data centers by 2025.  

Colocation benefits include:  

  • Saving money on on-premises data center real estate costs 
  • Improved disaster recovery and physical security due to being located in a provider’s secure data center 
  • The ability to scale without thinking about moving buildings, building new structures, etc.  
  • Cost savings from energy and facility management  
  • More options for connectivity when compared to an on-premises data center 

For whom is cloud computing best?

Cloud computing is a great option. With the cloud option, 

  • you don’t need to purchase your own hardware, 
  • you can get up and running quickly, 
  • and you have the option of working with experts to get everything set up (when working with cloud service provider).  

On the other end of the spectrum, large companies looking to offset the costs of hardware may also find cloud-based options worthy. If you don’t have your own hardware already and aren’t all that particular and have small or highly variable workloads that need to scale, the cloud may be the right fit. 

For whom is colocation best?

With the versatility and potential suite of services and physical features offered by colocation, it can make sense for almost any business. Colocation can help ease the transition from legacy workloads, increase your disaster recovery preparedness, and enable hybrid cloud deployment.  

Sometimes, legacy workloads aren’t ready for the cloud quite yet. Maybe you have equipment contracts not yet expired, but don’t want to manage a full on-premises data center. Moving to a colocation facility is a step in the right direction without making any major transitions right away.  

Like with the cloud, colocation offers increased continuity and better disaster recovery for your business. Without the proper plan in place, your business could be taken down by a fire, a flood, an outage, or a cyberattack.  

Minimize unplanned downtime while choosing a more secure data center with contingencies, such as geographic disbursement and alternate power options, in place. With colocation services, you have access to more than just “ping, power, pipe.” You have access to more safety (hurricane, tornado, earthquake-resistant buildings, fire detection, etc.), expert technicians, your own space, and even customized areas to fit your needs.  

Consider a hybrid cloud deployment

The cloud and colocation aren’t mutually exclusive. Many organizations use different approaches depending on their workload needs. It’s not uncommon to see businesses using colocation and cloud to reap the benefits of both worlds. A hybrid deployment is an environment leveraging both cloud and non-cloud solutions to run their IT infrastructure. With a hybrid cloud, your business function is delivered across multiple clouds along with other on-cloud resources in a seamless manner. 

About half (45%) of businesses today use hybrid cloud solutions. The adoption of hybrid is expected to grow, with 58% of companies using or planning to use hybrid infrastructure in the future. Whether cloud, colocation, or a hybrid environment is right for you depends on your workloads, your legacy data, how much you’d like to own or rent, and how customized you want your experience to be.  

Also read: Hybrid Cloud vs. Multicloud – What’s the Difference? 

What next steps should you take?

If you’re a midsized business trying to decide between cloud and colocation  (or maybe you’re even mulling over building a data center), you can read more about the benefits of colocation and cloud in our strategic guide to colocation and data centers and our strategic guide to cloud computing. What you ultimately decide will depend on your size, your goals, and your needs.  

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