Colocation vs. Cloud Hosting: What's the Difference

Updated on Mar 29, 2022 by

The terms colocation and cloud hosting are often used interchangeably but refer to entirely different concepts when it comes to functionality.

Simply put, a colocation facility involves the leasing or renting of floor space in a data center to third-party organizations that have outgrown operational facilities in their data centers. On the other hand, cloud hosting involves designated service providers administering computing resources for such organizations in a cloud environment.

However, since the difference lies in the functionality and not the hardware's geographic location, the two remain specific terms and must not be conflated. Below are some of the critical differences between cloud hosting and colocation functionality that businesses must be mindful of.

What is Colocation?

A colocation fundamentally refers to a shared data center. Organizations can rent floor/rack space in a colo data center, along with power, connectivity, and cooling. You may also put physical security on the list with some colocation facilities. But unlike cloud hosting, a colocation data center does not offer virtual managed services.

When an organization rents a space in a data center, it brings its computing hardware. Since the company owns the hardware, the latter has greater control over its use and can ensure increased compliance from the facility. This is particularly advantageous for companies that want complete control over their hardware in the form of separate rack spacing, dedicated cages, or even private suites. In fact, access to power, telecommunication carriers, and physical security all require real estate-based interventions in a colocation facility.

What is Cloud Hosting?

What is Cloud Hosting?

Cloud hosting is on-demand access to online computing resources hosted at a remote data center managed by a cloud services provider (CSP). One of the most significant advantages that companies secure with a cloud provider is the availability of consumption-based pricing, which allows them to pay on the go for only the services consumed.

There are primarily three types of cloud hosting setups: public, private, and hybrid.

types of cloud hosting

The public cloud setup involves sharing computing resources and storage between customer-hosted applications and other people on the same hosting platform.

A private cloud is only dedicated to the needs of a single organization, ensuring that its sensitive data is not accessible to third-party providers.

While a hybrid cloud, as the name indicates, refers to a computing environment which combines the capabilities of both the public and private cloud setups offering more flexibility.

How Do Top Colocation Data Center Providers Compare with Cloud Hosting Platforms?


Generally, companies prefer to deploy computing resources to a third-party data center due to enhanced connectivity. This is because top data centers leave no stone unturned in ensuring their clients get the best bandwidth and reliability. Data centers can do that by investing in robust technologies such as multiple fiber connections, redundant services, etc.

With colocation, your company can quickly boost the output of an equipped server. By utilizing the optimal bandwidth and up-to-date technology of the colocation facility, your company can achieve the desired scalability. The upside is that they can achieve this result without perpetually developing and implementing cost-inducing modifications to their on-site system.

Most of the managed cloud hosting contracts come with pre-included terms that require them to make the much-needed upgrade to their system's infrastructure in response to the evolving technology. The financial incentives allow cloud providers to refresh their network hardware since the infrastructure is their customers' primary service.


Colocation may still be a more preferred choice than a cloud-based hosting solution when it comes to network security. This is especially beneficial if your company possesses the resources to implement in-house security systems. It would be up to the colocation facility to manage your security framework's physical components while your company can drive a remote operations center.


Once again, a colocation facility might have a certain edge over cloud hosting. Cloud services involve a layer of complexity resulting from storing data (from multiple companies) on communal servers instead of a dedicated server. Moreover, cloud hosting comes with a design that leaves companies bereft of control, exposing the network to certain risks.

Cloud providers do not have to adhere to all of the rules and regulations. At the time of the audit, the company would be responsible regardless of the source of the problem in case of any breach or offense.

For example, take the General Data Protection Regulation in the European Union that mandates retaining and regulating some data within the EU. If your cloud provider fails to comply with the regulation and data travels beyond the EU-based servers, your company can be charged for non-compliance.

This can be addressed by employing certified cloud providers that mitigate the risk of inadvertent non-compliance. A certified cloud provider will not only monitor and track your hosted data but also the engineers and technicians who access it. Be careful with the costs since certain providers can prove more expensive than conventional ones.

On the other hand, using a colo facility can significantly mitigate the dangers of non-compliance. Colocation ensures your company has complete control of both the hardware and networking so you can constantly monitor the compliance internally without having to incur additional costs.

Disaster Recovery

With cloud-based solutions, data recovery works like cloud computing, as you can store and retrieve data through a remote cloud platform. In the event of an interruption, cloud hosting stores critical data and apps in the cloud. And since cloud-based disaster recovery is automated, it spontaneously relieves your system of a lot of the stress brought on by the interruption.

While a colocation facility may not typically provide a disaster recovery plan, their redundant power capabilities and ISP connections are sound. With these resources at your disposal, you can easily switch to your backup system or host your infrastructure in multiple colocation data centers in the event of an attack. You will either have to develop and implement your own data recovery solution or hire managed backups from your colocation facility for an additional cost.

Clients can benefit from both redundancies and data recovery with cloud hosting, while colocation typically offers redundancy only. Here, cloud hosting has a clear advantage over colocation.


A colocation facility may entail greater upfront costs than a cloud-based solution. First of these is the cost of hardware and its installation in a colocation facility instead of utilizing the cloud provider's server resources.

But while this may save you from immediate costs, cloud services often come with a feature-based pricing structure that can slowly but steadily incur increasing prices. So although cloud-based services can be sufficiently flexible and scalable, accessing them can put a significant financial strain on your company in the long run.

Ultimately, your choice for colocation or cloud-based solution should be based on your company's needs. Businesses looking to cut back on upfront costs can opt for cloud-based hosting, but those looking for a steadier financial plan down the timeline should opt for a colocation.

Conclusion: Migrating your IT assets to cloud hosting or colocation data center

Both cloud-based solutions and colocations can serve as competitive alternatives to house your company's data. Before migrating your IT assets to either cloud hosting or colocation, you must carefully consider several factors.

As far as functionality is concerned, each alternative comes with its own set of pros and cons. When choosing either, you'd have to look at the problems associated with cloud requirements and data center locations.

Cloud-hosting offers a powerful virtual hosting solution, whereas with a colo data center you can use your proprietary equipment and hardware. Opting for a top data center colocation service that nicely fits your company's needs can help scale your business massively.

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