Colocation or Public Cloud – What Is Right for My Business?

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  • All businesses need to regularly reassess IT architecture and evaluate how IT needs should be split between colocation facilities, public cloud providers, and potentially proprietary data centers. Each has relative advantages that may be more or less attractive to you based on your business goals.

  • The growth in business adopting SaaS and IaaS is making IT infrastructure increasingly complicated by adding new options to the mix.

    In the past, businesses only had to analyze “build vs lease” scenarios for their IT needs. They could construct their own data center or rent space in a third party data center for colocation. Now this decision has evolved to “build vs lease vs completely outsource.” The answer might be all three.

    As businesses configure their “hybrid cloud” architecture, they need to decide what stays “on premise” and what should be on infrastructure completely virtualized, automated, orchestrated, and maintained by a private or public cloud service provider.

    As a component of this process, it is imperative for businesses to understand what colocation is today, how it has evolved, and how it can be a major enabler of business value.

  • Colocation has some key advantages over public cloud and owned data centers

    A company is using colocation services when it is renting space, power, and bandwidth capacity for its owned server equipment from a third party data center. That company can architect its technology stack for its specific needs with control of the hardware, while taking advantage of the colocation provider’s core competencies of data center construction and operation.

  • Whether you are representing a startup that is evaluating moving some compute or storage out of the public cloud or a large enterprise moving away from owned data centers and server closets, colocation has some key advantages over its alternatives.

  • Consideration 1: Capital Expenditure vs Operational Expenditure?

  • For most businesses, colo’s benefits over constructing a proprietary data center clearly outweigh the downsides. Constructing a data center requires a business to predict its computation and storage needs almost a decade in advance. Additionally, businesses must be able to design the site for optimal efficiency and connectivity.

    In contrast, colocation providers offer short-term contracts (think: 1 year), specialize in constructing data centers for optimal air and energy flow, and compete for business based on their power usage effectiveness (PUE). The sheer scale of these providers means they have a plethora of connectivity options for their tenants, resulting in a more competitive environment for network solutions and lower latency than that company would have achieved at a proprietary location. Scale also means that the third party site can spread the costs of power and network redundancy and shared services like security.

    However, what you gain in lower capex, greater scalability and lower costs, is offset by the fact that you don’t get to choose the specific location of the data center, since you don’t own it. With that said, there are data centers all over the world and in every major metro area, so you choices in location won’t be as limited as you think.

  • Consideration 2: Cloud vs Colo?

  • The calculus comparing colocation to the public cloud is a little more complicated because it’s much more dependent on the specifics of your compute and storage needs. The main benefit of the public cloud, whose main providers are AWS, Microsoft Azure, and the Google Cloud Platform, is its ability to scale up or down quickly. Businesses can increase their compute at the push of a button (and an opening of the wallet).

    This flexibility is valuable to any business but be warned the costs of that optionality are built into public cloud pricing. Companies that have moved beyond startup size and have some predictable storage and compute needs often find it more cost effective to stick with colocation services. Colo services are also ideal for companies with strict compliance and legal requirements to ring-fence or otherwise separate sensitive data, like HIPAA data.

  • Consideration 3: How Important is Latency to Your Business?

  • Generally speaking, colocation has some other neat features that make it interesting for your tech stack. If you set up your servers and connectivity in the right way, you can decrease your networking costs while gaining improvements on speed and latency

  • Essentially, colocation allows businesses to bypass the public internet and contract directly with network solutions providers, resulting in this double benefit. The colocation option also allows businesses to have servers near all of their key audiences and enables edge computing, making everything feel faster to your end user.

  • Consideration 4: Your Most Valuable Asset, Your People

  • One softer thing to consider when making the decision to add colocation as part of your technical infrastructure is the skillset of your tech team. The skill set of someone who’s worked with a server closet or in a proprietary data center is more applicable to architecting a colocation solution than the skills of someone who has only ever worked on the public cloud.

    Hybrid cloud is the future, but if you have a team that’s mostly been focused on the public cloud, it may make more sense to continue paying the public cloud flexibility premium until you are confident you can spin up a great colocation infrastructure team.

  • Consideration 5: Scariness

  • For many, the mental ease of pushing a button to turn on or turn up cloud is appealing – when you have a lot to worry about, how your data is stored can fall lower on the priority list. The major cloud providers do an excellent job of making pricing easy to understand, so you can make your choice and move on with your day.

    With colocation, the pricing models are a bit more complex, because of its multivariate nature. What compounds that complexity is that each colocation data center provider will build quotes that really don’t allow business to easily compare specs and pricing. UpStack’s platform aims to make sourcing colo as easy as it is to buy cloud. Through our apple-to-apples pricing and highly specific specification filters, you can be assured that the quotes you receive are easy to read, so you can spend less time level-setting pricing and more time designing the optimal IT stack.

    It is our belief that once a business matures enough to be able to predict storage needs and compute, it is time to consider colocation as a part of an optimized hybrid tech stack.

    Ready to find colocation for your business? Use our sourcing tool to find the best data center for your needs and get data center costs.

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