You need to move everything to the cloud.”

Have you considered colocation? That will solve all of your problems.”

The cloud, colocation. It’s all the same thing.”

If you’ve discussed the idea of data management with anyone over the last few years, chances are you’ve heard statements like these at one time or another. When it comes to delivering the services that your company needs, quickly, affordably and efficiently, everyone has an opinion.

Unfortunately, opinions are often based on misinformation or misunderstandings, and you cannot let those incorrect assumptions and opinions influence decisions about your business. Case in point? The notion that cloud computing and colocation are two terms for the same thing. While there are some similarities between the two types of data management, they are actually quite different from each other. Understanding how each works and their benefits and drawbacks will help you make a decision that ensures you have the functionality you need while protecting the bottom line.

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Defining Cloud and Colocation

The easiest way to understand the difference between cloud computing and colocation is to think of it in terms of an empty room. In a colocation center, that room is filled with your company’s own hardware. You manage all of the servers, disk space, applications and connections using the provider’s networks. The fee to rent the space includes the utilities — including heating and cooling — as well as security.In some cases, the colocation center offers managed services to help maintain the network and equipment, but your company owns the equipment.

In a cloud computing environment, sometimes called cloud colocation, the empty room is filled with an existing network, already loaded with the software, disk space and applications you need. In many cases, these same applications and storage are also used by other businesses (known as the public cloud), but some companies utilize private clouds to store data and manage applications via the Internet.

Which is Right for You?

Two major factors often influence the decision of whether to use the cloud or colocation: security and cost. In some industries, particularly health care and financial services, federal laws and industry guidelines limit how companies can use cloud services; at the very least, using public cloud services is prohibited, and most companies need to rely on their own private servers and networks to manage data. In other cases, though, moving to a colocation center can actually help a small company meet strict compliance and certification requirements that would be challenging or costly otherwise; for example, meeting the requirements for SSAE 16, SAS 70 or TIA 942 is often handled for you when you move to a colocation center.

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Cost is also an important consideration. When a company moves to a colocation center, it is still responsible for purchasing and maintaining the network equipment. However, if a company is running out of space to house a growing network of servers, moving to a data center can solve the space issue without incurring the costs of moving the entire office to a larger space. Colocation can also help reduce other costs, including the electricity and day-to-day maintenance of the network.

Cloud computing also helps companies manage day-to-day functions. In fact many companies turn to cloud providers to manage portions of the network in order to free up IT staff to focus on other projects related to business growth, rather than housekeeping. Cloud services also allow companies to scale services up or down as necessary, without investing in extra hardware—or being left with too much unnecessary equipment. At the same time, one major disadvantage of cloud computing is that companies lose a major portion of the control over their data, specifically when it comes to managing outages and downtime. When you’re relying on a particular application or server for business critical functions, extended or regular outages will not be acceptable.

A Hybrid Approach

As data management technology evolves, many companies are opting to take a hybrid approach, using both colocation and cloud computing to manage data and applications seamlessly. Companies are developing their own cloud infrastructures within colocation centers, building private or hybrid cloud stacks that allow flexibility and functionality. For example, the network might operate out of a colocation facility that is completely private and managed internally, with private cloud servers dedicated to file storage or vital applications.

Both colocation and the cloud have their advantages, and which one is right for your business depends on your budget, your need for security, your tolerance for outages and projections for growth. Do not fall into the trap of thinking they are the same, though, and understand the benefits and limitations of each before you make a decision.