On-Prem vs. Colocation vs. Cloud: Which Is Right for Your Business?


If you find yourself deliberating between on-prem, colocation, and cloud, there is no absolute “right” answer.  However, there is the best-fit based on the needs of your IT department and organization at large. So let’s consider the advantages and drawbacks of all three options today.


Of course, this is the tried and true solution, the way it was always done before we were aware we even had a choice. The major advantage for keeping the core of your IT estate on-prem is control. In this case, there is rarely a decision to be made that is outside of your control. You make all of the decisions concerning what to purchase when to deploy it and how. You don’t have to worry about some unknown party making configuration modifications that you don’t agree with. You don’t have to avoid the apprehension of migrating legacy applications to a new technology platform and deal with compatibility issues. You also don’t have to worry about a vendor going out of business, making policy changes, or altering their cost structure.  

Besides the issue of control and avoiding unperceived headaches, there are some other real advantages to the traditional way of doing things.

    • Compliance: With the growing number of compliance regulations being introduced such as HIPAA, GDPR and CCPA, many organizations need to host sensitive or personal data in a location under their own watch to remain compliant.  
    • Total and faster access: Being on-prem means having 24/7 access to any and all of your servers and infrastructure.  Hardware malfunctions or total failures can be addressed more quickly as there is no need to coordinate schedules with anyone outside of the organization.
    • Customization: You can apply granular customization to any and all aspects of your data center.

As typical of life however, having control comes at a price. Some of the tradeoffs for being totally in-charge are as follows:

    • CapEx: This is the most capitally expensive model as all building construction and renovations must be financed by your organization.  
    • Lack of flexibility:  While you may have rightsized your datacenter to your company’s needs at the outset, things change over time.  Unfortunately, there is no way to dynamically size your physical space.  Short windows of opportunity may be forfeited because of the amount of time required to scale and provision to meet increased demand. 
    • Labor challenges: To have control, you need IT personnel to maintain it. IT expertise doesn’t come cheap. Ironically, you will also be competing against cloud and colocation vendors for talent.   

Learn More: Is Your Colocation Data Center Living in the Past?   


A colocation vendor supplies you the physical facility and space to host your computing hardware. The vendor also provides power, cooling, and security as well.  What you do with the racks you rent is up to you.  You must still set up and maintain all of the involved hardware.  While you have no control over the hosting site, you retain total dominion over the equipment itself.  While CapEx costs are substantially less, you still have to purchase all of your hardware equipment. There are some key advantages to this approach: 

    • Greater reliability and redundancy: Colocation vendors design their hosting facilities with resilience from the ground up. Not only do they have duplicate Internet circuits, but they are often located in proximity to separate energy grids for power redundancy as well.  
    • Higher Quality Systems: Thanks to their large budgets and economies of scale, colocation vendors have elaborate cooling, security, and UPS backup systems. This gives smaller organizations access to higher-tier systems that they could not afford on their own.
    • Scalability and Flexibility: Adding more capacity is as simple as adding another server in the rack. Because your IT personnel don’t have to support you, a colocation solution can also be the first step to a full migration to the cloud.  

Here are the cons of colocation:

    • Reduced access: While colocation data centers are open 24/7, one still has to make the trip over there when a serious hardware error occurs. This may also impact the efficiency of hardware maintenance tasks. 
    • Reduced versatility: While colocation providers give you space for your equipment, they don’t provide a means to remotely monitor your equipment. Because these vendors charge for power and bandwidth, customers must have a sense of trust regarding how much power and bandwidth they are using.  

Learn More: Do Data Center Colocation Firms Need SMART Goals? 

The Cloud

And then there is the cloud, the choice that doesn’t involve hardware at all.  This means no purchasing and maintenance costs as well as no headaches.  This is one of the cloud’s most alluring aspects.  The dearth of hardware makes the cloud fluid and agile, which is what digital transformation is all about.  The cloud seems like an ideal match for organizations that cannot raise cash for CapEx projects or lack the internal expertise to deploy and manage their own hardware.  Large cloud vendors can provide even greater resiliency designs than colocation models as traffic can be distributed amongst multiple data centers throughout different geographical regions.  The many advantages of cloud migration have certainly been extensively covered over the past five years.  Some of the primary benefits include the following:

    • Scalability: The cloud provides you the opportunity to right-size your IT estate in a nearly effortless manner that is impossible with hardware-based models. Companies can quickly add more processing and storage resources when needed or deploy new virtual machines or containers within minutes.  
    • Predictable budgeting: No more having to worry about replacing those expensive servers that are approaching end-of-life or malfunctioning equipment.  No more power and cooling costs to worry about.  The absence of surprise purchases makes budgeting easier.  Because you only pay for what you use, IT managers no longer have to overprovision servers to account for growth, saving money.
    • Less labor intensive: Not only does cloud computing remove the responsibility of hardware upkeep, but it also eradicates mundane tasks such as patching and updating as cloud servers and applications are always pristinely up to date..

But don’t think that the cloud is a panacea of perfection.  It has its drawbacks as well.

    • Transparency: If you don’t have any control over hardware resources, you are somewhat out of the loop. It is impossible to know exactly what actions your cloud vendor takes regarding redundancy, operational efficiency, and security outside of your service level agreement.
    • Compliance: Some compliance regulations prohibit certain data types from being hosted in the cloud.  For international cloud vendors, there is also the issue of data sovereignty.
    • Faith dependency:  Migrating all of your digital assets to the cloud requires considerable faith in their chosen cloud vendor.  Once you sign an agreement, you are assuming that their cost structure will not significantly change and that their service will not deteriorate in the future.

There will probably be a fourth option that right now we are not even aware of at some point in the future.  That is why IT is a forever moving target.  As mentioned at the outset, there is no perfect choice for the long run, just an ideal choice that balances your needs and costs right now.