Has Cloud Killed Colocation?-A Whitepaper by Virtual Internet

Colocation and cloud computing are in many ways synergistic saviors for an IT department wishing to attain economies of scale, increased agility, a reduction in complexity and additional cost savings.

While virtual dedicated servers are without doubt the future direction of the industry, colocation still occupies an important place at the table for a hands-on IT team.

Both collocation and cloud computing reflects an ongoing theme that began in the 1990s with the birth of the Internet: The continued outsourcing of complex IT operations to more sophisticated 3rd party service providers.

This trend has accelerated in the 21st century with most of the attention focused on the tremendous advancements in virtualized technology offered through cloud packages such as VMware and Xen Sandbox enterprise servers (both offered by Virtual Internet).

However, it would be mistake to surmise that colocation has no role to play as the march towards virtualisation continues (projected to account for 80% of all computing provisioned through the Internet by the year 2020).1

In fact, a recent survey of IT departments revealed that only 51% of respondents use virtualisation within their in-house IT infrastructure, and only 32 percent use it in colocated servers. As many as 57 percent of respondents, said they did not believe that virtualisation would significantly reduce their data center footprint.2

Another study indicates that 83% of respondents are planning data center expansions through 2011. Increasingly, IT organizations are looking to third party suppliers with flexible financing strategies as a means to supplement their own aging datacenters.3

To fully understand the advantages of colocation in relation to cloud computing it’s essential to examine the full range of hosting options available to an IT department (including virtual dedicated servers offered by Virtual Internet).4

Shared hosting

In this configuration, the company website is one of many on a single server sharing a common pool of resources. Cheaper costs come at the expense of security and stability.

Traditional Virtual Private Server (VPS)

This basic virtualized environment divides a single server into multiple servers without directly impacting the hardware. Users typically do not have root access. It’s more flexible and secure than a shared package but growth is restricted since resources are limited.

Dedicated server

In this scenario, the company has almost complete control over the hardware, including ownership. The user engages the server through remote FTP access, VPN and/or RDP.  All resources are dedicated but entry costs are higher and redundancy requires extra investment.

Traditional Colocation

Colocation allows a business to outsource only the support infrastructure of a data center — heating, cooling, site security, connectivity, and so fourth, while maintaining company-owned servers. This offshoring of technology to a provider reduces both cost and complexity.

Managed Colocation

A variation of traditional colocation is something called managed colocation, which removes the burden of managing the infrastructure. The user remotely manages and administers the environment, including the networking devices, monitoring tools, and the operating system, giving some measure of control. Managed Colocation typically offers greater value than traditional colocation or on-premise solutions.

Cloud computing and Virtual Dedicated Servers (VPS)

Cloud hosting is a style of computing where scalable and elastic IT-related capabilities are provided as a service to customers using Internet technologies.5

The cloud model offers the entry-level pricing of shared hosting, the flexibility of VPS and the resource guarantees of a dedicated server or colocation model.

The company only pays for resources he needs and can scale up or down without the limitations of a VPS. The cloud is also self-healing; if there is a hardware failure the virtual dedicated server starts up elsewhere in the virtualized environment within seconds.

Similar goals; different paths

After assessing the above it is clear that cloud hosting is a natural evolution of both VPS and colocation. However, the colocation model remains extremely compelling to organizations adopting a wait-and-see attitude to the cloud.

Although colocation and cloud computing are similar in that they involve slightly different degrees of outsourcing, going from colocation to the cloud is a big step for some enterprises.

Given the security and compliance challenges associated with cloud computing, means some decision-makers remain reluctant to outsource storage of their sensitive and critical data to the evolving capabilities of the private and public cloud.6

In these instances, it is usually preferable to maintain ownership and tight control of the hardware and related equipment found under either the traditional or managed colocation model.

If the enterprise or business has a sophisticated IT department and unusually complex critical business applications it may (in some instances) gain comparable economies of scale via the colocation model than by consuming cloud services.7

Some studies comparing tightly controlled colocation configurations to cloud models suggest that colocation may over a short period of time be cheaper than the cloud. However, this generally requires an experienced and forward thinking IT team to ensure the server is fully utilized at all times.

Further, over longer periods, it would still make sense for the organization to provision some of the business applications in the cloud. This diversified approach mitigates risk and allows an organization to slowly take advantage of improved security and compliance models as cloud computing matures.8

A natural match

In many ways, cloud computing and colocation are a natural match. Cloud resources are accessed via the Internet, making reliability a key requirement.

Further, 24×7 service dependability is the hallmark of a top-notch colocation provider. Seek out providers like Virtual Internet, which offer free VI-tal support packages (which “never sleeps”) and underpin all their hosting plans.

Since cloud computing is vulnerable to certain threats like power outages, faulty or sub-par data links and lax security, it’s vital to look for a colocation provider that offers measureable guarantees in these areas.9

For instance, not only does Virtual Internet use some of the most sophisticated data centers in the United Kingdom, it also owns a massive 10,000 square foot data centre in London. The centre has redundant power, air conditioning and multiple data carriers to ensure an “always up” environment.

Customers may ship the hardware to Virtual Internet’s data centre where engineers will take care of the power and cabling. Several additional services are offered to streamline and enhance the colocation configuration. Thus, colocating company servers at a robust established and secure web hosting company could be the first step in a long-range cloud rollout.

Twin Peaks

A recent Wall Street Journal article highlights the thoughts of a typical colocation customer: 10

We did look a lot at the cloud, and what we found is that we’re probably not ready yet in terms of our own internal processes. The things that we keep coming back to tend to be more contractual than technical. Everybody is focused on how to get your information into the cloud, but you also need to focus on how do you get your data out, or switch it to another provider. And the mechanisms for doing that right now are pretty young and not well developed. You’ve got to look at the security of the information and the legalities around the information and who has responsibility for what. It is much more complex than in the old days, when you just had a provider and you gave things to them and they ran it for you.

The customer interviewed above brings up an important point about moving information in and out of a cloud. Currently, decision-makers may feel they are faced with an either/or situation, which forces them to choose between a colocation and a cloud model.

However, recent advances in virtualisation technology are making great strides in allowing an organization share data between a colocation (or on-premise) server and various cloud services without being forced to make this choice.

For instance, CloudSwitch has recently announced a software appliance that bridges the enterprise data center with cloud computing services, extending enterprise security and control into the cloud. Applications remain tightly integrated with enterprise data center tools and policies, and are managed as if they were running locally.11

Essentially this allows a company to get cloud scaling and agility with NO lock-in.

This is just one example of how your colocated data centers may soon live in greater harmony with the growing power of the cloud.

Has Cloud Killed Colocation?

Cloud computing has not killed colocation. In fact, the growth of cloud computing is in many ways dependent on the trust built into existing colocation centers that have been offered by service providers since the 1990s.

One continuous challenge of colocation data centers is the risk of over provisioning for cyclical spikes in activity, especially over the holiday season. In these instances, cloud services are extremely attractive. However, many enterprises are still testing various forms of cloud deployments and may not wish to re-architect their infrastructure or security protocols thus making colocation extremely attractive.

Further, if the IT team is running highly utilized servers it may offer comparable cost-savings to those existing in the cloud.

Any company currently running on-premise servers may benefit immediately by colocating infrastructure to an external provider with 24/7 VI-tal support as offered by Virtual Internet.

Over time, the company may progressively test various private and public cloud deployments before moving non-essential (or essential) applications to a virtualized environment.

Finally, the incredible pace of research and development in virtualisation technology means that companies may soon be able to interface with external cloud environments via various commercialized software appliances – without terminating their legacy colocation (or on-premise) configurations.

Bridges are being built between the powerful, “company-owned” enterprise data centers found under the colocation model and the new emerging elastic “scalable” capabilities of the cloud.  The future looks extremely bright for both models.


1. “The Cloud, the Exaflood, and the Internet of Things–Preparing for the Next Digital Revolution.” Michael R. Nelson Center For International Studies, 12 April 2010

2. “Hosting’s Culture Shift” David Hakala Focus, 30 April 2009

3. “Study of U.S. Data Center Industry Indicates Widespread Expansion of Data Center Facilities Will Continue in 2010 and 2011” n.a Digital Realty Trust, 3 March 2010

4. “Cloud Hosting Explained” n.a. Virtual Internet Video Channel, 7 December 2010

5. “Cloud Foundations” n.a. Gartner Inc., n.a.

6. “The Cloud’s Impact on Colocation” Jeff Clark The Data Center Journal, 4 May 2010

7. “Comparing the Cost of Cloud vs. Colocation” Rich Miller Clearview, 23 August 2010

8. “Cloud: can it be a viable replacement for your data center” Ray Nugent Slideshare, June 2010

9. “Top Emerging Colocation Trends” Jason Ferrara I/O Blog, 12 April 2010

10. “So Much Information, So Little Room” Ben Worthen Wall Street Journal, 11 October 2009

11. “CloudSwitch Enterprise 2.0 Delivers great flexibility and control in the Cloud” n.a. CloudSwitch Blog, 13 December 2010.

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