When scaling a small or midsized business, there will likely be a tipping point where your existing server setup can’t keep up. Your in-office server that once worked fine may now struggle to support a growing client base and increasingly complex systems. This is usually when you’re forced to choose between moving your server to the cloud or colocating.
It’s not an easy choice, especially as there are similarities between the two options, such as scalability and the benefit of moving your infrastructure offsite. But once you get a clear understanding of the difference between colocation and cloud hosting, you’ll be able to make a more informed decision about which model to choose.
In this article, the expert team at BlackBox Hosting will explain the pros and cons of cloud hosting vs colocation and how to choose what’s best for your team and your business’s future.
What is Colocation Hosting?
One of the reasons why colocation hosting is becoming a more popular choice is that it gives businesses greater control over their systems without requiring them to construct their own data centre.
The demand for colocation in the UK has been rising over the last few years. The data colocation market was valued at £2.95 billion in 2023 and is expected to grow to approximately £6.6 billion by 2029.
With colocation hosting, your business owns the physical servers, but they’re housed at a third-party data centre. In other words, you get access to a professional-grade server without having to worry about its maintenance. Your server is housed in a well-equipped server facility complete with cooling systems, connectivity, and security infrastructure.
Understanding Cloud Hosting
Now let’s look at cloud hosting in detail. As of 2024, cloud hosting generated approximately £37.8 billion in revenue, and the market is projected to hit £108 billion by 2030.
With cloud hosting, you’re essentially renting access to computing resources hosted in your provider’s environment. Everything, from your applications to storage, is managed offsite, with your cloud partner handling physical servers, security, scalability, and system updates.
The biggest advantage that cloud hosting offers is its flexibility. You can add servers in minutes and easily scale storage as your business grows. It’s the ideal choice for companies looking to expand quickly without the hassle of managing physical infrastructure.
Difference Between Colocation and Cloud
The primary difference between colocation and cloud lies in ownership and control.
- Colocation: You buy your own servers, and you’re in charge of how they run. You get full control over hardware and configurations.
- Cloud hosting: You use someone else’s infrastructure and services. You rent the functionality but don’t control the hardware.
But that’s not all. If you’re making the decision between cloud hosting vs colocation, it’s also important to consider their differences in costs, performance, security, compliance, and sustainability.
Cost Comparison
With colocation, there’s an upfront investment. You buy and install the servers, and once they’re in place, the ongoing costs are steady and predictable. You’re paying for the rack space, power, and bandwidth, often monthly or annually.
Cloud hosting, on the other hand, requires no hardware investment, making it far more accessible and scalable from day one. While costs can fluctuate based on usage, this pay-as-you-go model gives you the flexibility to scale resources up or down depending on your business needs, so you’re only paying for what you actually use. This makes it ideal for growing businesses or teams with changing demands.
Performance
Colocation offers dedicated resources. Your server isn’t shared, and you can optimise it to your exact needs. This makes it a great choice for latency-sensitive applications, custom software, or large databases.
Cloud hosting is known to be more flexible than colocation, but it might come with some trade-offs, especially during peak usage periods when resources are stretched. Some businesses start with cloud hosting and then later move to colocation.
Security
In the case of colocation, your servers are physically secured in a facility with 24/7 monitoring, biometric access controls, and environmental protections. You decide how your data is encrypted and who has access to it. Because of this degree of control, colocation is perfect for companies like financial institutions, government contractors, or healthcare providers that have sensitive data and/or highly customised infrastructure, as well as stringent compliance requirements.
With cloud hosting, the provider mostly handles security, including everything from firewalls and threat detection to and data encryption. While visibility into the entire technology stack is limited, this shared model reduces the burden of day-to-day operations. Cloud hosting is best for startups, expanding companies, and businesses with small IT teams that value speed, scalability, and cost-effectiveness over fine-grained infrastructure control.
Compliance
Compliance is absolutely essential if your business involves dealing with financial records, health data, or government contracts.
If you choose colocation, you’ll maintain complete control over your servers, including their physical location. It’s important you have a clear understanding of the legal and regulatory frameworks that apply, based on the country where your data is stored. Colocation is especially useful for businesses that need to show complete data sovereignty and accountability.
While cloud providers do offer region-specific hosting options and often meet many compliance standards, the nature of cloud infrastructure means your data may still be backed up or mirrored across multiple international locations. This can make it harder to track exactly where your data lives at all times, which may raise concerns for highly regulated industries.
Sustainability
Many industries raise the major concern that data centres use a lot of energy, and it’s become important for both colocating and cloud hosting companies to address the issue.
Cloud hosting and colocating companies are heavily investing in green energy, carbon offsetting, and water-free cooling systems to achieve this. Before you decide on a partner, you’ll want to learn about their long-term environmental commitments, as well as their carbon footprint and energy sourcing methods.
Partner with BlackBox Hosting for Colocation, Cloud Hosting and More
Knowing the difference between colocation and cloud hosting will make it much easier to make an informed decision. Whether you lean toward colocation for control and compliance or cloud hosting for flexibility and scale, your choice of colocation or cloud services partner matters as much as your chosen model.
At BlackBox Hosting, we offer both UK-based colocation and fully managed cloud hosting. Our facilities are ISO-certified, GDPR-compliant, and powered by high-efficiency infrastructure designed to meet the needs of growing businesses.
If you’re still trying to decide between these two choices, call us on +44(0)203 740 7840 to learn more about our secure and managed private cloud services.
