Cloud vs Colocation: What is the difference?

September 14 2022, by Krish Ruban | Category: Data Centres

What is Cloud Computing?

Recent strides in computing and IT infrastructure have made cloud computing a compelling option for both enterprises and end users. This in turn has seen a drastic uptake in cloud computing from businesses of all sizes.

The term “cloud computing” has been thrown around to loosely refer to terms such as utility computing (on-demand computing) and software as a service (SaaS). However, this broad definition can be greatly misleading and inaccurate, as they are merely one of several forms of service that cloud computing can provide.

Rather, cloud computing can be seen as the delivery of computing services such as servers, databases, networking, software, storage and intelligence via internet connectivity to offer faster and more flexible resources, high-performance capacity, as well as scalability.

Cloud service providers look to provide one or a combination of these services, including but not limited to:

  • Software as a service (e.g. Salesforce, Adobe suite, etc.)
  • Platform as a service (e.g. Google App engine, OpenShift etc.)
  • Infrastructure as a service (e.g. AWS, Cisco Metapod, Microsoft Azure, etc.)
  • File sharing and storage (e.g. Dropbox)
  • Big data and business intelligence systems (e.g. Civis Analysis)
  • Cybersecurity (e.g. Forcepoint)

As a general rule of thumb, any services that don’t require physical proximity to the IT hardware in use can be considered candidates for cloud delivery.

Types of Cloud Hosting Services.

Cloud services can be categorised into three main types of deployment models: public, private and hybrid. In order to determine which model is best for your business, we need to explore each one and how their specific benefits.

Public Cloud.

Public cloud services or environments refer to the complete provision of hardware, storage and resources by a cloud service provider. However, public cloud providers typically do not manage and support the software running on their servers. Examples of public cloud providers include AWS, Azure and Google Cloud.

In a public cloud model, many businesses share the same server premises, as well as access to basic infrastructure maintained by a cloud service provider. This is the main reason why public cloud services can be a highly cost effective solution, since the business usually pays via a pay-as-you-go model that charges based only on the resources it actually uses.

However, since the business is utilising external IT infrastructure, the main drawback is the business’ lack of control over security and privacy measures. This is why many public cloud providers are unable to meet strict data-handling compliance requirements, as their customers will always be sharing the same IT infrastructure.

Private Cloud.

Private cloud architecture delivers their storage, computing and other resources over the network, but exclusively for one organisation or select organisations (multi-tenant). When observing public vs private cloud services, the main difference is that businesses do not share their cloud infrastructure with other organisations in a private cloud. This is the main reason why they are preferred by large enterprises.

This means that private cloud models offer highly customised environments and the option for businesses to select the hardware and technology used to build it. Since they are a dedicated cloud service tailored for the use of a single customer, they generally have higher levels of control over security and privacy.

The only downside to private cloud architecture is that the business is responsible for managing their own software being deployed on the infrastructure hosted by the cloud service provider. Although this means the business has greater control over their IT operations, it may require more internal labour to maintain and deploy.

This is why colocation can be highly complimentary to private cloud , as it is highly advantageous to build them in hosted environments that can guarantee the necessary physical security and technical support.

At Macquarie Data Centres, our physical data safeguards are trusted to secure the operations of 43% of Federal Government agencies within Australia. This means that our world class facilities are specifically designed with all the bells and whistles to host and protect some of the most confidential data in Australia. In addition to our government standard certifications, our data centre campuses are compliant with a multitude of different security measures and certifications so you can focus on growing your business instead.

Private Cloud vs Community Cloud Services.

These two cloud provision models are often used interchangeably and can be a subject for confusion to those unfamiliar with cloud services. Rather, community clouds are a subset of private cloud services.

Community cloud services are a variation of the private cloud model that provides a cloud solution tailored to the needs of a specific business community. Related or coordinated businesses can share infrastructure from the same cloud provider that has been specifically designed for every business involved.

Community clouds are an attractive option for businesses operating in the same sector that require mutual and highly specialised configurations, or for joint ventures between businesses that require extensive collaboration. Organisations in the health, financial or legal sectors that are looking to implement cloud services may find it difficult and costly to adhere to rigid regulatory requirements and as such, these kinds of businesses may find value in sharing community cloud services.

Hybrid Cloud Services.

Hybrid cloud or multi-cloud services are a combination of multiple private or public cloud systems. With hybrid cloud architecture, sensitive data such as transactional or customer information is processed through the private cloud to ensure the integrity of data remains uncompromised. On the other hand, any IT operations that do not deal with confidential data can make use of the public cloud to process higher volumes and velocities of data at reduced costs.

These hybrid cloud models typically consist of one self-managed private cloud and two public clouds, although the structure will vary depending on the size and scale of the business. Hybrid cloud allows for greater versatility and highly optimised IT operations and hence, they have become the go-to for a majority of large scale organisations and even medium sized businesses.

Is Colocation a Private Cloud?

Though some people classify colocation under private cloud services, there are clear distinctions between what both services actually offer.

Colocation shares some similarities with private cloud services in that the business can potentially purchase their own equipment that is then hosted by the provider. However, this is where the similarities end. Nowadays, businesses typically utilise shared infrastructure owned by the cloud service provider. Moreover, colocation facilities do not provide managed services and software resources to their tenants. Rather, they only provide their customers with the physical capacity (i.e. floor space, rack space, power, cooling, etc.) for IT infrastructure. At the end of the day, it’s up to the customer to decide how to best utilise the allocated space.

However, this is also why colocation provides the ideal backbone for private and hybrid cloud adoption. With business offerings becoming more customer centric than ever before, flexibility, as well as control over your hardware and software has become the highest priority for multichannel businesses.

Colocation facilitates a great degree of scalability when it comes to allocating resources and data across multiple cloud systems. It also enables secure and private high performance connectivity to the data centre providing access to public cloud, as well as connectivity to other carriers that may be required for an effective private cloud setup. At Macquarie Data Centres, our colocation services are at the heart of deeply integrated IT solutions utilised by numerous Fortune 500 companies. We ensure your Colocated assets can be bare metal, self-managed, or part of a fully managed environment.

With Macquarie Data Centres, you have the freedom to change your mix of in-house, Colocation and Cloud solutions over time. We forge long term relationships so we can grow with you and that’s why we’re Australia’s most recommended Colocation provider.

What is Colocation?

Colocation on the other hand, refers to the hosting of IT infrastructure and data within an off-premises multi-tenant data centre. It provides the necessary physical safeguards and floor space, as well as highly-specialised power and cooling configurations to facilitate the optimal conditions for stability and security.

With the digital landscape continuing to grow at an exponential rate, many businesses now have the necessary IT infrastructure to facilitate the huge influx in operational data. However, they lack the 24×7 physical security, highly reliable power and optimised cooling systems to make the most of its potential. This is why data centres have become essential to facilitating business growth, whether it’s for an e-commerce based business, SaaS business, or just for enterprises looking to leverage data and software driven operations.

To put it simply, colocation providers provide the perfect foundations for businesses to continue to build out their IT infrastructure and digital capabilities.

Macquarie Data Centres is one of Australia’s most trusted and reputable colocation providers. We provide the space, energy, certifications, as well as cooling services for major Fortune 500 companies and over 42% of the Australian Federal Government’s agencies. If you’re interested in finding out more about our data centres and the benefits that it can provide for your business, head over to our comprehensive breakdown of colocation services and its features.

What are the Key Differences Between Cloud Hosting and Colocation Data Centres?

With the aforementioned definitions in mind, let’s take a deeper dive into colocation vs cloud services and how they differ on a fundamental level. Although common misconceptions have caused colocation and cloud to be used interchangeably, there are clear distinctions between the two.


Notably, colocation is where the business provides the IT equipment and infrastructure and the data centre provides the necessary space, power, cooling and access to network services for it to run smoothly. Industry leaders in colocation, such as Macquarie Data Centres also provide around the clock 24/7×365 monitoring and security measures for optimum performance.

Whereas cloud hosting is the provision of software or hardware that is remotely accessible via the internet. Although some cloud service providers may have some of the same standards as colocation providers, they are not expected to have physical safeguards or advanced cooling and power configurations to the same standard as tcolocation providers.

However, cloud and colocation are not mutually exclusive, as most large businesses will opt for a combination of both to streamline their operations. In fact, colocation provides the best possible environment for cloud computing to flourish and scale.


Another factor that differentiates cloud and colocation services is the degree of control that the organisation has over its own IT infrastructure and other resources.

Although your level of control will always depend on the type of cloud model you choose to go with, a public cloud provider will play host to many organisations from a myriad of different industries. This means that public cloud providers will not give any of their customers physical or low-level access to their storage hardware and server configurations, meaning that organisations are often left at the mercy of the cloud provider. Colocation providers, on the other hand, provide secure 24×7 access to your IT equipment and are ideal for organisations that require a high level of control over their IT configurations and infrastructure.

Colocation vs Cloud icon

The Importance of Cloud Technology and Colocation.

Cloud services have become ubiquitous throughout the global business landscape within the last decade and only saw continued growth throughout the pandemic due to a surge in remote working models that necessitated a centralised database and enterprise wide software system. Even before the pandemic, however, cloud was always seen as a revolutionary technology that could assist with interdepartmental coordination and prevent the buildup of information silos within large organisations.

Moreover, the challenges presented by the pandemic also highlighted the importance of data centres to cloud operations. Reduced headcounts, difficulties accessing their own on-premises data centre facilities and delays in hardware supply chains were just some of the many challenges that colocation helped businesses to overcome. Hence, many businesses, including early adopters of cloud technology have begun to shift away from public cloud services toward hybrid cloud infrastructure so that they are able to leverage the flexibility of having private cloud for sensitive data and public cloud for streamlined tasks. Though initial costs may seem high, when you break down the cost of colocation, it’s easy to see how it can help you implement reliable cloud technology and save you money in the long run.

Business Growth and Scalability.

Not only do hybrid cloud and colocation services allow businesses to meet growing data demands, but they also provide businesses with the ability to prepare in advance for the future adoption of groundbreaking innovations brought about via macro level trends such as AI, as well as IoT and big data driven analysis.

Additionally, the rise of these data rich technologies have already placed increasing amounts of strain on existing on-premises solutions, creating a greater demand for colocation services that can help facilitate them. It is estimated that over the next decade, these technologies will deliver between $9.5 trillion and $15.4 trillion in global annual economic value. More importantly, it is predicted that due to these data-driven technologies the world will be generating around 175 zebibytes of data annually by 2025.

These dense datasets will become harder and more expensive to move around and this will inevitably place a heavy strain on existing networks. However, by localising data traffic, analytics as well as management, businesses can more effectively control their data and scale their digital operations. This is why colocation services are pivotal for business growth both now and in the future.

Macquarie Data Centres are specially designed to facilitate scalability. As your business grows, so do we. You can expand your IT environment with confidence using our energy-efficient Australian data centres with industry-leading PUE’s, or if you’re feeling extra ambitious, you can even reserve a private hall for future growth.

Benefits of Using Colocation for Cloud.

By now it should be clear that the consideration should not necessarily be colocation vs cloud, but rather, how colocation and cloud technology can be jointly utilised for maximum effectiveness. Colocation, when used in conjunction with a hybrid or private cloud environment can help reduce costs in the long-term and establish a long-term foundation for your business to scale by leveraging key innovations.

Stable Connections and Accessibility.

Latency and processing speeds are often highly dependent on proximity, meaning that a colocation provider’s physical location is crucial to efficient cloud operations.

Our data centre campuses are situated in optimal locations around Sydney and Canberra allowing for easy access, as well as superior and stable connections. Our facilities offer broad carrier connectivity options, allowing you to be anywhere in the world and host your data with us. We are also able to provide connectivity between our different Macquarie Data Centre locations, making your hosting accessible and convenient for you.


Cloud services can help your business with a host of different data-based functions, but can often leave much to be desired in terms of security. The physical security of sensitive data should always be a major concern for businesses that deal with a large volume and variety of customer data.

Although reputable cloud service providers will offer robust administrative and technical safeguards to ensure the integrity of your data, they are unable to provide the optimal physical environment for your equipment and servers. Moreover, by choosing to host your IT infrastructure on a public cloud you are relinquishing accessibility and control to your own tech, since you do not know how or where it is stored.

Colocating with reputable providers like Macquarie Data Centres on the other hand, gives you full control of factors such as on-premises security and access to your hardware whenever you need. Moreover, the facilities can handle the physical and infrastructural security measures to cover all the bases.


The best colocation providers are able to provide extensive contingency measures such as ongoing backup power and disaster recovery as part of their offerings. Although some cloud providers also provide redundancy measures, they are usually incomparable to the comprehensive measures provided by colocation specialised data centres. Our colocation facilities have dual power in from racks, cages and halls, as well as a team of highly certified, government cleared engineers who can assist with any hardware issues you may encounter whilst utilising our facilities. In this day and age, even the shortest amount of downtime can result in costly consequences for any e-commerce or SaaS businesses utilising cloud technology. That’s why you can trust us to provide the leading-edge facilities that provide the ideal foundation for your cloud and non-cloud infrastructure.

All companies need to invest in maintaining redundant business continuity solutions to ensure recoverability in the case of emergencies. Colocating with us enables you to direct a larger portion of your budget and staff toward strategic directions, rather than IT. What’s more, colocation is the most reliable backup strategy if your organisation heavily depends on cloud infrastructure.

Cloud Bursting.

Cloud bursting is a configuration setup that allows you to make use of cloud computing resources whenever your on-premises infrastructure hits max capacity. When organisations run out of computing resources in their internal data centre, they “burst” the extra workload over to their external cloud infrastructure. It essentially allows you to keep up with highly intensive workloads without having to compromise your operations.

In this sense, cloud bursting is a highly convenient and cost-effective way to assist with unanticipated spikes in workload or seasonal fluctuations in demand. By implementing cloud-bursting strategies businesses can not only utilise and manage their own resources more efficiently, but they can also avoid spending on on-premises infrastructure expansion without limiting growth potential.

Though theoretically sound, cloud bursting does present some significant hurdles that can make it seem like an unattractive proposal. Though these hurdles include security and data consistency, one of the biggest is connectivity between clouds. Networking presents significant challenges such as building low-latency, high-bandwidth and redundant connections between private infrastructure and external infrastructure hosted on the cloud.

Fortunately, colocation providers are able to provide the perfect connectivity to facilitate effective cloud bursting. In fact, one of the many services offered at Macquarie Data Centres is the ability to Integrate your colocation, dedicated servers, private clouds and public clouds. Our Cloud Services Gateway provides secure, agile and low-latency connectivity between your colocated hosting environment and any public cloud service provider of your choice.

Colocation or Cloud? Which is Best for Your Business?

Although cloud and colocation are considered to be synonymous terminology by some within the industry, it’s important to be aware of the major differences that we have highlighted throughout this article. As we begin to become more dependent on cloud infrastructure, colocation can help you make the most of this technology, as well as alleviate many of the challenges that come with cloud technology.

So, when you begin planning the implementation of data-driven technology to grow your business,, the consideration shouldn’t be between colocation vs cloud. Rather, you should be considering how you can leverage colocation to make the most of your cloud infrastructure.

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