Colocation vs cloud

In colocation vs cloud, explore how a well-designed, colocation-based system under your control can outperform cloud hyperscalers like AWS, Azure, and Google.

In recent weeks, thousands of businesses have been affected by major outages from Amazon Web Services (AWS) and Microsoft Azure.

The AWS outage disrupted major services, including Ring and Lloyds Bank in the UK. Around a week later, Microsoft Azure experienced a disruption that impacted High Street retailers including Asda, M&S, and O2 in the UK and Starbucks in the US. Businesses operating Microsoft 365 were also affected.

Both incidents left thousands of sites and applications counting the cost of prolonged downtime, lost productivity, and reputational damage.

Consequently, CIOs and CTOs in the UK are questioning whether the approach is a sustainable long-term strategy and are actively considering alternative approaches.

In this blog, we explore the merits of a well-designed, colocation-based system under your control but within a third-party data centre.

First, let’s discuss public cloud and colocation services.

What is the public cloud?

Public cloud refers to computing services (e.g., servers, storage, and applications) provided to customers over the Internet.

Public cloud infrastructure is shared between multiple customers (tenants) and is available as a pay-as-you-go model, meaning you only pay for the computing resources you consume. This enables organisations to mitigate the risk of overprovisioning or missing capacity and quickly adapt to changing market conditions.

The main providers of public cloud services (also referred to as hyperscalers) include AWS, Microsoft Azure, and Google Cloud Platform. Together, they account for around 70% of the European market which was worth €61bn in 2024. It is expected to grow 4% year-on-year in 2025 to €74.4 billion.

What is the colocation model?

A colocation model involves a third-party data centre providing rack space, power, and a connection to the internet while the customer has responsibility for the management of all software and hardware, including full control over the configuration, operating systems, data storage, and security.

There are many providers of colocation services in the UK, including Redcentric, Datum, and Equinix.

Colocation vs hyperscale

The main difference between colocation and the public cloud hyperscalers relates to ownership and management. In a co-located facility, the hardware is not owned by the data centre, it is owned by the business renting the space, who also have full control over their infrastructure. With public cloud, the hardware is owned and managed by the hyperscaler.

Another key difference surrounds financing. Colocation requires an initial capital outlay to purchase servers and other equipment while public cloud is an ongoing, operational expense.

Colocation benefits

Next, let’s consider some of the benefits of colocation and why colocation-based services are a better option than the public cloud hyperscalers.

Better reliability

The AWS and Microsoft Azure disruptions were caused by “DNS (domain name system) issues” and were a reminder of the over-reliance on a small number of US companies. With Amazon’s US-EAST-1 data centre in Virginia handling around two-thirds of the world’s internet traffic, UK/EU organisations are vulnerable to the cascading effects of a major outage from a single point of failure. These failures can be catastrophic and lead to lost revenue, compliance breaches, and reputational damage.

With colocation, you are not dependent on the provider. You have full control and responsibility for your physical server/hardware and lease the space and colocation facilities (e.g., power/internet connectivity, cooling, security etc) from the colocation provider. You have autonomy to configure systems and can design them to isolate failure and automatically failover to a backup server. As an example, many vendors will replicate the collocated server(s) to a second geographical location in near real-time. These replicated servers are capable of being promoted to live in the event of a failure with the third-party data centre. This offers near 100% uptime on power and network.

Most importantly, you have full visibility and can constantly monitor performance and respond immediately in the event of system downtime. This is valuable for highly regulated organisations where outages and data loss can result in financial penalties.

Ultimately, a well-designed system - using replication and redundancy – is more resilient, providing uninterrupted availability.

Cost certainty

The pricing strategy of public cloud providers is complex and difficult to understand with costs varying depending on the location and pricing tier.

To illustrate, one of Amazon’s most popular cloud products is EC2, and there are multiple ways to pay – on-demand, savings plans, reserved instances, and spot instances. EC2 is also available on the AWS Free Tier with 750 hours per month for 12 months.

Escalating monthly bills are another reason to opt for colocation. As your workload/usage increases, costs can spiral out of control especially if resource usage is not carefully monitored and optimised.

Public cloud providers promise cost savings, but many organisations find the savings never materialise. The hyperscalers have also been accused of introducing price increases when launching new features, with customers surprised by unexpected bills.

Additionally, users complain about the difficulty of interpreting bills and understanding the cloud resources used in the billing period.

Colocation data centres, by contrast, offers transparency and cost control with fixed monthly costs for rack (by type/size), power, and bandwidth. This provides a lower TCO, especially for consistent workloads.

Better performance

With hyperscaler data centres, performance metrics like latency, throughput, and bandwidth can fluctuate because of the shared infrastructure (with other tenants). For example, in a multi-tenant environment, if a customer consumes a disproportionate amount of shared resources, it can degrade the performance and availability for other tenants. Performance can also vary if a data centre is located on another continent, as transferring data will take longer and provide slower response times.

Colocation is perfect for organisations that require high performance computing. You do not share resources with other customers in a local data centre which can provide low-latency connectivity to minimise transmission delays.

In contrast to the large cloud providers, you can setup and configure your IT infrastructure to your exact needs with dedicated servers and bandwidth providing stable performance.

Data security

Public cloud infrastructure is shared between multiple customers, which can introduce potential security vulnerabilities across tenant boundaries. One misconfiguration or fault in a multi-tenant system risks data leakage and unauthorised access.

Alternatively, a colocation site provides physical isolation and full control over data privacy and security. This is important for organisations that handle sensitive data who must comply with legislation such as HIPAA or GDPR.

Data sovereignty

Driven by concerns around political interference, businesses are seeking less dependence on US companies and exploring more local solutions. In Europe, there is a growing realisation that the continent is over-reliant on the US tech giants and other top hyperscale companies, with AWS, Microsoft, and Google accounting for 70% of the European market. At the same time, these providers may move data across multiple regions, contravening compliance requirements and putting organisations at risk of fines and penalties.

Consequently, the EU Commission has created “A European Strategy for Data”, which aims to create a single market for data. This work expands on the “EuroStack imitative” which is designed to support digital sovereignty and allow the EU to become more technologically independent across all layers of its critical digital Infrastructure.

In contrast, colocation in a local data centre can eliminate concerns over data sovereignty as you know where your data resides, who can access it, and how it’s backed up.

However, a word of caution for businesses seeking to leave the cloud hyperscalers, local data centre capacity is a significant obstacle to overcome. According to Politico, the EU has admitted that untangling from the dominance of US technology companies is "unrealistic".

This may be one reason why the UK Government has committed to building new data centres. In November 2025, over £10 billion of data centre developments were sold, approved, or started the planning process with Equinix announcing a £4 billion investment at an 85-acre site in Hertfordshire. For context, 60% of the UK Government’s digital presence is hosted in AWS, Microsoft, and Google.

Sensing the shift, hyperscalers are investing in purpose-built data centres in specific countries or regions to ensure data sovereignty. For example, the AWS European Sovereign Cloud is entirely located within the EU and is physically and logically separated from AWS’ global systems. Microsoft has also launched the Microsoft Sovereign Cloud.

Avoid vendor lock-in

One of the main risks associated with hyperscale cloud providers is vendor lock-in.

At the start, organisations are offered “free credits”, savings for long-term commitments, and volume discounts for increased usage structured to incentivise customers to use a single provider.

However, once you are embedded within a hyperscaler ecosystem, cost can escalate as usage and complexity increases, and it is expensive to migrate to another cloud service provider – or rebalance workloads – because of data egress fees.

Technical barriers such as limited interoperability and portability also contribute to vendor lock.

An Ofcom review into the UK cloud market found it is difficult for businesses to switch and use multiple cloud suppliers. These concerns led Ofcom to refer the public cloud infrastructure services market to the Competition and Markets Authority’s (CMA) for further investigation. The CMA found the market is “not working as well as it could be”.

With colocation, you will sign a contract for an initial period (usually 12 or 24 months) to rent rack space, deploy your own IT equipment, and provide the staff to operate it. This gives you the freedom to move hardware to another provider at the end of the contract if you desire.

Simplicity

Hyperscaler companies have hundreds of products and cloud solutions, each with their own features, configurations, and use cases. This is a challenge for customers who must navigate an ever-increasing product portfolio. With several overlapping products, customers can get confused when choosing the best solution for their needs.

Designing cloud computing services like Amazon EC2 or Azure Virtual Machines requires an in-depth understanding of cloud provisioning with misconfiguration leading to performance issues, higher bills, and physical security breaches.

Conversely, colocation-based systems are much simpler to understand. Moreover, they are easier to administer with access to online portals with tools to configure settings, control power, and reboot remotely, as well as reporting, billing, and helpdesk functionality.

Sustainability

According to the International Energy Agency (IEA), global electricity consumption from data centres was estimated to amount to around 415 terawatt hours (TWh) in 2024. This is projected to double by 2030 to around 945 TWh.

In the US, the electricity demand of big tech data centres is surging.

Consequently, hyperscaler cloud providers have made bold pledges and committed to ambitious sustainability targets around net-zero and renewable energy. AWS, for example, has committed to reaching net-zero carbon by 2040. Microsoft will be carbon negative by 2030, with historical carbon emissions removed by 2050.

However, every business is facing rising pressure to calculate their environmental footprint and the metrics available from the hyperscalers are often obscure and averaged across their global presence. In fact, according to the Guardian, the real emissions from Google, Microsoft, Meta, and Apple are probably about 662% – or 7.62 times – higher than officially reported.

With colocation, you get better visibility of your energy consumption with data centres providing reporting on key metrics like PUE (power usage effectiveness) by location. This allows you to demonstrate robust security and compliance with ESG reporting requirements.

How to transition to colocation services

Moving workloads from the public cloud to the private cloud can be challenging and requires careful planning. Our recommendations include:

Conduct an in-depth assessment

Identify suitable workloads to move to colocation and quantify the potential cost savings. You will also need to plan the physical infrastructure (e.g., rack space, processing capability and storage) and create a team to support the migration and day-to-day management.

Develop a migration plan

Create a detailed roadmap with steps for data migration and application transition, including timelines, resource allocation, and contingency plans. This will allow for a smooth transition.

Consider hybrid cloud

Consider hybrid cloud environments that combine public cloud with colocation. For example, private cloud (either colocation or on-premises) is better for primary systems or organisations that must comply with regulations. Conversely, the public cloud is ideal for applications that demand flexibility.

With the hybrid approach, your mission-critical applications remain fully operational if AWS suffers a major outage.

Seek expert help

Third-party consultants and managed service providers can provide invaluable support before, during, and after migration. Their skills and knowledge can reduce risk – accelerating the migration of data or applications and providing support and training to your team post-repatriation.

Consider a multi-cloud strategy

A multi-cloud approach is using cloud computing services from two or more cloud service providers to run your applications. According to OVHcloud, 64% of organisations see their use of multi-cloud increasing in the next two years.

Adopting a multi-cloud approach can offer greater flexibility to customers and avoid vendor lock-in. Multi-cloud environments can also reduce IT expenditure with cloud providers offering different pricing models, enabling organisations to select the most cost-efficient vendor for specific workloads.

Conclusion

Colocation vs cloud - which option is better?

While the big cloud providers provide scalability and convenience, they concentrate risk.

The recent AWS and Azure outages were reminders that when millions of customers depend on a shared environment, a single misconfiguration can result in systemic failure. The generally accepted wisdom that there is safety in using one of the hyperscalers has proven to be false.

On the contrary, a well-designed, colocation-based system offers resilience, compliance, and control.

In our view, the public cloud is a powerful tool but should be part of a hybrid or multi-cloud strategy.

To discuss your cloud strategy, please call us on 03300 100 000 or complete this form.