Colocation vs cloud
When you weigh colocation vs cloud, the real choice is how you pay. Colocation wants money at the start, then usually costs less month to month.
Cloud asks for nothing at the start, then the bills add up over time. That split between capital and running costs sits at the center of the decision, and how much data leaves your systems each month shapes almost everything else.
Up-front payment or pay as you go
With colocation you own the servers and put them in someone else's data center. You then pay a fee each month for the rack space, power and network connection, and the machines remain your property.
Cloud is renting compute, billed by the hour or even the second. You never own a box. Nothing to buy, but the running bill is usually higher because the meter never stops.
Scaling is different as well. In the cloud you get more capacity with a few clicks. With colocation you must add or take away physical equipment. If your workload is steady but your data keeps piling up, colocation usually wins on cost.
Colocation or AWS: which is cheaper for your data?
AWS is the cloud platform run by Amazon, and the charge people don't expect is egress. Egress is what you pay when data leaves the provider's network for the open internet. Every file a user pulls down counts.
AWS includes 100 GB of free outbound data transfer per month. Past that, the rate is $0.09 per GB up to your first 10 TB, which means 10 TB out costs $912.60. More downloads mean a bigger line on the invoice, and growing storage lifts the bill as well.
Colocation providers usually charge for bandwidth in another way. Many plans give you unmetered traffic over a 1 Gbps connection, so sending more data never changes what you owe. A GPU customer switched from per-second billing to a fixed price built on power, space and cooling, and their monthly number became easy to predict.
How do colocation and cloud prices compare by rack size and city?
Colocation pricing goes by the rack. A rack is that tall metal cabinet your machines slide into, and every package ships with a fixed power allowance.
| Package | Monthly list price | Power included |
|---|---|---|
| 1–4 servers | $69–$199 | roughly 0.24 kW |
| Quarter rack | $330–$399 | roughly 0.6 kW |
| Half rack | $530–$699 | roughly 1.2 kW |
| Full rack | $930–$999 | roughly 2.4 kW |
When your equipment needs more power than the package allows, the extra costs more, and the rate changes by city. Our price tool estimates that with CBRE's asking rents, which land between $155 and $275 per kW monthly in 16 markets. Those rents apply to large contracts, so treat the numbers as estimates, not market rates. A provider may quote you something different.
| Full rack at 5–10 kW | Estimated monthly cost |
|---|---|
| Dallas-Fort Worth | roughly $1,350–$2,410 |
| Northern Virginia | roughly $1,420–$2,790 |
| Chicago | roughly $1,440–$2,710 |
| Silicon Valley | roughly $1,450–$3,090 |
Cloud has no rack price. What you pay tracks what you use, and when you mix cloud with colocation, bandwidth, cross connects and cloud egress fees climb quickly. Give the price tool three answers about space, power and city, and it hands back a monthly estimate in dollars.
What did one company pay before and after its cloud exit?
37signals, a software firm, shared its figures after leaving the cloud. Real numbers like these are rare.
| Line item | What it cost |
|---|---|
| Total cloud bill in 2022 | $3.2 million |
| Cloud servers, excluding S3 storage | roughly $2.3 million a year |
| 8 dedicated racks in 2 data centers | roughly $60,000 a month |
| New servers amortized over 5 years | roughly $600,000, or $120,000 a year |
| Total yearly cost after leaving | $840,000 |
Against the $2.3 million it used to pay, the company expects about $7 million in savings over five years. Their workload is not yours, so your own outcome may fall anywhere.
Does a dedicated server beat colocation?
With a dedicated server, the hardware belongs to the provider, and you're the only one renting it, so you never buy a machine. In colocation the server is yours, and what you rent is the space, power and connection around it.
With only a few machines, the smallest colocation package handles 1–4 servers at $69–$199 monthly, power of roughly 0.24 kW included. Since the hardware is yours, you can upgrade it or take it to another facility whenever you like.
Questions people often ask
What is a colocation data center?
It's a building where an operator rents rack space, power and network connections to many customers at the same time. PeeringDB lists 1,086 of these buildings across the 48 cities we cover, and each city page shows all of them along with the operator, the networks, the internet exchanges and the address.
Which providers run the most colocation buildings?
Counting buildings in those cities, PeeringDB puts Digital Realty in front with 68, then Equinix and DataBank tied at 60 each. After that come Cologix (38), Centersquare (37), Flexential (36), Lumen (33), CoreSite (28), Cogent (25) and EdgeConneX (23).
Where are colocation buildings most common?
New York is first with 92, and Ashburn follows at 80. Next come Chicago with 68, then Dallas at 58, Silicon Valley with 56, Los Angeles at 49, Toronto with 46 and Atlanta at 42. The single best-connected site is Equinix's facility in Ashburn, which lists 523 networks.
Is colocation cheaper than cloud everywhere?
Rack pricing stays close from city to city, but finding space does not. CBRE reports that Northern Virginia and Hillsboro, Oregon are nearly full, with vacancy of just 0.2%, while Minneapolis sits far looser at 16.8% and Denver at 13.8%, so in a tight market you may have fewer choices when you request quotes.