In the last ten years, cloud computing has transformed into a necessary aspect of almost every company’s IT strategy.

Cloud computing, or the Cloud, is a data storage and processing solution where the user utilizes virtual servers instead of physical servers. The virtual servers are supported by physical servers, often in multiple locations, but the physical servers combine to host the entire virtual ecosystem. Since the virtual ecosystem is shared by the physical servers, the user’s data isn’t tied to a specific physical location.

This is part three of Data Center Fundamentals, datacenterHawk’s guide to getting up to speed on the data center market. If you’re a new participant in the industry, then this is for you. Instead of analyzing deep market trends, we’ll be covering the basics one step at a time. Be sure to subscribe to our monthly update to know when we release future topics.

Advantages of the cloud compared to colocation

Operating in the cloud has distinct advantages, primarily driven by the absence of physical infrastructure.

Instead of physically commissioning and installing new servers as you would with colocation, cloud servers can be deployed almost immediately and at a lower cost. Users also have easier access to their cloud ecosystem and can interact online instead of physically managing the servers from inside the data center.

Users also don’t need to lease the infrastructure required to support their servers. This provides ample flexibility to scale up, down, or reconfigure based on user needs.

When virtual servers are shared across various physical locations, cloud computing can provide a more highly available solution. Most cloud infrastructure includes geographic diversity, with the multiple locations supportive of operations if one of the locations suffers any downtime.

Disadvantages of the cloud compared to colocation

Transitioning existing systems from physical servers into the cloud is complicated. In some cases, users find their systems aren’t as efficient in the cloud as they were in physical servers. In cases like this, migrating out of the cloud back to their own servers can be even more complicated.

Since the physical servers aren’t made available to end users of the cloud, users have less control or ability to respond when downtime occurs. When colocated, you can physically send someone to work on a resolution. With the cloud, you’ll likely communicate with a support team who will respond within the time frame stated in your service level agreement, which could be between 15 minutes to 12 hours.

Operating in the cloud can be less expensive for many users, but some that scale up find it to be more expensive than their physical infrastructure. Cloud services are typically offered in a “pay what you use” model, and companies can quickly end up using and paying more than they anticipated.

While the cloud can be very helpful for companies, it requires thorough planning to execute the transition.

Cloud’s impact on the data center industry

The mainstream adoption of the cloud created ripples in the data center industry the same way colocation did.

Almost every company utilizes the cloud in some capacity. It solves problems that leasing physical servers can’t. Instead of housing a handful of racks on premise or going to colocation, now most small companies deploy their systems straight to the cloud and large companies utilize the cloud in various operations.

The three largest providers of cloud services are Amazon, Microsoft, and Google. Each company has spent billions of dollars over the last five years to develop their cloud offerings.

However, these companies have found they can’t build fast enough to keep up with demand, so they have leased capacity from data center providers.

The term “hypserscale leasing” came about due to the demand generated by cloud providers and the large leases they executed with data center providers. Some of the larger data center providers have even adjusted their traditional design to build data centers that more closely match the needs of cloud providers in an effort to capture the demand they generate.

The myth of cloud takeover

The popularity of the cloud led many in the industry to believe the cloud was the next stage of digital transformation and would replace colocation.

Cloud computing is certainly a necessary aspect of a modern company’s IT strategy, but hasn’t functioned as a replacement for colocation across the board. The cloud can be a complicated solution and doesn’t meet everyone’s needs all the time. Many data center providers report an uptick in absorption from users that migrated to an all-cloud solution and found it didn’t fit their needs. Hybrid solutions are popular today, where users have a mix of some systems in the cloud and others in physical servers.

While the cloud has taken some requirements away from colocation, it has substantially increased the demand for colocation overall. In fact, cloud adoption is one of the biggest sources of data center absorption, based on our analysis and discussion with top providers, and we expect to see that trend continue.

This was part three of Data Center Fundamentals, datacenterHawk’s guide to getting up to speed on the data center market. Be sure to subscribe to our monthly update to know when we release future topics.