Colocation is usually the better fit when you need to run and control your own server hardware but want someone else to provide the facility. Cloud infrastructure is often a better fit when you want to consume compute, storage or managed services without procuring and maintaining physical servers. These are not exact opposites: “hyperscale” describes scale, while colocation and cloud describe different ways to house or consume infrastructure. The right choice depends on your workload, operating requirements, location, network design and full lifecycle cost.
What is the difference between hyperscale, colocation and cloud?
These terms describe different things, so comparing them as three mutually exclusive data-center options can be misleading.
- Colocation is a facility service: you rent space for equipment you own. The operator typically supplies power, cooling, physical security and network bandwidth; your organization remains responsible for its servers and software. AWS’s data-center overview describes this division and its trade-offs.
- Cloud infrastructure means renting infrastructure or higher-level services from a provider rather than owning and maintaining the physical servers. The provider manages infrastructure provisioning and maintenance to varying degrees, depending on the service. AWS describes cloud as offering on-demand access and usage-based flexibility, but those features and responsibilities must be checked for the specific service.
- Hyperscale describes scale, not whether a customer uses cloud or colocation. In a 2022 article about AWS networking, AWS said an environment could be considered hyperscale when it supports thousands of application endpoints and tens or hundreds of gigabits of traffic per second. That is an AWS-specific practical example, not a universal industry definition.
A hyperscale company may build and operate its own data centers, use colocation facilities to expand or enter markets, and offer cloud services. The categories can overlap: Uptime Institute’s 2025 survey found that many surveyed colocation providers host hyperscale technology companies.
Should you use colocation or cloud for your workload?
Start with what your team needs to own and operate. Colocation keeps your organization responsible for the hardware while shifting facility operations to a provider. Cloud reduces the need to procure and maintain physical servers, with the amount of operational work transferred depending on the service. Neither arrangement removes the need to manage the application, assess security and compliance, or plan how systems connect.
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| Decision factor | Questions for colocation | Questions for cloud |
|---|---|---|
| Control and responsibility | Does your team need to select, own and operate the server hardware while outsourcing facility operations? | Is provider-managed infrastructure or a higher-level service acceptable for this workload? |
| Capacity and scaling | Can you forecast hardware and space needs, procure equipment and expand in the locations you need? | Does demand vary enough to benefit from on-demand resources, and are the required services available? |
| Location and connectivity | Is a suitable facility near users, partners or data sources, and does it offer the network connections you need? | Are the provider’s regions and interconnection options suitable for your latency and network requirements? |
| Compliance and operations | What facility, hardware and operating controls does the workload require, and who will implement them? | Which specific services and regional controls meet the workload’s requirements? Verify their scope rather than assuming provider-wide coverage. |
| Total cost over time | Have you counted hardware, facility space, power, network, staff and contract commitments? | Have you counted resource usage, data movement, service mix, support and commitment terms? |
| Hybrid placement | Which components need to remain on equipment you own? | Which components can use cloud services, and how will they communicate with the colo environment? |
Cloud can reduce hardware procurement, maintenance and capacity-planning work, according to AWS’s cloud deployment guidance. Colocation can reduce the burden of operating a facility and may place equipment nearer users, but reaching multiple geographies can be difficult and costs can grow as requirements expand, according to AWS’s comparison. Treat these as factors to evaluate, not guarantees for every provider or workload.
Is colocation cheaper than cloud?
There is no workload-matched price comparison in the available evidence that establishes one model as categorically cheaper. The answer depends on what you run, how steadily you use capacity, where it must run and what your team must pay to operate it.
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- Easy equipment configuration: Fully adjustable mounting rails and numbered U positions, with square holes for easy equipment mounting with top and bottom punchout panels for easy cable access
- Durability: Made of high quality cold rolled steel holds up to 110lb (50kg) (Easy Assembly Required)
- PCI & HIPPA and EIA/ECA-310-E compliant
For colocation, include the equipment lifecycle as well as facility space, power, connectivity, staffing and contract commitments. For cloud, account for resource usage, data movement, the mix of services, support and commitment terms. Compare the same workload, capacity, locations and service levels over the same period; a facility charge and a cloud usage rate alone are not equivalent totals.
Can you connect a colocation data center to AWS?
Yes. AWS documents Direct Connect availability at colocation campus locations. AWS’s Direct Connect Layer 1 overview explains the connection model. Whether a particular facility and connection meet your needs depends on location and service availability. Check the relevant campus and connection options when designing the network, including how latency-sensitive traffic and data transfer will be handled.
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Why colocation and hyperscale can coexist
Colocation is not limited to small organizations, and a hyperscale operator does not have to place every workload in facilities it owns. In Uptime Institute’s 2025 survey, 62% of surveyed colocation providers said they hosted hyperscale technology companies (n=151 in the report’s chart); its weighted average indicated that 44% of facility capacity was dedicated to such companies. In the 2024 survey, 61% of surveyed providers reported hosting hyperscale tenants (n=182). These are survey results, not a census of worldwide data centers or capacity, and the percentages should not be read as a definitive market trend.
Large proposed campuses also illustrate why scale does not settle the deployment choice. In an October 2023 analysis, Uptime Institute identified proposals for 26 mega data centers since 2021, each with planned power provision above 500 MW. It estimated that if all were built to planned capacity and operated at half projected capacity, annual use would be about 45 TWh. This was a conditional estimate about proposals, not measured consumption; the analysis noted that financing, connectivity, power and permissions could prevent projects from being built or reaching planned capacity. See Uptime Institute’s analysis of hyperscale colocation campuses.
Quick Recap
A practical way to choose
- Set the operating boundary. Decide whether your team needs to own and operate server hardware or can use provider-managed infrastructure and services.
- Map the workload. Identify demand patterns, required capacity, latency constraints, data location and dependencies on specialized hardware or services.
- Check location and connections. Confirm suitable colo facilities, cloud regions and interconnection options for users, partners and data sources.
- Verify obligations. Match the actual facility controls or specific cloud service and regional controls to your compliance and operational needs.
- Compare lifecycle cost. Model the same workload over the same period, including hardware replacement or cloud usage, network and data movement, staff and contractual commitments.
- Consider a hybrid design. Place components according to their control, location, service and connectivity needs rather than assuming every part of an application must use the same model.
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