On premise data centre vs colocation

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When we look at today’s world, there’s almost nothing that isn’t digital. And due to this, there is a strong need for secure, scalable infrastructure that is always running. There is more data out there than ever before, and businesses and enterprises need to store their data safely. They need a system that stores, processes, and makes it easily accessible at all times.

Luckily, there are models out there that offer this, with on premise data centres and colocation services being two of the most common. They both provide institutions with the environment to maintain robust data systems, but they have their differences.

Below, we’ll look at the two options and what sets them apart. We can help you choose which one is best for you or your business by assessing the benefits and challenges of both. Let’s get started.

What is colocation?

The first model we’ll look at is colocation. You may sometimes see it referred to as colo, but it essentially provides a rental space in a professional data centre to store your own IT hardware and workloads. This differs from previous methods of keeping servers on-site, which often come with challenges such as higher costs, limited scalability, and lower levels of resilience. With colocation, you don’t need to build the facility yourself, making infrastructure management much simpler and more reliable.

Let’s look at how it works. Simply put, you place your own servers, storage and networking equipment in a third-party facility, retaining full ownership and control. You maintain and manage your hardware, while the colocation provider ensures the facility environment, such as power, cooling, connectivity and physical security is available at all times.

An important aspect that makes colocation so unique is that its facilities are designed with redundancy in mind. Features such as multiple power feeds, backup generators, and multiple network connections are standard. This is challenging for businesses to establish in-house without incurring a significant financial burden. Providers such as Datum also maintain recognised certifications like ISO 27001 and PCI DSS, assuring organisations that they are operating within a secure, compliance-ready environment.

Colocation provides organisations of all sizes with reliable infrastructure hosting without the burden of building and running a data centre themselves

Benefits and challenges of colocation

Benefits

  • Lower upfront costs: you don’t need to fund the construction of a data centre. Instead, you pay a predictable monthly or annual fee for rack space, power, cooling, and connectivity. You still own your hardware, but the facility costs are taken care of by the provider.
  • Efficiency and security: colocation facilities give you access to cutting-edge cooling, redundant power, and enterprise-grade security measures.
  • Scalability: is your business growing at a high speed? No problem. You can add more racks without the delays and expense of new construction.
  • Professional support: many providers, including Datum, offer on-site engineers through remote hands services, helping with tasks such as hardware reboots, cabling, or troubleshooting, so your team doesn’t always need to be on-site.
  • Sustainability: modern colocation centres are built with energy-efficient designs to meet ESG goals.

Challenges

  • Reliance on the provider: you depend on the provider as you rely on them for uptime and security. However, with the right partner like Datum, you can have peace of mind with a Tier 3+ aligned design, 100% uptime SLAs, and responsive UK-based support.
  • Limited customisation: You don’t have the same level of control as when designing and managing your own facility. Although some colocation providers offer options such as dedicated suites or caged areas, your setup will often still need to adapt to the provider’s environment.
  • Compliance checks: providers maintain certifications such as ISO 27001 and PCI DSS to support compliance. However, responsibility ultimately remains with your business to ensure operations meet requirements under frameworks such as GDPR and FCA obligations. Providers can support this with compliant environments, but the accountability stays with the customer.

What is an on premise data centre?

Another popular model enterprise businesses are considering is an on premise data centre. Unlike colocation, where the facility is owned by a provider, an on premise data centre is wholly owned, designed, and operated by the organisation itself. It could include an on-site system that stores the servers, or a private site built and maintained just for one business.

While businesses have control over colocation, they have even more control when it comes to on premise data centres because they are the ones who build the layout and configure the power and security. It’s a suitable solution because it allows an organisation to tailor the design of the system to align with their individual IT strategies and goals.

However, this can be prohibitively expensive as the business needs to cover the cost of everything. This includes the initial build and the ongoing costs, including utilities, staffing, maintenance, and upgrades, as well as keeping up with growing demand and adapting the system as requirements change.

On premise data centres are most commonly used by large organisations or businesses in industries with more strict compliance and security requirements. This could be anything from financial institutions to healthcare providers.

Benefits and challenges of on premise data centres

Benefits

  • Complete ownership and control: you have total control over everything from the building design to operational policies. Everything is in your hands.
  • Customisation: since you build the data centre, you can tailor the environment to perfectly match your business’s IT needs, including power, cooling, or networking requirements.
  • Security for sensitive environments: large enterprises often prefer the added assurance that the data centre is on-site and totally isolated. They do not share the same facility with anyone else.

Challenges

  • High cost: both the CapEx and OpEx of on premise data centres are high. Building, powering, and staffing a whole facility can have a large financial toll on a business.
  • Staffing needs: you’ll need to have experts as part of your IT team who know how to design, build and manage the data centre infrastructure.
  • Scalability: scaling capacity is slow and costly compared to the agility of colocation or cloud. Expanding typically requires new construction or large infrastructure upgrades, and it can prove expensive if you end up running more capacity than you ultimately need.
  • Utilisation risks: without careful planning, facilities may be underused, leading to wasted space, power, and resources.

Key differences between colocation and on premise data centres

Ownership vs service subscription

The biggest difference between colocation and on premise data centres is ownership. When a business opts for colocation, they are paying a provider to rent the data store environment. However, they still maintain control over and own the hardware. With an on premise data centre, a business owns and operates the facility itself, having complete and total power.

CapEx vs OpEx

The financial models also differ significantly. Building an on premise data centre involves heavy capital expenditure (CapEx) upfront, followed by ongoing operational costs (OpEx) for power, staffing, and maintenance. Colocation reduces the need for large-scale CapEx on facilities, since the business pays a predictable monthly or annual fee for space, power, and cooling. However, customers are still responsible for purchasing and maintaining their own servers and networking equipment.

Infrastructure control

Control is an important topic when talking about the differences between these two methods. An on premise data centre gives you complete control over designing and operating the system. Colocation doesn’t take control away from the hardware or data, but the third-party provider will be responsible for the physical environment.

Scalability

Many businesses are growing rapidly in the digital age, which means they often need to expand their data centre. The on premise model makes this more difficult as it means expensive, large-scale construction. However, colocation allows scaling to happen swiftly by adding more racks or expanding the contracted space.

Physical and operational responsibility

Running a business is hard enough, so adding control over the staffing, maintenance, compliance, and security of the data centre can be a significant amount of work when using the on premise model. Colocation shifts a large amount of this responsibility to the provider, allowing them to use their specialised expertise while the business can focus on operations.

Security and compliance

Both on premise and colocation models can achieve high standards of security and compliance. In an on premise data centre, responsibility for compliance and audits sits entirely with the business. In colocation, providers typically maintain certifications such as ISO 27001 or PCI DSS for their facilities. These certifications don’t automatically make the customer compliant, but they give organisations a strong foundation to meet their own regulatory requirements.

How to choose the right model for your organisation

So, how do you know which model is best for your business? Here are a few key factors to consider before making a decision:

  • Budget: do you have the expenditure to build and maintain your own data centre, or would a set monthly or annual service model be better suited?
  • In-house expertise: does your business have an IT team with knowledge to build and run a facility, or do you need outside help?
  • Security and compliance: are you in a heavily regulated sector where complete ownership is necessary, or can you meet your obligations through a certified provider?
  • Growth expectations: are you looking to scale quickly and need a more flexible solution? Or are you focusing on long-term forecasting?

What works best for you

Colocation and on premise data centres offer businesses the same thing: a safe and reliable place for data and full IT storage. However, they both work in very different ways. The on premise model gives a business complete control; however, it does cost a lot more. Colocation is a flexible and efficient service that is often the most cost-effective option.

We can’t tell you what the best choice is, as it depends on your organisation’s goals, budget and compliance needs. However, if you’re looking for a reliable colocation provider, Datum is here to help. Contact us today to discuss your options.

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