Data Center vs cloud – which is right for you?

The amount of data is constantly increasing and all of this data has to be stored somewhere. More and more companies are looking towards cloud service providers for a solution without thoroughly considering the alternatives. It is really no wonder, considering that until this year, there was no good alternative – a large-scale data center – built for this purpose – in Estonia. As things are different now, it is a good time to figure out what the difference is between a data center and the cloud and how a company can benefit from both.

Racks in colocation data center. Photo: Tõnu Tunnel

First, let us talk money

As long as the amount spent on a cloud service every month is still in the triple digits, the cloud is one of the most cost-effective options. If the monthly expenses grow into the quadruple digits and beyond, however, alternatives should be considered. One such alternative is creating a footprint at a data center and setting up a hybrid cloud. Despite what is widely believed, it is not as expensive and complicated as people think. As the devices are designed to last for 5–7 years in good conditions, their depreciation is relatively low. As can be seen from the example of Dropbox, switching from a cloud service to a data center service can increase profitability by more than 30%. This means that coming up with plans and making some calculations may be worth it.

What is a cloud service, anyway?

When we talk about cloud services, the first things that come to mind are often digital disk space providers, such as Dropbox and Google Drive. It is true that storing data on a cloud drive has become a normality for companies and private persons alike.

For larger companies, however, disk space is only the tip of the iceberg when choosing a cloud service provider – usually, a kit of tools and technologies is also part of the service. These are based on remote servers that are accessible online. The provider of a cloud platform manages the required storage space, servers, and networks; the companies simply pay for using the services whenever they need them. The price is usually based on the volumes used and grows linearly.

In the case of cloud services, getting acquainted with the content of the service offered is a good idea. Many are surprised, for example, that it is a platform service and it is not responsible for the quality or backup of the data. Companies should also pay attention to the expenses of leaving the cloud – they can be quite impressively large and inhibit changing service providers in the future.

So, what does a data center do?

As the name implies, a data center is a building constructed specifically for storing data. Unfortunately, people tend to apply the name to all kinds of other premises that are not actually intended for storing data and do not ensure the level of reliability that makes real data centers so valuable. We will not discuss such premises here.

Similarly to the cloud, a data center is a place where a company stores its data – to be more precise, the company rents premises for its IT equipment at the data center. This means that for companies, a data center is a step above a cloud, as it ensures a physical location with a high level of reliability and security, which form the foundation of a future-proof and flexible IT infrastructure. At a data center, the initial investment is larger than that of getting started with a cloud, but in the future, as volumes increase, the costs grow at a much slower rate. Based on public price lists, we can deduce that at current prices, using cloud services becomes more expensive than a data center at about 70 TB – if we are only comparing storage space.

A lower starting cost with the cloud?

If a company wishes to expand their IT capability beyond their office server or is only getting started, a cloud service is a logical first choice, as it has a low starting cost. Cloud services are often preferred because they already sound more flexible than any physical solutions – volumes can be increased or decreased based on the needs of the company. This is actually also true for data centers, but we will get to that a little later.

Another key factor of the increase in the popularity of cloud hosting is the simple accessibility of it. According to WebTribunal, 94% of companies already use cloud services to some extent.

However, the use of cloud services also has its downsides for companies. As data volumes increase, so might the costs, and if the data is sensitive, security concerns may arise. To upscale successfully, you should not rely solely on cloud services – instead, you should consider establishing a hybrid infrastructure that involves both a data center and the cloud. Being overly reliant on the cloud in the different departments and teams of a company can create a sprawling shadow IT that is difficult to manage and consolidate effectively.

Flexibility is not unique to cloud services

Companies who are growing beyond their current data storage solution often lack the resources for building their own data center. Here is where colocation data centers built specifically to provide data hosting services for companies come in.

In the largest colocation data center of the Baltics, which was recently opened near Tallinn, you can rent a rack or a private suite – based on what the company needs and on what scale. You can have one, two, or even ten racks and in a private room, you can decide on the use of space. This means that flexibility is definitely not a concept unique to the cloud.

This service at a colocation data center requires companies to procure their own servers and storage space, which can be more expensive than using public services. The investment will be worth it, though – it will result in a much more secure and reliable infrastructure.

You should also pay attention to the location. At a data center, companies have full ownership of their devices and control over their placement, but if engineers need to carry out routine maintenance in the servers, it is important that the center is within a reasonable distance of the office – otherwise, the amount of time and money spent on it becomes excessive. Fortunately, it is not much of a problem in Estonia, as the only real data center of the country is located a 20-minute drive away from the heart of Tallinn. Not that any distance is too great in Estonia.

Which is better, then – a data center or the cloud?

We do not really need to pit them against each other – instead, we should consider how we can combine them. Many companies do use both or combine them with other IT infrastructure solutions.

The main difference between the cloud and a data center is how data is managed and stored in each. In the cloud, the servers belong to the cloud service provider and data is managed virtually. In a colocation data center, the servers are not the property of the center but the person renting the premises. If you value privacy, security, and independence, you should consider choosing a data center from the start. If your volumes are low and unlikely to increase over time, the cloud might be the most cost-effective option.

Both solutions allow companies to cut costs, as long as you consider carefully when to use one or the other. However, making poor choices or not making any at all may cost millions as volumes increase.