Title: Data Center vs Cloud: On-Premises, Colocation, and Cloud | FOUND Description: Data center vs cloud: the cloud runs in data centers. On-premises, colocation, and public cloud compared on control, security duties, cost, and staff. Canonical: https://lotsfound.com/insights/data-center-vs-cloud/ # Data center vs. cloud: on-premises, colocation, and cloud compared The cloud is not an alternative to data centers. It runs in them. The real choice is who owns the building and the servers: your organization on its own premises, a colocation provider that rents you space, or a cloud provider that rents you computing. [Tell us what you are looking for](/contact/) In this article 1. [Is the cloud a data center?](#is-the-cloud-a-data-center) 2. [The three models](#the-three-models) 3. [How the models compare](#how-the-models-compare) 4. [Control](#control) 5. [Security responsibility](#security-responsibility) 6. [Cost](#cost) 7. [Staffing](#staffing) 8. [How organizations choose](#how-organizations-choose) 9. [What this means for land](#what-this-means-for-land) 10. [Key recap](#key-recap) 11. [Questions](#questions) 12. [References](#references) > **Quick summary:** This guide compares the three ways an organization can house its computing: its own server room, a colocation data center, or the public cloud. It is for business owners, public officials, and residents who hear "the cloud" and "data center" used as opposites. The key point: all three run in data centers. They differ in who owns the equipment, who secures it, what it costs, and who staffs it. ## Is the cloud a data center? The cloud runs in data centers. The [federal definition of cloud computing](https://nvlpubs.nist.gov/nistpubs/legacy/sp/nistspecialpublication800-145.pdf) from the National Institute of Standards and Technology describes a physical layer of server, storage, and network components under every cloud service. The [International Energy Agency](https://iea.blob.core.windows.net/assets/de9dea13-b07d-42c5-a398-d1b3ae17d866/EnergyandAI.pdf) defines cloud computing as the provision of computing services through the internet. It names cloud services as a main use of hyperscale data centers. So "data center vs. cloud" is really a question of ownership. When you use the cloud, your work runs on a provider's servers in the provider's data center. When you run your own server room, it runs on your servers in your building. ## The three models The three common models are on-premises, colocation, and public cloud. Hybrid setups combine them. - **On-premises.** Your organization owns the servers and the room or building they sit in. You supply the power, cooling, network, and staff. - **Colocation.** A provider owns the building and rents you space, power, and cooling, with network service to connect your equipment. You own and manage the servers. The [Department of Energy's design guide](https://www.energy.gov/sites/default/files/2024-07/best-practice-guide-data-center-design.pdf) describes colocation this way. - **Public cloud.** A provider owns the building and the servers and rents you computing as a service. The NIST definition sorts cloud into three service models: infrastructure, platform, and software as a service. The NIST definition also allows a private cloud, used by one organization, to exist on or off premises. A cloud can therefore sit in your own building. [What is a colocation data center?](/insights/colocation-data-center/) explains the leasing side in more depth. ## How the models compare The models compare on four points: control, security duties, cost, and staffing. | | On-premises | Colocation | Public cloud | |---|---|---|---| | Who owns the building | You | The provider | The provider | | Who owns the servers | You | You | The provider | | What you control | Everything | Your servers and software | Your data, settings, and applications; more under infrastructure service | | Security duties | All yours | Building security is the provider's; system security is yours | Shared, and the split depends on the service model | | Cost pattern | High first cost, then operating cost | Rent for space and power, plus your equipment | Pay for use | | Staffing | Your own facility and IT staff | Your IT staff; the provider runs the building | Fewer staff for hardware; skills for cloud contracts and cost control | ## Control Control falls as you move from on-premises to cloud. Under the NIST definition, an infrastructure-as-a-service customer does not manage the underlying cloud infrastructure. It does control operating systems, storage, and deployed applications. A software-as-a-service customer controls much less, often only some application settings. In colocation, you keep control of your own hardware. The provider controls the building, the power, and the cooling. ## Security responsibility Security responsibility is shared in colocation and cloud, never handed off whole. A [2026 Government Accountability Office report](https://files.gao.gov/reports/GAO-26-107530/index.html) describes the split for each cloud model. With infrastructure as a service, the organization and provider share responsibility for data, identity and access management, and networking. With software as a service, they still share it for data and for identity and access management. Colocation works the same way. North Carolina's state technology agency secures its [colocation facilities](https://itservices.nc.gov/services/hosting/data-center-co-location-services) to stated federal and international standards. Its customers remain responsible for software and operating system patches, backups, access control, monitoring, incident response, and encryption. The trade has two sides. NIST's [cloud security guidelines](https://nvlpubs.nist.gov/nistpubs/Legacy/SP/nistspecialpublication800-144.pdf) note that large providers can let security staff specialize. The same guidelines warn that public cloud customers share components with other customers unknown to them, and that a configuration error can expose data. > **Watch for:** Moving to the cloud or to colocation does not move all of the security work. Read the contract for which duties stay with you. ## Cost Cost depends on scale and use, and no model is always cheaper. The Department of Energy guide states that colocation and cloud have a lower first cost than an on-premises data center and may have a lower operating cost. It also notes that an on-premises facility needs a backup site if failure would stop operations, which adds cost. Cloud bills need management. In the 2026 GAO report, 17 of 24 federal agencies said that controlling cloud costs required changes in how they manage technology. North Carolina publishes its own [hosting rates](https://it.nc.gov/services/billing-rates/current-service-rates/2026-2027-hosting-rates) by the server and by the month. For fiscal 2026 to 2027, cloud server administration costs 173.15 dollars per server per month, beside separate rates for physical and virtual server maintenance. ## Staffing Staffing is the hidden cost of on-premises computing. The Department of Energy guide states that an on-premises data center requires expert staff. It adds that small on-premises rooms may lack around-the-clock staff, adequate redundancy, and efficient design. Colocation and cloud move the building staff to the provider. Your own staff still have work. The state's colocation customers need a technical understanding of their own application architecture. In the GAO report, 10 of 24 agencies said resource constraints hindered their efforts to hire a cloud workforce. > **Take action:** If you are planning a facility of your own and need land with the power and fiber it requires, tell us what you need. Start with [Tell us what you are looking for](/contact/) ## How organizations choose Organizations choose by mission, not by a rule. The Department of Energy guide describes three paths: an on-premises data center only, a "cloud first" approach where most work runs in the cloud, or a hybrid. In a hybrid, the most critical operations stay on premises and other work, such as data storage, runs in the cloud. North Carolina's state government shows the mix. Its technology agency offers both colocation in its own data centers and cloud server administration from the same rate schedule. ## What this means for land As enterprise rooms lose share to colocation and cloud, computing moves into larger purpose-built buildings. The International Energy Agency estimates that enterprise facilities fell from 85 percent of global capacity in 2005 to about 28 percent. Those buildings need land, power, water, and fiber. [Types of data centers and the land each one needs](/insights/types-of-data-centers/) matches each model to its site, and [Who owns data centers?](/insights/who-owns-data-centers/) sorts the owners. The common objections to the buildings are checked in [Are data centers bad? The objections, checked against the record](/insights/data-center-misconceptions/). ## Key recap - The cloud runs in data centers. The difference between the models is who owns the building and the servers. - On-premises means you own both. Colocation means you own the servers and rent the space. Cloud means you rent the computing. - Security is shared in colocation and cloud, and the customer keeps duties such as patches, access, and data protection. - Colocation and cloud lower first cost, but 17 of 24 federal agencies reported that cloud costs needed new management. - Many organizations use a hybrid, keeping critical systems on premises and moving other work to the cloud. ## Questions ### Is the cloud cheaper than an on-premises server room? Sometimes. The Department of Energy guide states that cloud and colocation have a lower first cost and may have a lower operating cost. Federal agencies still report that cloud costs need active control. ### Is the cloud more secure than my own server room? It depends on the setup. A large provider can employ specialized security staff, but the customer keeps duties for data and access. A shared platform also carries risks that a private room does not. ### What is the difference between colocation and cloud? In colocation, you own your servers and rent space, power, and cooling in someone else's building. In the cloud, the provider owns the servers and you rent computing from them. ## References Primary sources cited on this page, in APA style. - International Energy Agency. (2025, April 10). *Energy and AI*. [https://iea.blob.core.windows.net/assets/de9dea13-b07d-42c5-a398-d1b3ae17d866/EnergyandAI.pdf](https://iea.blob.core.windows.net/assets/de9dea13-b07d-42c5-a398-d1b3ae17d866/EnergyandAI.pdf) - Jansen, W., & Grance, T. (2011, December). *Guidelines on security and privacy in public cloud computing* (NIST Special Publication 800-144). National Institute of Standards and Technology. [https://doi.org/10.6028/NIST.SP.800-144](https://doi.org/10.6028/NIST.SP.800-144) - Mell, P., & Grance, T. (2011, September). *The NIST definition of cloud computing* (NIST Special Publication 800-145). National Institute of Standards and Technology. [https://doi.org/10.6028/NIST.SP.800-145](https://doi.org/10.6028/NIST.SP.800-145) - North Carolina Department of Information Technology. (n.d.). *2026-2027 hosting rates*. Retrieved October 2, 2026, from [https://it.nc.gov/services/billing-rates/current-service-rates/2026-2027-hosting-rates](https://it.nc.gov/services/billing-rates/current-service-rates/2026-2027-hosting-rates) - North Carolina Department of Information Technology. (n.d.). *Data center co-location services*. NCDIT IT Services. Retrieved October 2, 2026, from [https://itservices.nc.gov/services/hosting/data-center-co-location-services](https://itservices.nc.gov/services/hosting/data-center-co-location-services) - U.S. Government Accountability Office. (2026, June 23). *Cloud computing: Federal government needs to address procurement challenges* (GAO-26-107530). [https://files.gao.gov/reports/GAO-26-107530/index.html](https://files.gao.gov/reports/GAO-26-107530/index.html) - Van Geet, O., & Sickinger, D. (2024, July). *Best practices guide for energy-efficient data center design* (DOE/GO-102024-6283). U.S. Department of Energy, Federal Energy Management Program. [https://www.energy.gov/sites/default/files/2024-07/best-practice-guide-data-center-design.pdf](https://www.energy.gov/sites/default/files/2024-07/best-practice-guide-data-center-design.pdf) ## Data-center fundamentals - [What is a data center?](/insights/what-is-a-data-center/) - [What is a hyperscale data center?](/insights/what-is-a-hyperscale-data-center/) - [Types of data centers and the land each one needs](/insights/types-of-data-centers/) - [What is a colocation data center?](/insights/colocation-data-center/) - [What is an edge data center?](/insights/edge-data-center/) - [What is an AI data center?](/insights/ai-data-center/) - [Data center campus: what it is and what it needs from land](/insights/data-center-campus/) - [Data center vs warehouse: how the site needs differ](/insights/data-center-vs-warehouse/) - [What is PUE (power usage effectiveness)?](/insights/what-is-pue/) - [What are data centers used for?](/insights/what-are-data-centers-used-for/) - [Why do we need data centers?](/insights/why-do-we-need-data-centers/) - [When was the first data center built? A short history](/insights/history-of-data-centers/) - [What does a data center look like?](/insights/what-does-a-data-center-look-like/) - [How does a data center work?](/insights/how-does-a-data-center-work/) - [Who owns data centers?](/insights/who-owns-data-centers/) Send the requirements. We reply with how we would run the search. [Tell us what you are looking for](/contact/) ## Tell us what the project needs Load, acreage, counties, and timeline. We reply with how we would run the search and where we would start. [Start a site search](/contact/) [Try the calculators](/tools/) Transactions are handled through a licensed North Carolina real estate brokerage.