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Some might use the phrases "private cloud" and "colocation" interchangeably, but they actually refer to two completely different things. The main distinction between the private cloud vs. colocation lies with functionality: The private cloud enables designated users within an organization to act as tenant administrators, whereas a colocation facility operates as a data center that rents floor space to an organization that has outgrown its own data center.
Simply put, an organization can host a private cloud within a colocation facility, but the simple act of using a colocation facility is not the same thing as building a private cloud. The environment's functionality determines whether that environment qualifies as a private cloud or colocation, not the hardware's geographic location.
Understand the public cloud
To understand the differences between private clouds and colocation facilities, think about how you define the public cloud. The public cloud has gained rapid popularity over the last several years and has become almost synonymous with IT outsourcing. But the public cloud means more than simply the leasing of IT resources in a remote data center.
The main advantage of a public cloud is that the cloud provider makes consumption-based pricing available for managed services. Although these managed services run in the cloud provider's data center rather than in an organization's own data center, the remote location alone does not define the provider as a public cloud.
The location of the cloud provider's data center is irrelevant. The thing that really makes a company a public cloud provider is whether they provide managed services to multiple tenants.
The basics of a colocation facility
Unlike a public cloud provider, a colocation facility does not provide managed services. Instead, a colocation facility is simply a shared data center that provides its customers with floor space, power, cooling and connectivity. Some colocation facilities also provide physical security.
The organization that leases space within the colocation facility provides its own racks, servers and other data center equipment. Since the organization owns the hardware that it uses, it can use that hardware in any way that it requires.
Private cloud vs. colocation
Private clouds differ considerably from both public clouds and colocation facilities, but they do have certain similarities as well.
Much like public clouds, most private clouds work as multi-tenant clouds that an organization uses to host managed services. Private clouds can also isolate tenants from one another using software-defined boundaries. A colocation facility is also a multi-tenant environment and operates a remote data center. However, the similarities end there.
Although public cloud providers make their services available to the general public, cloud providers design private clouds to service internal tenants. For example, each department within a large company might act as a tenant and can create VMs based on templates provided by the organization's IT department.
Some might assume that organizations host private clouds within their own data centers, and in many cases, organizations do. However, an organization does not necessarily have to host a private cloud on premises to possess a private cloud.