With so many options for storing and managing your mission critical applications and data, how do you know what will work best for your business? For companies considering an outsourced solution, understanding the difference between the cloud, managed hosting and colocation will make the decision process a little easier. Here’s a breakdown of each option, who’s buying and my take on where it’s going.

Cloud Hosting

Cloud hosting includes facilities, network, storage and on-demand, multitenant elastic computing capacity, which can be either dedicated or virtualized. “Elastic” means customers must be able to scale both up and down on demand, without a contractual commitment to capacity. Managed and professional services may be optionally included.

Who’s Buying?
Startups and small businesses use the cloud to host applications. They are focused on optimizing and building business processes rather than IT infrastructure.

Enterprises use the cloud when they are told to cut costs, or when they are led by a true IT visionary. However, they will never outsource their entire IT operation to the cloud.

My Take
As I see it, the cloud has value, but the enterprise will embrace it only in parts or build their own.

Managed Hosting

Managed hosting offers an alternative to hosting your infrastructure on hardware in the office closet or “IT room.” Closets and small rooms don’t provide adequate cooling and power to efficiently run a company’s servers – not to mention fail over and redundancy for unplanned power outages and natural disasters.

SMBs can now host their infrastructure off-site and without the CAPEX of investing in server hardware. Companies like Rackspace, HostGator and Godaddy excel in this arena and sell hundreds (if not thousands) of these virtual, dedicated or sliced servers every month.

Who’s Buying?
Managed hosting works well for established small and mid-size companies that feel their infrastructure requires better business continuity and performance and/or their applications need dedicated servers. However, these companies aren’t quite ready to outlay the capital to buy the hardware, budget for power and cooling, and figure out where to host the equipment.

Also, companies that rely heavily on availability benefit from managed hosting, like e-commerce businesses or a new (insert your definition here) Web 2.0 company.

My Take
You still are not seeing the enterprise clients moving to managed hosting, typically because they have too much invested in their own hardware and people.

Colocation (Outsourced Data Centers)

Colocation providers offer the latest in data center design, power, cooling, connectivity and security for a consolidated monthly rate. Companies choose colocation because it allows them to use their own hardware, but eliminate the CAPEX of constructing or expanding their own data center.

Who’s Buying?
Colocation works best for mid-size companies and the enterprise. They have invested in all the hardware and expensive ERP software and have too many people to not use them. Many IT service companies and hosting providers also rely on third party data centers to host the infrastructure of their customers, while ensuring reliability and scalability.

So why do the enterprise clients tend to outsource more and use colocation?
• Many times, their own data centers have no more power capabilities, and the CFO said he wouldn’t give them a blank check to redesign and retrofit their own data center.
• They need secondary sites to have a failover in case of an emergency, and why build two data centers?
• IT leaders have gotten smart. They can sign a three-year lease with a third party provider and know they are in good hands with experts that concentrate on the utility service that data centers offer.
• Enterprises outsource because data center providers can do it better, faster and cheaper. Companies eliminate spending millions on the capital investment of data center design and receive the latest in power, cooling, connectivity and 100% SLA guarantees.