The Basics

The main difference between a cloud and a data center is that a cloud is an off-premise form of computing that stores data on the Internet, whereas a data center refers to on-premise hardware that stores data within an organization's local network. While cloud services are outsourced to third-party cloud providers who perform all updates and ongoing maintenance, data centers are typically run by an in-house IT department.

Although both types of computing systems can store data, as a physical unit, only a data center can store servers and other equipment. As such, cloud service providers use data centers to house cloud services and cloud-based resources. For cloud-hosting purposes, vendors also often own multiple data centers in several geographic locations to safeguard data availability during outages and other data center failures.

For companies considering whether or not to use cloud computing versus staying with or building their own data center, there are three primary factors affecting their decision: their business needs, data security and system costs.

Does your business need a cloud or a data center?

A data center is ideal for companies that need a customized, dedicated system that gives them full control over their data and equipment. Since only the company will be using the infrastructure's power, a data center is also more suitable for organizations that run many different types of applications and complex workloads. A data center, however, has limited capacity -- once you build a data center, you will not be able to change the amount of storage and workload it can withstand without purchasing and installing more equipment.

On the other hand, a cloud system is scalable to your business needs. It has potentially unlimited capacity, based on your vendor's offerings and service plans. One disadvantage of the cloud is that you will not have as much control as you would a data center, since a third party is managing the system. Furthermore, unless you have a private cloud within the company network, you will be sharing resources with other cloud users in your provider's public cloud.

Cloud security vs. data center security

Because the cloud is an external form of computing, it may be less secure or take more work to secure than a data center. Unlike data centers, where you are responsible for your own security, you will be entrusting your data to a third-party provider that may or may not have the most up-to-date security certifications. If your cloud resides on several data centers in different locations, each location will also need the proper security measures.

A data center is also physically connected to a local network, which makes it easier to ensure that only those with company-approved credentials and equipment can access stored apps and information. The cloud, however, is accessible by anyone with the proper credentials anywhere that there is an Internet connection. This opens a wide array of entry and exit points, all of which need to be protected to make sure that data transmitted to and from these points are secure.

Cloud vs. data center costs

For most small businesses, the cloud is a more cost-effective option than a data center. Because you will be building an infrastructure from the ground up and will be responsible for your own maintenance and administration, a data center takes much longer to get started and can cost businesses $10 million to $25 million per year to operate.

Unlike a data center, cloud computing does not require time or capital to get up and running. Instead, most cloud providers offer a range of affordable subscription plans to meet your budget and scale the service to your performance needs. Whereas data centers take time to build, depending on your provider, cloud services are available for use almost immediately after registration.