Colocation and Cloud are two different aspects of web hosting services. There are several comparisons between both Colocation web hosting and Cloud web hosting. The basic point is which service is cost- effective while in comparison  with each other. When putting this point that is colocation is cost-effective when compared to cloud? Then there were much contradictory statements which came out : One of the statement was “ Users would have to add their internal costs to begin making the expenditure comparison – something that few enterprises are able to accurately break out from their overall IT expenditure. Beyond this fuzzy cost versus price issue, there is no evidence of operating system, hypervisor virtualization, instance monitoring, images, billing, load balancing, storage, IP addresses (each AWS instance has its own public IP address), security and management console costs thrown on top of the colocation pricing if it were to compare with an IaaS that encompasses all of these components.”

According to a comparison using Amazon Web Services pricing as a benchmark. They posted a spreadsheet outlining the analysis, which finds that an equivalent workload would cost $118,248 at Amazon and $70,079 in a colocation facility. Some commenters have critiqued their data, but his downloadable spreadsheet allows users to plug in different variables, providing a tool to evaluate the economics of different approaches and workloads.

The basic comparison comes with the leasing services and buying it totally. Colocation hosting solutions gives you the option of leasing the services from a secured and well monitored infrastructure whereas Cloud allows you to purchase the services as per the requirement and need one has. The difference is the duty cycle. If you are running infrastructure with a duty cycle of 100%, it may make sense to run in-house.” A duty cycle refers to the percentage of time a hardware asset is in use. Getting peak efficiency out of hardware is a key focus for Google, but the colo math won’t work as well for companies that get less mileage out of their servers. But cloud platforms will be more attractive to companies with lower hardware utilization.

While concluding we can say that buying and leasing/renting the services are two different part which makes any financial decision vital. Here the difference between the colocation web services and cloud hosting services is incomparable as far as the services are concerned. Thus we can say that the cost-effectiveness can be decided upon the fact on the demand and requirements of the services. A subtle conclusion of this type of analysis is that duty cycle optimization for a given application should be a key criterion for cost reduction. And, somewhat conversely, if an application already has a high duty cycle then the opportunities for cost reduction through cloud-based resources will be limited at best. Or, more simply: if you already run highly-utilized servers then you might do better with collocation.