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    Colocation, The Cloud And Offshoring: A Guide For Small Businesses

    The hype and hysteria surrounding the advent of cloud computing in recent years have made it impossible to ignore. Is it the future of computing or just another fad, and how does it relate to the equally impenetrable sounding concepts of collocation and offshoring?

    Cloud Computing

    The use of computing resources (both the hardware and software) that are delivered as a service over a network (normally the Internet). The name derives from the use of a cloud-shaped symbol in system diagrams. Cloud computing entrusts remote services with a user’s data, software, and computation. Read about the benefits an enterprise can have by utilizing cloud services.

    This means, in effect, that software and databases are stored remotely and accessed via the internet. The service providers manage the services, usually for a fee. It has been claimed that this can reduce the cost to the user by outsourcing their hardware and software maintenance and support and that software updates are quick and easy, being provided the source. Other benefits include access to your data from anywhere, using low powered devices, including some mobile telephones. Also proponents claim that the initial start up costs for a business would be lower without the need for investing in costly hardware and software; economies of scale that is.

    Of course, there are drawbacks, for example, all the users’ data is stored externally on another company’s server. This raises questions of security, who else has access to this data? Other things that need to be questioned are the level of maintenance of the hardware, what happens to your data if their system fails. Negatives to bear in mind have to be security and cost.


    Colocation is the act of placing multiple entities within a single location. This can mean, for example, off-site data storage in a data center. This can be important for businesses since the loss of data can be crucial for companies of any size. An unexpected loss in data can result from fires, earthquakes, floods, intentional harm, or any sort of natural disaster and store your data externally can prevent this.

    In addition to data storage, Colocation does include several businesses working out of a single site. This could be an independent retail outlet working out of a shopping center, allowing for greater customer access and lowered costs through economy of scale.  Colocation would also include start-up businesses operating out of an enterprise park or similar.

    The benefits of Colocation of a potential user will be security (either data or physical), the opportunities for networking and increasing business through extra foot traffic.  Drawbacks could include cost issues and longer contracts for space/service than may be practical.


    Offshoring, usually confused with outsourcing, is the relocation of a business process from one country to another, usually an operational process, such as manufacturing, or support processes, such as accounting. A prime example of this has been call-centres being relocated overseas. But it can also mean manufacturing services, either full or partial or even financial and insurance requirements.

    There are advantages to Offshoring in that costs are greatly reduced, increasing corporate profitability as well as providing jobs in countries with high unemployment, for example, India or China, but it means an increase in unemployment in the original country.

    Drawbacks include massively extended supply-lines, increasing logistical problems, fluctuations in currency would mean costs are not stable making financial planning more difficult, but the biggest, in my view, is the Customer Service aspect.  We have all had problems with overseas based call centres and the frustrations that engenders.




    All of these practices, Cloud Computing, Colocation and Offshoring have benefits and drawbacks and it can only be decided whether the process would be useful based on a strong business and cost model for each individual operation.

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    Ecbert Malcom
    Ecbert Malcom
    I am a resident author at Broodle.
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