Data Center Types {An In-Depth Comparison}

Every data center is purpose-built to match the specific requirements of the organization it serves. As a result, no two facilities are the same. Each data center has unique equipment, design choices, configurations, and operational approaches.

Despite these differences, every data center falls into one of seven broad categories based on its role in the tech ecosystem. Understanding these categories is vital if you plan to get into business with a third-party data center or build your organization’s own infrastructure.

This article explores different data center types and their distinct functions in the IT landscape. Jump in to learn about each type’s unique features and see whether some of these facilities have a place in your IT strategy.

Data Center Types: Overview

The table below provides a high-level comparison of the seven main data center types:

Data Center Type	Main Selling Point	Biggest Downside	Ongoing Costs	Scalability	Ideal User
Enterprise	Complete control over the data center.	High setup and maintenance costs.	Regular upgrades, power, cooling, and management costs.	Moderate (expansion requires significant investment and physical space).	Companies that need total control over the infrastructure.
Colocation	Access to high-quality infrastructure that requires no in-house maintenance.	Limited control over the infrastructure.	Monthly service fees, plus the occasional cost of upgrading equipment.	Moderate (limited to available rack space).	Companies that own servers and need high-quality dedicated space to host them.
Hyperscale	Massive scalability and resource optimization.	Enormous upfront and ongoing costs.	Huge costs due to constant power, cooling, and personnel needs.	Top-tier (scales seamlessly with business needs).	Major cloud providers and enterprises that require massive scale capabilities.
Edge	Reduced latency for local processing.	Limited scalability and geographic limitations.	Moderate costs on power and cooling, minimal on-site maintenance.	Low to moderate (limited by geographic factors and network capacity).	Organizations with latency-sensitive applications and a geographically spread-out user base.
Cloud	Flexible, on-demand IT resources.	Complete dependency on the third-party provider.	Clients only pay for the resources they actively use.	High (easily scalable with a pay-as-you-go model).	Businesses with projects that benefit from flexible, on-demand IT resources.
Micro	Cost-effective for small-scale processing in the immediate proximity of the data origin.	Limited capacity and scalability.	Basic maintenance and remote management costs.	Very low (restricted by local capacity and component size).	Businesses in need of small-scale localized processing.
Managed Services	Outsourced infrastructure management.	Limited hardware customization.	Monthly service fees for support and maintenance.	Moderate (scalable within the limits of the provider’s infrastructure).	Companies that want fully managed IT with minimal in-house maintenance.

Data Center Types: In-Depth Comparison

Below is an in-depth look at the different data center types you can use to host applications and workloads.

Enterprise Data Centers

An enterprise data center is a facility owned, operated, and maintained by a single company. These facilities are designed top-to-bottom to support the specific IT needs of the owner organization.

While initial setup and ongoing maintenance costs are high, enterprise data centers enable businesses to be in total control of their IT environment. Here are the main selling points of enterprise data centers:

• Control over data security. Enterprise data centers allow companies to set custom security policies and apply optimal precautions to protect against data breaches and leaks. High levels of data privacy make these facilities the go-to choice for organizations that handle sensitive data (financial institutions, healthcare providers, government agencies, etc.).
• Infrastructure customization. Enterprise data centers enable complete customization of server configurations, networking equipment, power design, and cooling systems. Owners get an opportunity to create a hosting environment ideal for their mission-critical workloads.
• Direct equipment oversight. Organizations get hands-on oversight of physical hardware, which allows them to optimize performance and address issues without relying on third-party providers.
• Compliance with regulations and standards. Enterprise data centers allow businesses to design facilities that reliably align with relevant compliance requirements (e.g., HIPAA for healthcare providers or GDPR for companies that handle private data of EU residents).

The main downside of enterprise data centers is the high cost. High initial and operational expenses for equipment, maintenance, and staffing are common barriers for adopters. These facilities also often suffer from limited scalability as scaling up requires advanced planning and significant physical space.

Enterprise data centers are ideal for organizations with the resources and a genuine need for an on-site dedicated infrastructure. Companies that set up such facilities prioritize maximum control over their data, require on-prem computing for regulatory or security reasons, or simply cannot find a third-party provider that meets all their IT requirements.

Colocation Data Centers

A colocation data center is a facility that enables businesses to lease physical space to house their own IT infrastructure. Colocation clients bring and manage their servers and networking equipment, while the colocation provider supplies power, cooling, and physical security.

Colocation costs depend primarily on how much space you rent (rack, cage, suite, room, etc.) and your power consumption. Companies can choose between wholesale and retail colocation:

• Wholesale colocation involves leasing large, dedicated spaces (often entire suites or floors) to clients with a substantial IT footprint.
• Retail colocation involves renting smaller spaces (individual racks or cages) and is ideal for small to medium-sized businesses.

Here are the main benefits of colocation data centers:

• No investments in a data center. By leasing space, companies avoid the massive upfront capital expenditure of building and maintaining a data center.
• High-performance connectivity. Colocation facilities offer advanced connectivity, including access to major internet exchanges, low-latency networks, and multiple carriers.
• Top-tier facilities. All top colocation data centers have redundant power, network connections, and cooling to ensure high availability and uptime. Such features make colocation attractive to companies with mission-critical workloads.
• Outsourced security. Colocation providers offer high-end data center security measures to protect tenant equipment and data.

The main issue with colocation data centers is the high ongoing cost. While companies save on initial infrastructure investments, leasing becomes a considerable OpEx cost over time. Colocation also offers limited customization compared to a custom-built enterprise data center.

Colocation data centers are ideal for companies that need a reliable, secure environment for their privately owned IT infrastructure. These facilities are also the go-to choice for companies that do not have the capital to build or are unwilling to invest in a dedicated data center.

Hyperscale Data Centers

A hyperscale data center is a massive facility that supports the world’s most extensive data storage and processing needs. These facilities deliver highly scalable high-performance computing (HPC) power for a large user base.

Hyperscale data centers are characterized by their sheer scale and ability to support thousands of servers across multiple floors. These data centers demand a high capital investment to build, but they operate at a lower cost per unit due to economies of scale.

Here are the main advantages of hyperscale data centers:

• High scalability. Hyperscale data centers scale horizontally (i.e., by deploying new same-size servers to handle an increased load demand). This scaling strategy enables large enterprises to seamlessly handle increasing, fluctuating, and unpredictable workloads.
• Maximum uptime. Hyperscale data centers are built with top-tier redundancies, including backup power supplies, failover systems, and multiple network connections. It is common for these facilities never to experience any substantial downtime.
• Advanced automation. Hyperscale facilities rely heavily on automation for operations. High levels of automation minimize the chance of human error and reduce operational expenses.

The biggest drawback of hyperscale data centers is that companies need a huge budget for these facilities. Building a hyperscale data center requires a massive upfront investment in real estate and infrastructure. The sheer size and complexity of hyperscale facilities also means they are challenging to maintain and operate effectively.

Hyperscale data centers are ideal for large enterprises with extensive data processing needs, such as cloud service providers (CSPs) and social media companies. These organizations need an infrastructure to support hundreds of thousands of servers, so their only realistic option is to build a custom hyperscale data center.

Edge Data Centers

An edge data center is a facility located close to end-users to minimize latency. These facilities are designed to process and store data locally to improve performance for the nearby customer base.

Edge data centers are valuable for use cases that require real-time data processing (e.g., IoT devices, self-driving cars, streaming services). By reducing the physical distance data must travel, edge data centers improve response times and performance.

Here are the main selling points of edge data centers:

• Reduced latency. These data centers significantly decrease latency by positioning edge servers closer to end-users. This feature is critical for real-time applications like VR, autonomous driving, and competitive gaming.
• Local data processing. Edge data centers process data locally, which reduces the load on central data centers and the amount of data transmitted across networks. Less transmitted data also means fewer opportunities for a threat actor to intercept traffic.
• Bandwidth reduction. Edge processing significantly reduces overall network bandwidth usage. The facility only transmits essential data to the central data center.
• Backup in case of network outages. Edge data centers can operate independently from the primary data center in case of connectivity issues. This redundancy helps maintain business continuity in case of network disruptions or outages.

Although edge data centers require a smaller initial investment than larger facilities, they are still costly to establish and maintain due to their dispersed nature. Edge data centers also lack the compute power for large-scale data analytics or long-term storage. Adopters must pair these data centers with a more powerful facility to handle tasks beyond real-time data processing.

Edge data centers are best suited for companies with latency-sensitive applications and a large, geographically dispersed user base. These facilities also make sense for companies aiming to reduce bandwidth costs by processing data closer to its origin.

Cloud Data Centers

A cloud data center is a facility designed to virtualize storage, compute, and networking resources and provide them as services over the internet. These data centers allow businesses to access and manage IT resources remotely, so users can scale up or down based on current demand without investing in physical infrastructure.

Cloud data centers have extensive hardware and virtualization technologies to support flexible, on-demand resource allocation. They rely on advanced resource allocation techniques (e.g., load balancing and autoscaling) to optimize performance based on real-time demand.

Here are the main benefits of cloud data centers:

• Scalability and flexibility. Cloud data centers allow businesses to quickly scale resources up or down according to their current demand. Such a capability is ideal for companies with fluctuating cloud workloads.
• Pay-as-you-go pricing. With the pay-as-you-go model, companies avoid upfront capital expenses and pay only for the resources they actively consume. This model is ideal for users with limited budgets or temporary computing needs.
• No infrastructure management. When you sign up for cloud data center services, the provider handles all maintenance tasks (e.g., updates, security, hardware replacements, repairs).
• Interoperability. Most cloud data centers support interoperability with on-prem or hybrid cloud models, which further boosts flexibility.

The most common concerns of cloud data centers are security-related, as these facilities enable multiple tenants to share hardware. Cloud environments also offer less customization than privately managed infrastructure. Businesses with highly specific IT requirements may find the cloud too restrictive.

Cloud data centers are ideal for companies seeking flexible and cost-effective access to IT resources without having to invest in any infrastructure. Small and medium-sized businesses with variable workloads benefit the most from the cloud’s pricing models and ease of scaling.

Micro Data Centers

A micro data center is a small, self-contained facility that serves very localized, specific needs. Micro facilities are primarily used for small-scale edge applications that require latency-free data processing.

While they share a similar purpose, edge and micro facilities are not the same type of data center. Edge data centers support larger-scale regional needs, whereas micro data centers focus on hyper-localized tasks that require minimal infrastructure, such as:

• Processing data from IoT sensors.
• Supporting local surveillance systems.
• Enabling quick data analysis for single-site applications.

Here are the main selling points of micro data centers:

• Low latency. Micro data centers enable data processing near the source. This setup eliminates latency and enhances performance for applications that require real-time processing.
• Compact design. The compact design of micro facilities allows for deployment in space-constrained areas where it’s impossible to deploy any other type of data center.
• Low initial investment. The smaller size and contained setup make micro data centers a cost-effective choice for businesses that need limited computing power.
• Low ongoing costs. Micro data centers are more energy-efficient than other data center types due to their small footprint and limited equipment.
• Remote management. Most adopters manage micro data centers remotely without on-site personnel. This characteristic makes micro facilities useful for installations in remote locations.

The main con of micro data centers is that they have limited storage and processing power compared to other data center types. Due to their compact design, micro facilities have limited capacity and do not handle extensive or high-volume processing demands.

Micro data centers are the go-to choice for businesses that require localized computing in immediate proximity to the data source. Organizations with distributed field locations also benefit from micro data centers as they enable on-site computing without significant investments.

Managed Service Data Centers

A managed services data center enables clients to outsource day-to-day IT management tasks (disaster recovery, data backup, server management, cyber security services, etc.) to a third-party provider. Users rent a server from these facilities and pick what additional services they wish the provider’s team to perform on a regular basis.

Managed services data centers operate under a subscription-based pricing model. Costs vary based on chosen services, making these facilities a flexible option for companies of different sizes. Here are the main benefits of signing up with a managed services data center:

• Access to specialized expertise. These data centers provide access to skilled IT professionals who are difficult to recruit and retain.
• Flexibility. These data centers offer scalable solutions that can grow with the business. Clients can adjust IT resources and services as their needs change over time.
• Predictable monthly pricing. The subscription model offers predictable costs and helps businesses manage budgets more effectively.
• Reduced IT management overhead. Outsourcing daily infrastructure tasks frees up internal resources. Teams get to focus on strategic initiatives and core business goals rather than routine maintenance.

As for the downsides, the most significant issue of managed services data centers is that any changes to the infrastructure must go through the service provider. This process can create delays for urgent needs, which can be a massive issue in some scenarios.

Additionally, most of these data centers offer only standardized hardware their in-house teams are familiar with managing. This limitation is often restrictive for companies with complex infrastructure requirements.

Managed services data centers are ideal for small to medium-sized businesses without large in-house IT teams. Businesses experiencing rapid growth also benefit from the flexibility of these data centers.

Which Data Center Type Is Right for Your Business?

Understanding the different data center types is essential for businesses looking to host their applications at a third-party facility. Each type plays a distinct role in the tech ecosystem and addresses different business requirements. By understanding what each type offers, businesses can choose facilities that do not hinder performance, hurt the bottom line, or cause unnecessary operational headaches.