Cloud bills grow with your business. That is the pitch, and also the problem. Every new user, every new dataset, every backup job adds to next month's invoice. Colo works the other way. You pay for a cabinet, some power, and a cross connect. The bill is the same in month 12 as it was in month 1.
So when does one beat the other? Here is the math for 2026.
The fixed part of a colo bill
A single cabinet in a Tier 3 facility runs about $850 to $1,400 a month in most U.S. metros. That includes 4 to 6 kW of power. In Chicago or Dallas, you can find $795. In New York or the Bay Area, expect $1,600 and up.
Add a cross connect to your carrier of choice for $250 to $400 a month. Add a 1 Gbps IP transit commit for around $600. Now you are at roughly $1,700 to $2,400 all in for a cabinet with real bandwidth.
That is your fixed cost. It does not move if your app gets busy on Tuesday.
The variable part of a cloud bill
Take a mid-size SaaS running on AWS. A steady workload of 20 vCPUs, 80 GB of RAM, 4 TB of block storage, and 8 TB of egress a month.
Compute on m6i instances: about $1,850 a month with a 1 year reserved commit. Storage on gp3: about $340. Egress at $0.09 a GB: about $720. Load balancer, NAT gateway, CloudWatch, and the other small line items: another $400 or so.
Total: roughly $3,300 a month. And that is the floor. Every new customer pushes it up.
Now put the same workload in a colo cabinet. Two used Dell R660 servers with 32 cores and 256 GB each, bought refurbished, run about $8,000 total. Amortize over 4 years and that is $167 a month. Add the $2,000 cabinet from above. You are at $2,167 a month, and egress does not scale with usage. It scales with your IP transit commit, which you set once.
Break even here is under a year. After that, colo saves about $1,100 a month.
Where cloud still wins
This math flips for spiky workloads. If your traffic doubles for one week a quarter and sits idle the rest of the time, you are paying for capacity you do not use in a colo. Cloud lets you rent that peak and give it back.
Cloud also wins when you have no ops team. Somebody has to rack the servers, swap the failed drive at 2 a.m., and keep the firmware current. If that person does not exist on your payroll, the $1,100 you save on hardware gets eaten by a managed services contract.
And if your app is built on 40 AWS services, moving is not a hardware exercise. It is a rewrite.
The workloads that move first
The ones that pencil out for colo in 2026 are the boring ones.
Big databases with steady load. File storage that just sits there. Backup and archive. Video transcoding. Anything with predictable CPU and heavy storage. Anything where egress is the biggest line on the bill.
The ones that should stay in cloud are the bursty ones. Ad tech. Retail during holidays. AI inference where demand swings by 10x in a day. Anything you built last month and might rewrite next month.
What to check before you move
Pull your last three cloud bills. Add up compute, storage, and egress. If egress alone is more than 20 percent of the total, colo probably wins. If your compute is 90 percent reserved instances that never get returned, colo probably wins. If you are paying for idle capacity to handle a peak that happens twice a year, stay in cloud.
Then get two colo quotes in your metro. Prices vary by 30 percent building to building, even on the same street. We see it every week.
Want a second set of eyes on the numbers? Upload your cloud bill and a colo quote and we will show you the break-even month.