What is the difference between physical and virtual data centers?

A physical data center is a facility that centralizes an organization’s shared IT operations and equipment for computing, networking, and data storage. A virtual data center utilizes virtualization and cloud computing to enable data center capabilities without the physical infrastructure. The goal of this article is to compare and contrast physical and virtual data centers in terms of ownership, location, hardware, scaling, costs, performance, and security.

Definition of Physical Data Centers

A physical data center is a dedicated, physical facility used to house computer systems, servers, storage systems, networking equipment, and other IT infrastructure. Physical data centers contain racks upon racks of servers and hardware, cooling systems, power backup systems, and various levels of physical and cyber security (source).

The hardware within a physical data center includes servers, storage arrays, networking switches, routers, load balancers, firewalls, and more. Physical data centers are designed for high availability with redundant power supplies, internet connectivity, cooling systems, and security measures.

Physical data centers enable dedicated, secure space for organizations to locate business-critical IT infrastructure, servers, and applications. They provide hardened facilities with controlled access, extensive physical security, and infrastructure monitoring. Physical data centers allow organizations to fully own and manage their infrastructure.

Definition of Virtual Data Centers

A virtual data center (VDC) is a cloud-based infrastructure that provides users with on-demand access to a shared pool of configurable computing resources like networks, servers, storage, applications, and services. These resources are hosted on physical hardware in one or more data centers owned by a cloud provider. The key difference from a traditional, physical data center is that resources are virtualized and allocated dynamically based on the needs of users [1].

In a VDC model, organizations don’t have to purchase, configure and maintain physical IT infrastructure. Instead, they can provision virtual resources as needed via a self-service portal. The cloud provider owns and operates the physical infrastructure and facilities. Virtual resources can be scaled up or down on-demand to meet changing requirements. VDCs are commonly deployed using private clouds dedicated to one organization or public clouds shared by many customers [2].

The virtualization and automation capabilities of VDCs allow IT teams to be more agile and responsive to business needs. Resources can be deployed rapidly without long procurement and configuration processes. Utilization is often improved since virtual resources can be allocated only when needed. VDCs running on public clouds also allow almost unlimited capacity when requirements spike.

Ownership and Location

A key difference between physical and virtual data centers is in how they are owned and where they are located. Physical data centers are owned outright by the company and located on the company’s premises. The company is responsible for building and maintaining the facility. Virtual data centers, on the other hand, are leased from a third-party provider and hosted remotely in the provider’s facility. Rather than owning the infrastructure, companies rent compute, storage, and networking resources from the provider to create a virtual data center.

With a physical data center, the company has full control over the facility location, layout, security, and hardware used. Since virtual data centers are hosted remotely, companies have less control over the physical infrastructure. However, virtual data centers allow companies to quickly scale capacity and resources without large upfront infrastructure investments.

According to Panel: How is the sustainability agenda impacting …, ownership models may shift more towards virtual data centers as companies aim to meet sustainability goals by 2030. Physical data centers require significant capital expenditures and have higher fixed maintenance costs.


One of the biggest differences between physical and virtual data centers is the hardware. A physical data center requires purchasing, installing, configuring, and maintaining all of the physical hardware such as servers, storage, networking equipment, racks, cooling systems, and power systems. This hardware is dedicated solely to that particular data center. The organization has full ownership and control of the hardware lifecycle.

In contrast, with a virtual data center the hardware is owned and maintained by the cloud provider. The virtual data center utilizes the shared compute, storage, networking, and other resources of the cloud provider. Rather than purchasing physical servers, the virtual resources like virtual machines, object storage, load balancers, etc. are provisioned as needed (Park Place Technologies, 2022). The cloud provider is responsible for managing, maintaining, and upgrading the underlying physical hardware. This removes the hardware management burden from the virtual data center owner.

The hardware flexibility and utilizing shared infrastructure is a key benefit of the virtual model. Computing resources can be spun up or down on demand to meet changing needs without having to purchase new physical hardware. The organization only pays for the resources they use.


A key difference between physical and virtual data centers is how they handle scaling. Physical data centers require the installation of new hardware in order to scale up capacity and performance. This involves purchasing new servers, storage devices, networking equipment, etc. and physically installing them in the data center facility (Belden.com, 2017). The process can be time-consuming and disruptive. Virtual data centers, on the other hand, can scale via software. Resources like CPU, memory, and storage can be added or removed from virtual machines on-demand. This provides much more flexibility and agility when workloads change (LinkedIn.com, 2023).

Hyperscale cloud providers like Amazon Web Services and Microsoft Azure use virtualized infrastructure to offer quick and easy scaling capabilities to customers. With physical data centers, companies need to predict future capacity needs upfront and install equipment ahead of time. With virtual resources, capacity can be adjusted dynamically as needs change.


There is a significant difference in costs between physical and virtual data centers. Physical data centers require major upfront investments in land, construction, power and cooling infrastructure, networking equipment, servers, and technical staff. These costs can easily run into the millions of dollars before the data center is even operational. In contrast, virtual data centers have much lower startup costs since no physical building is required. Services can be spun up on demand through cloud providers like AWS, Google Cloud, or Azure. This “pay as you go” model allows businesses to pay only for the compute resources they actually use.

Ongoing costs also tend to be lower with virtual data centers. While physical data centers require ongoing investments in energy, maintenance, upgrades, and staffing, virtual resources can be scaled up or down to match demand. Businesses save on costs like cooling, real estate, and excess capacity. Public cloud providers also offer options like reserved instances and spot instances to reduce computing costs. According to one analysis, public cloud infrastructure is up to 77% less expensive than on-premises infrastructure over a 3-year period. (https://www.zdnet.com/article/the-data-center-cost-conundrum/)

However, some larger enterprises find the opposite when analyzing total cost of ownership over extended time periods. The pay-per-use billing of cloud providers can ultimately exceed the fixed costs of owning and operating their own data centers after 5-7 years. Each business should carefully evaluate their unique needs when comparing data center costs.


A key difference between physical and virtual data centers is performance guarantees and control. Physical data centers offer guaranteed performance because organizations have full ownership and control over the dedicated hardware resources. There are no other tenants competing for resources, so workloads get consistent and predictable performance (De Angelis, 2015).

In contrast, performance in virtual data centers is dependent on shared hardware resources. The underlying physical infrastructure is shared across multiple tenants, meaning performance can be impacted by other organizations’ fluctuating workloads. This makes performance less consistent and predictable compared to physical data centers (De Angelis, 2015).

Overall, physical data centers offer guaranteed performance and control, while virtual data centers face performance variability based on shared resource utilization.


Physical data centers have more inherent security because they are fully controlled by the company owning them. Physical access can be restricted as needed, with security guards, access cards, biometric scans, and other measures. Network security is handled onsite with firewalls and intrusion detection systems. Encryption and key management also stay in house. However, data centers still have vulnerabilities such as natural disasters, power outages, and insider threats. Redundant infrastructure can help minimize downtime risks.

Virtual data centers hosted by cloud providers relinquish some control over security to the provider. While it’s their responsibility to restrict physical access and provide network security, customers don’t have full visibility. Cloud providers offer tools to control virtual network access and encryption, but the customer must properly configure them. With infrastructure distributed across data centers, redundancy is built-in to ensure uptime. Overall both models can provide strong security with proper planning, but physical data centers allow for more customization and hands-on control. {“results”:[{“url”:”https://www.cisco.com/c/en/us/products/security/secure-workload/index.html”,”title”:”Cisco Secure Workload – Cisco”,”snippet”:”Cisco Secure Workload uses prescriptive security and compliance recommendations …”},{“url”:”https://www.veritas.com/insights/articles/data-center-security”,”title”:”Data Center Security | Veritas”,”snippet”:”Read about data center security including physical, network & virtual security.”}]}


In summary, the key differences between physical and virtual data centers are:

Ownership and location – Physical data centers are owned and housed in a single physical location, while virtual data centers can be distributed across multiple locations.

Hardware – Physical data centers require purchasing and maintaining dedicated hardware, while virtual data centers utilize shared hardware resources.

Scaling – It’s easier and faster to scale capacity with virtual resources than physical hardware.

Costs – Physical data centers have high upfront capital and maintenance costs, while virtual data centers are based on flexible usage-based pricing.

Performance – Physical data centers offer more predictable latency and throughput for latency-sensitive applications. Virtual data centers can experience noisy neighbor issues.

Security – Physical data centers have more control over physical security while virtual data centers rely more on software-defined security.

Overall, virtual data centers tend to provide more flexibility and agility, while physical data centers offer more control. Companies with latency-sensitive workloads or strong security requirements may still prefer physical data centers, while businesses that need to rapidly scale capacity are better suited to virtual data centers. Consider your specific use cases, performance needs, security priorities, and budget when deciding between physical or virtual data centers.