How does a VPS Work? (Cloud Explained Series)

cover pic VPS

VPS is a popular service allowing users to set up their own virtual machine without the need to pay for using the whole capacity of bare metal server. Studying the technology behind VPS is a good start on a journey to understand the cloud as a whole, because VPS instances are basically the building blocks of every cloud. Most people who use cloud are somewhat familiar with the term VPS, virtual machine or compute instance, but very few understand the service on a technical level. Contabo Cloud Explained Series is here to provide deeper technical explanation beyond the usual sales pitch.

Table of Contents

What does VPS Stands for?

VPS stands for Virtual Private Server. VPS is a virtual environment which runs on a physical server usually located somewhere in a data center. Thanks to technology called virtualization, a VPS behaves like a virtual computer with its own virtual CPU cores, RAM, storage and network interfaces.

Virtualization. The Technology Behind VPS

What is Virtualization?

As mentioned above, the process of creating a virtual operating system on top of the physical server is called virtualization. On one physical computer, multiple users can run different operating systems all of them separated from each other. For instance, user A may utilize CentOS, while user B sticks to Debian on their virtual machine, on the same physical server.


A hypervisor is a software that makes virtualization possible. It is connected directly to the server hardware and it distributes resources such as RAM and CPU to each VPS. While from users’ perspective each virtual machine is a fully operational environment, from providers’ perspective it’s just a single data file that can be moved around as needed.

virtualization example

Picture: Example of virtualization using a hypervisor. Several virtual instances are created (VM1, 2, 3) – all of them share the same hardware capacity.

We will explain hypervisor and virtualization in more detail in the next article of Cloud Explained series.

Key Benefits of VPS

Independence and Safety

One of the main advantages of VPS is that the instances usually come with the root access and hence unlimited access to modify the operating system, install and run any apps and packages.

Not only does it allow a high level of customization of each VPS independently, but it also ensures full separation between each environment. If one of the VPS becomes unresponsive or gets hacked, the others will remain unaffected. This independence is very beneficial in terms of risk reduction – when one element fails, the rest of the environment remains intact. And that also makes VPS the perfect sandbox for developing and testing new things.

“If one of the VPS instances becomes unresponsive or gets hacked, the others will remain unaffected”

Customization and Affordability

The rise of VPS has also contributed to the growing popularity of microservices. With a dedicated server, it would be costly to deploy 1 server = 1 task approach, because most of the server capacity would be unused. But VPS is much more affordable as you can create a small instance with resources just for that one task. The other reason is the portability and scalability of virtual machines which is covered below.

Portability and Scalability

From provider’s perspective, each VPS is a large data file running on a host system thanks to a hypervisor. This large data file can be moved around to another server. This makes it possible to move a VPS from one physical host to another without stopping the machine.

Because the VPS Operating System is virtual it’s very easy to scale up or down an instance. In other words, in case you’re running out of hardware capacity, you can just always buy more. In case of Contabo, just go to your virtual private instance and click on the Upgrade VPS button. You can immediately increase your CPU cores, RAM, or hard drive capacity.

upgrade via CCP

VPS vs Other Compute Products

VPS vs Virtual Machine vs Cloud Instances

It’s basically just a different name for the same technology. As you might have noticed in this article, we have been using the term VPS, virtual machine and cloud instance interchangeably. In general, they are a virtual environment using a hypervisor. Virtual machines run on top of a physical server. Some companies even use custom names like “droplet” or “ec2”, but they all are referring to a VPS.

VPS vs Dedicated Servers (Bare Metal Servers)

The main difference between a VPS and a bare metal server is the price and computing power available. You can run the same Operating System on both VPS and dedicated server, but dedicated servers will usually come with more computing power and a higher price tag. The cheapest dedicated server from Contabo currently costs €129.99, while the cheapest virtual private server can be purchased for €4.99.

“The VPS is a slice of a dedicated server for a fraction of the cost”

VPS vs Virtual Dedicated Servers

Virtual Dedicated Server is – like VPS – a virtual machine. But VDS has much more computing power assigned to it, using both virtual and dedicated resources. VDS’s CPUs and RAM are not shared, similarly to a dedicated server. VDS is a great solution for users who need the portability of VPS and the power of dedicated servers.

VPS vs Shared Webhosting

Some people compare VPS to shared webhosting. While both can be used to host websites or webmails, shared hosting doesn’t offer the root access and the possibility to run whatever application you need. If your website performance constantly suffers because of high-traffic and your customers complain about it being slow, it’s about time to switch to VPS.

VPS at Contabo

At Contabo, VPS comes in many shapes and forms. The Storage VPS is intended for users who need large storage space, but doesn’t need high read/write speed. Ideal in case you simply need to park your data somewhere but you don’t want to use object storage.

The High-Performance VPS line on the other hand, can be equipped with a lightning fast NVMe storage – perfect for users who run websites, databases, or other demanding projects with a lot of read and write operations.

We also offer Virtual Dedicated Servers which bring dedicated resources of a dedicated server and the portability of a virtual instance.