Many companies these days are making use of hosting providers to house their critical compute infrastructure. There are many financial benefits to doing this as the costs of running a data center far exceeds the costs of leasing servers from a hosting provider.
But as with many things, there is always another side of the story that must be considered, your environments security. Dedicated and cloud hosting providers reuse their hardware often as clients may lease the hardware for only a short time. The question you must ask yourself is: What do these providers do with the hard drives once a server has been removed from the clients account before they lease that server to another client? Do they have documentation proving their compliance with the DOD_5220.22-M standard for secure data removal?
Just because an operating system has been re-installed, that does not mean the data is permanently wiped. In theory, one could argue that your data is never fully removed from a drive unless you properly destroy the drive, which can be an expensive operation, but the DOD_5220.22-M standard provides a set of reasonable guidelines for rendering the data unrecoverable for many situations.
Extracting the data from a recycled server is not all that complicated for your average system administrator. In fact, using one technique, its a simple one liner using dd and strings. So the next time you are curious about your hosting providers security practices, try running the following on the server or cloud server and see what fragments of data you can recover by:
dd if=/dev/sda1 bs=1M skip=5000 | strings
Review the output. If you see data on here from other users, the disks are dirty and that hosting provider is not properly sanitizing the hard drives before leasing the server to another client. This has huge implications, especially if you need to comply with security standards such as HIPAA, FISMA, PCI compliance or any of the other standards out there.
So the moral of the story is, always do your homework before choosing a dedicated or cloud hosting provider. Ask about their security procedures, ask them about their PCI, HIPAA, FISMA, ISO 27001, SSAE 16, etc. Never take anything at face value. Ask them for their report on compliance.
When it comes to your security stance, paranoia is your greatest defense.