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On-premise vs. cloud—choose the best computing model for your business by understanding the differences, as well as a third option: hybrid integration.

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On-Premise vs. Cloud: Understanding the Differences

Posted by Angela Davis on January 3, 2024

The shift to remote working in recent years has made understanding on-premise vs. cloud systems more urgent. 

The cloud computing market is expected to nearly double in size between 2022 and 2027, but is it definitely the right choice to leave behind on-premise legacy systems? It only takes a few clicks to get set up with a cloud provider, but you may still need the control and reliability that only an on-prem database can provide.

In this piece, we'll go over the pros and cons of on-prem and cloud systems, from security to infrastructure to costs. We'll also look at how both systems can be a good choice for some businesses and how hybrid integration can offer a third solution.

As the cloud computing market grows, understanding on-premise vs. cloud systems becomes more important

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Defining the difference between on-premise and cloud computing

On-premise 

On-premise (or “on-prem”) computing is how businesses have traditionally run their IT operations. The company’s data is stored on a server located on its physical premises, usually in the same building that everyone works in. 

This has one major benefit: businesses have total control over the machine and how it’s running, which can affect reliability, security, and compliance. 

Instead of serving hundreds of thousands of customers, the server is custom-built to keep the business running around the clock. Security can also be made as tight as it needs it to be and any unique compliance obligations can be easily adhered to.

Cloud 

However, most modern businesses are now opting to use cloud computing. By outsourcing server legwork to a third-party vendor, they can reduce what was previously a long and costly setup process down to just a few clicks. Simple subscription plans also mean that they can easily scale and only need to pay for the computing power they actually use.

While these vendors might be following best practices around security and data protection, however, they’re essentially selling a one-size-fits-all solution that might not work for every business.

This covers the basics of an on-premise vs. cloud definition, but what else do you need to know to choose between them? A cloud vs. on-premise comparison chart can make it easier to understand the differences.

 

 

On-premise

Cloud

Deployment

On-prem software requires manual installation on each individual machine. The business is responsible for keeping it up and running 24/7.

Depending on the provider, cloud deployment can be as simple as a few clicks. Data is stored in centers all over the world, with virtual machines running around the clock.

Technical requirements

On-prem systems require a significant investment in hardware and software. You need servers capable of running all day, every day, systems to keep them cool, and the right software to access and run your machines.

Vendors do all the legwork; you simply access the system from any internet-connected device to get your work done. The cloud itself runs from an industrial-grade machine in a data center, which is designed for peak efficiency.

Security

You're responsible for every aspect of your servers' security. You need to keep them in a secure physical location, which can only be accessed in compliance with whichever regulatory frameworks your company has to follow. You're also responsible for securing the company intranet, which will have varying levels of access to the server, as well as protecting it in the arms race that is modern cybersecurity.

Data centers have dedicated, around-the-clock security and sell themselves on their cybersecurity credentials. You still need to keep a close eye on employee access to the system, but vendors are responsible for the safety of the server itself.

Cost

On-prem requires a big upfront investment in everything from hardware and software to hiring or developing the people needed to maintain it.

Cloud computing solutions usually use a subscription model that scales to accommodate different customers and levels of usage. Hardware, software, electricity, and labor costs are bundled into one fee.

Integration

Integrating your on-prem system with other tools you use may be possible—but it’s likely to require a software developer who can custom-build these bridges for you. If your integrations break or fail to work as they’re supposed to, it's your job to fix them.

Modern cloud platforms are built with integrations in mind. Any integration they develop will be of value to hundreds or thousands of customers, so it's a no-brainer to continually create, update, and maintain these.

Access

You can access on-prem servers remotely, but you'll need to install all your own software to do it. If this ever breaks while your system administrator is working remotely, they could be cut off from the machine all day.

With data centers all over the world, most users will find that cloud computers are as fast and easy to access as on-prem ones (provided they have a good internet connection).

Upgrades

Upgrading a bespoke, on-prem solution can cost you time, money, and productivity. If other leaders aren't happy to down tools, major updates could be delayed as teams negotiate what is and isn't essential. Big, labor-intensive updates are often more about maintenance than anything else and won't make a big difference to ROI.

Vendors push frequent upgrades to keep their services fast, reliable, and secure.  Any updates they make will benefit thousands of paying customers. Everything from quick bug fixes to major migrations are included in the pricing plans, and all upgrades are completed with as little disruption as possible.

Exploring cloud vs. on-premise pros and cons

Let's now consider how the differences between on-prem vs. cloud services create pros and cons for both systems.

Infrastructure

On-prem infrastructure runs in-house, which provides a level of system control that cloud providers can't match. Being able to customize every aspect of a system according to your business's unique needs is a major pro, however, choosing, buying, installing, and maintaining this infrastructure can be a time and money sink.

You'll need to make a big upfront investment in machinery that will depreciate in value as it ages, so you’ll need to compare options and find the infrastructure that will give you the best ROI in the years or decades to come.

With cloud computing, it’s harder to summarize the pros and cons, as there's no one way to do it. It’s not just about having someone host a server for you; vendors will often run fully cloud-native architecture to meet diverse requirements from their clients. 

If you have an on-prem system that's starting to become a liability, hybrid cloud infrastructure is another option, but we'll get to that later on.

Storage and scalability

On-premise vs. cloud data storage and scalability are closely related.

With an on-prem system, storage is determined by your equipment. To add more, you need to physically add more storage to the machine, incorporate another server in your setup, or migrate to a new system entirely. These are all delicate, high-stakes processes that require time and money.

If, on the other hand, you don't need as much storage as you have, you might be wasting resources. Unfortunately, downsizing is just as much of an operation as scaling up.

Scalability is definitely one of the benefits of cloud vs. on-premise services. Flexible storage plans allow businesses to easily scale according to their needs. And, if you don't know exactly what those needs are, pay-as-you-go plans mean you only pay for what you use each month and nothing else. 

This can work especially well for seasonal businesses whose needs can dramatically change from one month to the next. Their site can then handle a rush in December or over the Summer, but they don’t need to pay for that capability for the rest of the year.

Maintenance

On-prem software isn't just an upfront investment—it's also a commitment to long-term maintenance. 

With a cloud solution, this is almost completely taken care of. You might still have employee laptops and workstations to keep up to date, but all updates to your cloud infrastructure are handled by the vendor.

This limits the problems you have to concern yourself with. Instead of stressing about keeping your entire cloud system secure, you only need to focus on issues like password management, device security, and role-based access to the likes of Google Drive folders—that is, the things you and your employees actually have to see and interact with every day.

Security, control, and compliance

Security, control, and compliance are vital parts of any business system and can include regulatory frameworks, certifications, and customers' needs. So, what does this mean when it comes to comparing cloud vs. on-premise security? 

Organizations in tightly regulated sectors, like banking and healthcare, might opt for an on-prem solution due to the level of control and reliability it gives them.

They might also need a bespoke solution that can serve any complex needs around compliance and frameworks like HIPAA and PCI DSS. 

When compliance frameworks start intersecting, they become more challenging for cloud vendors to accommodate. So, despite on-prem's drawbacks around pricing and maintenance, it may be the only option for companies for whom security and compliance are top priorities.

Answers to the question “What are your organization’s top cloud challenges?”

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Disaster recovery

Disaster recovery will look very different for on-premise vs. cloud computing services.

With an on-prem solution, your ability to recover data is highly dependent on your circumstances. If you're only backing up your data on one machine, it's vulnerable to physical damage via power failure, overheating, or flooding.

Cloud vendors might keep your data on multiple servers and locations anyway since this makes for better speed and availability—it also means data is more secure if one of those servers fails or becomes damaged. 

If something does happen, those vendors should be able to forward all your requests for data to a server that's still working perfectly. Your staff and customers might not even notice the temporary slowdown in the service.

Costs

Cloud solutions offer an attractively low barrier to entry. There's no hardware involved, and everything is priced into one simple monthly or annual fee. This can make the cloud vs. on-premise cost seem like a simple choice between an economical subscription plan or a steep upfront outlay, which can include payments for servers, cooling systems, software licenses, and more.

However, both options have some hidden costs. Your cloud subscription price will increase as your business scales, meaning your quick fix of ROI at the beginning may shrink over time. 

If you run an efficient system, your on-prem costs won't rise as much or as fast as your company grows, but you'll have to work to squeeze ROI out of it as time goes on and the system ages. 

In this situation, hybrid integration can prolong the life of legacy systems.

Answers to the question: “How would you summarize the state of your cloud costs?”

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Cloud vs. on-premise: Which is right for your business?

The choice between on-premise vs. cloud infrastructure depends on several factors. One of the most important is where your business is with regard to digital transformation.

If you're a new company starting with a green field, the only real question is how much control you need over your system. If you have to guarantee compliance or handle a lot of sensitive data, an on-prem system may be the better option. Otherwise, cloud technologies are now a standard choice for lean startups.

If you're a mature company that's grown around an on-prem system, it's a more fraught decision—one that'll require buy-in and consensus from multiple stakeholders. Factors to consider include:

  • Costs. Upfront investment, ROI, and total cost of ownership (TCO) in the long run.
  • Security. Do you need better security than cloud vendors can offer? Do you have the capacity for that?
  • Compliance. Do you have regulatory obligations that cloud vendors can't fully meet?
  • Maintenance. Does it make sense to commit to maintaining an on-prem system for numerous years? Do you want to run the whole business on this, or do you want to integrate with cloud apps and services?

A third option: Hybrid integration with OpenLegacy

New cloud apps and services are coming online all the time. IT teams have to decide if they buy them, build their own versions, or stick with the legacy systems they have.

With hybrid integration, however, you don't have to make that choice. Platforms like OpenLegacy enable transitional coexistence: you get all the convenience of a cloud system, but you can still get value out of your legacy system when you need it. This increases the shelf-life of your on-prem system and lets you take advantage of the benefits around security and control for longer.

And, if you're planning to move to the cloud, you can do so at your own pace without worrying about data continuity. You can road-test your cloud systems before you depend on them for everything, which makes the decision to move a much easier sell. 

With hybrid integration, you can enjoy the best of both worlds, and the on-premise vs. cloud long-term future of your business doesn’t have to be set in stone.

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