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On Premise vs Cloud Software. Detailed Comparison

Artur Olechowski d08c1359d2

14/04/2022 |

8 min read

Artur Olechowski

IT departments consider many factors before deciding whether a cloud solution is right for their business. Likewise, many companies cannot make the leap into the cloud and instead stick with their tried-and-true legacy applications and software. 

The cloud has increased in popularity because it offers incredible flexibility and savings across time and money, providing teams with agility and scalability. However, on-premises software may continue to adequately serve the business needs of many companies because it allows them to maintain a level of control that cloud solutions cannot.

Which option should you choose for your business use case: the cloud or on-premises software? What are the pros and cons of each solution?

Read this article for a detailed comparison of cloud software and on-premises solutions.


Table of contents:

  1. What you need to know about the cloud and on-premises software
  2. What to choose: cloud or on-premises? Key differences
  3. Combining cloud and on-premises: Hybrid cloud solutions
  4. On-premises vs. cloud software – wrap-up


What you need to know about the cloud and on-premises software

On-premises software

On-premises software requires the enterprise to buy a license or copy of the software to use it. In on-pre, your company doesn’t share resources with anyone else - which can be significant security or compliance requirement. This implies that there is generally greater protection than with a cloud computing infrastructure. However, the costs associated with managing and maintaining all the solutions entail are running exponentially higher.

Data security will always be paramount whether a company puts its applications in the cloud or keeps them on-premises. If you're a business in a highly regulated industry, the decision to house their applications on- or off-premises might already have been made for them. Knowing that data is located within proprietary servers, and IT infrastructure provides business leaders some peace of mind. 

Advantages of on-premises software

  • The primary benefit of on-premises solutions is that it's easy to get started. Users need to follow the onscreen directions, they're up and running and in a matter of minutes.
  • Another advantage is complete ownership and control over your hardware, data, and software platform. You can make any changes, configurations, or upgrades in line with your business growth.
  • Finally, with no reliance on external factors such as the internet, you enjoy greater security for both your business and personal information.

Challenges of on-premises software

  • First, there is a large upfront capital cost that a company has to bear right from the start. Add to that the support and functional costs to keep everything running properly.
  • Maintenance costs are also higher since you have to set aside resources and budget to cover hardware and software updates and storage, backup maintenance, and disaster recovery solutions.
  • This type of software needs to be installed on servers or individual computers. If you're not using a centralized installation program that automatically distributes the app across all devices at once, deployment takes longer than with cloud solutions.

Cloud software

The cloud is different from on-premises software in one key aspect: you don't need to host everything on-site with a cloud environment. This allows companies to pay only for their services and scale them up/down as needed.

You can also back up data easily because you don't have to store it all by yourself. And suppose your company plans to expand overseas. In that case, the cloud is an even better option because it only takes minimal effort to connect with customers, partners, and other businesses around the world.

Today, companies can choose from three types of cloud service models:

  • Infrastructure-as-a-Service (IaaS) - where you pay to use virtual machines (VMs), storage, networks, and operating systems.
  • Platform-as-a-Service (PaaS) - where you get on-demand services for developing software (testing, managing, and delivering software applications).
  • Software-as-a-Service (SaaS) - this is subscription-based software you can access over the internet; it includes maintenance as part of the subscription fee.

Advantages of cloud software

  • Cloud-based applications can be used from anywhere at any time, via any device, or a web browser. They're inexpensive since there's no need to make upfront payments like you would if you were to purchase hardware and software.
  • Hosting is maintained by the company that provides public cloud services, so there's no need to worry about maintenance problems or upgrades. The vendor employs security measures for your data that you'd find extremely high if you were hosting it yourself.
  • Cloud applications can be deployed in a matter of hours or days, as they are deployed online. There's no need for physical servers to be in place. Since you don't need to maintain servers, you also save money on power and other resources.

Challenges of cloud software

  • You can be as productive as you want in the cloud, as long as you have access to the internet. Without that connectivity, a cloud-based application simply doesn't work.

What to choose: cloud or on-premises? Key differences

1. Deployment

Resources are hosted in-house and within an IT infrastructure in an on-premises environment. You're responsible for maintaining the solution and all its related processes. 

In a public cloud computing environment, you host resources on the premises of the provider. You can easily access those resources and use them as much as you need at any given time. 

2. Cost

Enterprises that deploy software on-premises are responsible for the ongoing costs of the server hardware, power consumption, and space. 

If you pick the cloud, you only need to pay for the resources you use, with no maintenance and upkeep costs. This price adjusts up or down depending on how many resources your teams consume.

3. Maintenance and management

Understanding the maintenance needs of your applications plays a key part in when and how you run your workloads.

In a cloud-based SaaS application, the service provider pushes updates to the cloud resource without end-users needing to act on their own. That way, organizations transfer responsibility for vulnerability patches, uptime, and back up to the service provider. 

However, when using an IaaS or PaaS service, you're responsible for maintaining and securing applications running within the cloud environment. 

What does that look like for on-premises solutions? Since you own the software or hardware in this scenario, you're responsible for performing all maintenance activities on those devices. These activities include installing security patch updates to all devices, maintaining data center availability, and responding to services requests. 

4. Level of control

In an on-premises environment, a company retains its data and controls what happens to it. Companies in regulated industries with extra privacy concerns are more likely to hesitate before moving their data to the cloud. 

In a cloud infrastructure, the question of data ownership is one that many companies and vendors have struggled with. Since data and encryption keys reside within the cloud vendor, so if they experience downtime, you may be unable to access that data.

5. Security

Companies that deal with extra sensitive information – such as banking, defense, or intelligence industries – must have a certain level of security and privacy that an on-premises environment provides. 

Despite the promise of the cloud, security is still a primary concern for many industries, so an on-premises environment makes more sense despite some of its drawbacks and price tag.

There have been many publicized cloud breaches reported in the past few years. Some of the most common security threats include employee login credentials, information about their consumers such as credit card numbers or medical records, and intellectual property. 

6. Compliance

For companies that are subject to such regulations, it is imperative that they remain compliant and know where their data is at all times.

When choosing a cloud computing service provider, it's essential to make sure they're in compliance with all the different regulatory mandates within your industry. You'll also want to ensure that your sensitive data is secure and that your customers, partners, and employees are confident in their data security.

Combining cloud and on-premises: Hybrid cloud solutions

While the debate of on-premises versus cloud computing goes on, an alternative model emerged to promise the best of both worlds. A hybrid cloud solution features elements of different IT deployment types - from on-premises to private cloud and public cloud. 

The hybrid cloud depends on the availability of a public cloud platform from a trusted third-party provider, a private cloud infrastructure constructed either on-premises or through a hosted private cloud provider, and effective WAN connectivity between both of those environments.

On-premise vs. cloud software – wrap-up

Cloud software gives teams the ability to quickly respond to changes and collaborate across distributed environments. On-premises software offers a high level of security and guarantees compliance. But both types of software have positives and negatives, and no single solution fits all organizations and their unique IT decisions. 

If you're wondering which one is a better pick for your organization, get in touch with our experts. We have an excellent track record in helping companies select the best-performing solutions for their business needs.

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Artur Olechowski d08c1359d2

Artur Olechowski

Managing Director at Codete. Master of Law, a graduate of postgraduate studies at the University of Economics in Krakow. In his daily work, he masters the combination of business strategy and technology.

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