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By: Julia Nasy
3 Nov. 2023

Cloud vs On-Premise Comparison

11 mins read
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Today, cloud environments have phenomenal success: almost 94% of enterprises worldwide use at least one kind of cloud computing service. We’re seeing how cloud technologies displace traditional solutions, but does it mean that cloud computing is definitely better than on-premise? Actually, the answer to this question depends on different factors and the specific requirements of your organization.

The choice between these two options can be tough if you don’t understand their features and key differences. If you are wondering ‘what is best for my business,’ luckily, you’re on the right page. This article aims to analyze the risks and benefits of on-premise vs. cloud. And let’s start with the basics: what does on-premise mean, and what is the cloud environment in general?

What is On-premises?

On-premise, also known as on-premises, refers to software that runs on hardware physically located in an on-premise environment. In other words, organizations keep their computing resources in their own physical confines: data centers, server rooms, or other facilities for related equipment. Within this model, companies get full control over the hardware, software, and data. They have the flexibility to configure and customize their systems as needed to meet their specific requirements.

What are Cloud Computing Services?

The cloud refers to a network of remote servers and data storage facilities that are located all around the world and can be accessed over the internet. Cloud computing allows customers to access various services, including storage, computation, and software applications, all of which are hosted and maintained by cloud service providers.

Common examples of cloud services include the following models:

  • Infrastructure as a Service (IaaS). On-demand virtualized computing resources, such as servers, networking, andstorage for building and scaling IT infrastructure.
  • Platform as a Service (PaaS). On-demand services for building software, including testing, delivering, and managing apps.
  • Software as a Service (SaaS). Subscription-based software accessed from the internet that includes maintenance as part of services.

There are also three different types of clouds that businesses can use.

  • Public cloud. Public cloud services provide cloud computing resources, such as virtual machines, storage, and applications, over the internet to a wide range of users.
  • Private cloud. Private clouds offer cloud-based computing solutions exclusively to a single organization or a limited, specified group of users.
  • Hybrid cloud. Hybrid cloud solutions offer organizations the ability to harness the advantages of both private and public clouds, allowing apps and data to be shared between them.

Well-known cloud providers are Amazon Web Services (AWS), Microsoft Azure, Google Cloud, Dropbox, Apple iCloud, OneDrive, Netflix, and others.

Related reading: What is SaaS Application

On-Premises vs. Cloud - Key Factors for Comparison

Well, now you know that the fundamental difference between cloud vs on-premise software is the location of the servers and operating systems. But this information is still not enough to make an informed decision. It’s time to explore all the pros and cons of on-premise and cloud.


In on-premise environments, resources are deployed in-house and within a company’s IT infrastructure. It offers full control and data sovereignty. In other words, the organization is responsible for maintaining on-premises solutions and all its related processes. However, on-premise software deployment can be slower as it often involves additional hardware purchases and setup.

In parallel, cloud deployments provide cost-efficiency and the agility to adapt to changing market demands seamlessly. Organizations can use computing resources and services hosted in third-party servers or data centers. However, the deployment of cloud-based applications may involve shared responsibility for security.


As organizations have complete control over their on-premise infrastructure, they are responsible for ongoing maintenance of server hardware, updates, data backups, storage and disaster recovery, ensuring the reliability and availability of a system. To perform these tasks, companies need skilled IT staff, which adds to long-term costs and resource use.

With cloud computing services, you don’t need to worry about maintaining the IT infrastructure, software, or hardware. A third-party service provider ensures performance monitoring, service availability, data backup, recovery planning, resource optimization, capacity management, etc. However, it’s essential also to understand your responsibilities, depending on the type of cloud service being used (IaaS, PaaS, or SaaS).


Your choice between on-premise and cloud will likely depend on the level of security you need to meet compliance standards. When it comes to security issues, many organizations prefer an on-premise environment as a more trustless option. With it, data is stored within the company’s own servers. Companies can implement their own security protocols and customize security measures to meet specific needs.

Cloud solutions, on the other hand, benefit from the expertise and resources of third-party providers. They invest significantly in security measures that can be easily scaled in response to changing needs. They also offer compliance certifications and compliance tools to help customers meet industry-specific security and privacy requirements.

However, there is a hybrid approach, combining both on-premise and cloud solutions. In some cases, it can be the most suitable strategy to ensure better security for your sensitive data.


For some businesses, cost-effectiveness can be a decisive factor when choosing the model. However, this is not surprising since this aspect includes upfront investments, ongoing operational costs, and other potential long-term expenses. In this case, public cloud resources are much more profitable as they offer lower costs.

In an on-premise environment, organizations use in-house dedicated servers that require considerable upfront costs, including hiring a maintenance team. Additionally, companies also need to bear ongoing maintenance costs to manage server hardware, power consumption, and space.

In contrast, public cloud services require minimum upfront investments. Since a third-party service provider is responsible for hardware, software, and maintenance, you only need to pay for used resources. Public cloud providers often offer cost optimization tools, helping organizations identify resource inefficiencies and reduce unnecessary spending. Also, cloud computing doesn’t require expenses for employing a technical team.

Payment Model

On-premises software uses a licensing pricing model, which implies customers pay a one-time upfront fee to purchase a product license. In return, they can distribute the software within the company during the license period. However, this payment model has its drawbacks. For example, after the expiration of the license, companies can no longer download security updates and get customer support for their operating systems or software.

Cloud service providers employ a pay-as-you-go model, where subscription cost is calculated based on the amount of storage used, the number of virtual machines running, data transfer, and other specific resource usage. Thus, customers have greater control over their budgets and can avoid unexpected overages. Moreover, many cloud providers offer a variety of pricing plans, allowing users to choose the most cost-effective options for their workloads.

Scalability and Flexibility

Due to the ever-increasing demand and rapidly changing user requirements, infrastructure must be highly flexible and scalable to meet their evolving needs effectively. This factor is essential in keeping the dynamic nature of the company’s workloads.

However, scaling on-premise infrastructure can be challenging. Solutions hosted on local servers are less flexible, as they have a fixed capacity based on the initial hardware investment. They require a substantial lead time and extra costs to purchase and set up additional hardware for scalability.

At the same time, cloud infrastructure can be scaled up or down based on demand, thus offering more flexibility. This can be done in real time without significant delays. Moreover, cloud providers have data centers worldwide, enabling global scaling and redundancy without the need to build physical infrastructure in multiple locations.

Why is the Cloud Environment Better than On-Prem?

It’s time to sum up all results of our on-premise vs cloud comparison and see why cloud computing services are much more popular nowadays. First, the initial capital investment for an on-premise system is quite high, up to thousands of dollars, while a cloud solution is much cheaper due to the pay-as-you-go model.

On-premise systems require the management of the physical infrastructure and a dedicated team to oversee hardware maintenance, software updates, and security protocols. The cloud computing model removes this obligation. Additionally, cloud software deployment is much easier and faster since it uses cloud servers from the cloud provider.

Within the on-prem model, companies have full control over their hardware, software, and configurations. They also have a high level of customization for their on-premise infrastructure, enabling them to tailor it to their unique requirements. However, such systems are less flexible. Cloud infrastructures provide greater flexibility. You only pay for what you use, so you can easily scale up and down to meet demands quickly.

Apart from the features, it is equally important to note that cloud computing provides a choice between private cloud, public and hybrid. You can choose the type of cloud according to your requirements.

Related reading: SaaS vs. Cloud Computing

Which Option is the Right for My Business?

After a final comparison of on-premise vs cloud, you see that both models have advantages and disadvantages, and there is no one-size-fits-all approach. But the question of what is better for your business remains open. In order to facilitate the selection, we prepared a list of questions, answering to which you’ll find the optimal solution for your organization.

  • What kind of budget can you afford?
  • What are your security requirements?
  • Do you already have the tools to ensure top-level security?
  • Do you have a space to install on-premises equipment?
  • What payment method is preferable to you — initial one-time payments or monthly subscriptions?
  • Do you require on-demand services?
  • Do you want to be responsible for maintaining hardware and software?
  • What level of system scalability do you need?
  • Do you require customized solutions for your business?
  • Is it important for you to have access to the latest system updates?

Before deciding on-premise vs cloud, it’s also important to carefully analyze potential risks and benefits. You can contact a cloud service provider to learn more about cloud computing and explore how it aligns with your organization’s goals and requirements.