As companies deploy more software to help their businesses run more smoothly and efficiently, the question of how to host it is one of the most carefully considered ones. The acceleration of migrating to the cloud increased in 2020. The pandemic forced organizations to be more nimble and agile with access to technology. On-premises hosting is still an option, but it has limitations. In considering how to host your software, you’ll want to explore the key differences between cloud vs. on-premises.

What is “the Cloud”?

When most people use the term “cloud,” it seems like some abstract conglomerate of computing. It’s not something people can physically touch like their computer, but it is a real thing. The cloud is a physical network of servers that host data via internet connectivity.

There are three cloud types:


Third-party service providers host these, with the biggest being AWS (Amazon Web Services) and Microsoft Azure. The advantages of the public cloud include lower costs, high reliability, virtually unlimited scalability and no need for maintenance by users.


A private cloud is specific to one organization, and they are responsible for maintaining its infrastructure. These are common for government agencies or very large enterprises. The benefits are more control, privacy and flexibility.


These clouds combine public and private, allowing companies to decide what applications and data to host in each.

According to Statista, 82% of enterprises employ hybrid clouds, while 17% use only public and 1% private.

Who Uses the Cloud, and How Do They Use It?

Almost every company uses the cloud in some way, as Cisco reported that the cloud will handle 94% of workloads by the end of 2021. In addition, spending on cloud services continues to increase, with projections of more than $332 billion for 2021 and $397.5 billion for 2022.

The cloud enables a company’s workforce to work from wherever, which is a necessity as the way the world works continues to evolve. In 2020, 87% of enterprises accelerated their cloud migration because of COVID-19.

Businesses use it to host simple applications like Office 365, as well as more specific ones that contribute to workflows, automation, communications, analysis and more.

of workloads


What Is On-Premises Hosting?

The fundamental difference between the cloud and on-premises is where the software lives. With on-premises, the installation is local. It resides on your servers in your physical space. As a result, you are responsible for its maintenance, security, scalability, expansion and everything else.

The on-premises ecosystem involves servers, storage, networking, security and software to run the hardware. Building and maintaining an on-premises infrastructure requires capital, expertise and space.

Cloud vs. On-Premises: Key Differences

There are several key areas to contrast between cloud and on-premises.


Cloud hosting is more affordable than on-premises. You don’t need capital investment for equipment, labor and staff for a cloud setup. The costs are more predictable as well. Your monthly fee is typically a set amount earmarked as an operating expense. With on-premises, costs can fluctuate depending on the need to upgrade hardware, maintain adequate cooling for servers and equipment, or hire new employees to support your system. Energy costs are also a factor since on-premises solutions require continuous and uninterrupted uptime. With cloud hosting, all this is the responsibility of your partner.

Support and Maintenance

When adopting the cloud, your provider is the host, and they are responsible for all support, maintenance and upgrades. A cloud provider’s core competency is to take care of its facility, and that’s a specialized skill set.

If choosing on-premises, you must manage all these things on your own or outsource to a firm, which will be part of your IT budget.


Data centers for cloud hosting deploy advanced, layered security. They have the expertise, means and resources to do so. There isn’t one barrier of security — there are many. Cloud providers use security measures from penetration testing to proactive monitoring to ongoing threat analysis.

It’s in a cloud provider’s best interest to be relentless about security.

These data centers also have multiple backups of data and applications, ensuring a faster pace toward restoration.

An on-premises solution allows you more control over the network and its security. An enterprise can use many of the same strategies as cloud providers to bolster security. The cost for deploying these strategies in an on-premises setup can be high and can require levels of complexity that necessitate expertise internally or from a third-party managed service provider.

Having physical control of your data does not make it any less susceptible to risk. To match the level of most data centers, you need competent, advanced IT support.

There is no way to eliminate risk in hosting applications and data storage unless you’re offline. That’s not feasible in a business world that’s fully embraced digital transformation.


Cloud-based software is typically deployable in hours or days, depending on the complexity and configurations. An on-premises software launch can take considerable time since it’s a physical installation. Additionally, work on the infrastructure may be necessary.


If you need more space on the cloud, it’s flexible and available. You can scale up or down. With on-premises, if you need to expand, you need additional physical space along with the extra equipment.


With on-premises hosting, you’re in complete control of every aspect, which can be what an enterprise wants. Total control means you define the infrastructure, parameters, cybersecurity protocols and every component of setup. If that’s important to you, then on-premises makes sense.

Depending on providers, using the public cloud takes a lot of control out of your hands. That can be a positive for some companies that don’t have the means or expertise. While you have some say in configuration, you’ll receive guidance and explanations from your provider.


All software requires updates for security, new features or other upgrades. In cloud-based platforms, vendors deploy these automatically. This ensures your team has the latest software without creating IT burdens for your organization. For on-premises setups, in-house IT support must configure these software updates. If updates are not launched promptly, software can be out of date and less secure.


If your software applications live on local computers, there can be limitations to access. Users can access them remotely, but it often requires third-party support. It also opens up the possibility of higher risk exposure because of the workaround to access outside the physical space.

Anything that’s in the cloud is accessible as long as users have an internet connection and a login. Companies can also require a VPN connection for remote users, so they log in under the company’s secure network, not the user’s.

Energy Usage

On-premises solutions require significant energy consumption, leading to a larger carbon footprint and cost implications. A study looked at the carbon footprint of cloud vs. on-premises. It found that the cloud was up to 93% more energy-efficient and generates 98% less carbon than on-premises operations.

Cloud vs. On-Premises — What’s Viable for Your Organization?

There are advantages to cloud and on-premises hosting. As far as adoption, the cloud continues to grow, while on-premises is declining. The choice you make will depend on your goals, resources, budget and requirements.

You want applications that work for your users and make their daily lives easier. You’ll need to consult with your stakeholders to determine the best configuration for your company, considering the differences of each within the evaluation criteria.

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