On-premise and cloud infrastructures can both be used for computing and data storage.

According to Aberdeen Group, 70% of U.S. companies invest in cloud solutions, with such industry leaders as Netflix, Airbnb, Uber, Booking, and Facebook leading the way.

As stated by a Gartner market forecast, the worldwide revenue of the public cloud services has increased by nearly 19% to reach $246.8 billion in 2017, while its total revenue is projected to hit $411.4 billion by 2020.

In the meantime, Microsoft, Oracle, and corporate institutions, such as banks, insurance, and oil production companies opt to rely on customized on-premise solutions (i.e. in-house servers).

On-premise and cloud are two completely different solutions, yet with one single goal in common — implement a lean and agile IT structure that meets a company’s multiple needs without overburdening the business with its cost.

In this context, cloud allows for implementing lean, agile, and flexible integration networks at an affordable cost, which often makes it the best option for small and medium enterprises.

But what about enterprise-level organizations and businesses with strict data requirements? Do they benefit from the cloud? Should they opt for on premise instead?

The answer is, it depends.

To figure out if you need to utilize public cloud, on-premise, or a hybrid cloud that combines both, you have to assess your business objectives, research infrastructure requirements, and analyze major pros and cons of each approach.

To assist you in making an educated decision, we have listed major differences of cloud and on-premise solutions, analyzed their advantages and disadvantages, as well as provided our perspective on cloud in context of Big Data and DevOps.

Major Differences of Cloud and On-premise Solutions:

#1 Housing

In case of on premise, physical servers are generally stored on site.

While this is convenient, since the company has direct access to the servers and all data that is kept on them, businesses should employ technical staff to maintain, repair, and manage their servers.

In the meantime, cloud providers are responsible for all aspects of cloud server management. They have to upgrade, cool, power, maintain, and repair the accommodated servers.

Note that blackouts can happen to both solutions. Cloud servers are easily scalable when there is no opportunity to install a new server site.

#2 Management

Purchasing your own equipment to implement the on-premise solution is easier said than done. Not only does it require the proper infrastructure in place, but also investment in servers, software, and salaries of employees who deploy and maintain it.

This basically means that companies risk it when opt to invest in their own on-premise system. Should a project fail, the company will never return the money it has already spent on shipment, servers installation, software fine-tuning, and salaries of employees involved.

On the contrary, if a project that is built in the cloud fails, the business does not risk anything, other than a subscription fee to use its virtual infrastructure.

When it comes to the implementation of a wide infrastructure, a cloud’s virtual environment is much easier to manage and service.

For instance, though Microsoft is an active proponent of on-premise systems, in reality it utilizes cloud solutions as well. Utilizing the power of the cloud, one system administrator can serve ten times as many cloud machines than on-premise physical servers.

In addition to that, support services, such as the installation of drives and adding new machines, are performed much faster in the cloud. Anyone can get a cloud server anytime, while it takes at least a few weeks to purchase and deploy an on-premise server.

#3 Application Delivery and Workflow

As a rule, cloud solutions benefit from better application delivery and workflow, since they are managed easier and deployed faster.

Enterprise-level organizations can benefit from running their applications in the cloud, because:

  1. Cloud offers barely unlimited space
  2. It allows launching new applications in no time
  3. It enables companies to run storage updates without buying new hardware for their own data center

A company’s own servers may not be powerful enough to run and deploy workloads that are crucial for maintaining an efficient application development process. As an intermediary solution, the company’s servers can be partially reinforced by the cloud where they can test and run the required workloads.

#4 Energy

The average cost of a server in the U.S. is $731.94 p/month, with maintenance not included. The power costs are projected to grow by 10% annually, driven by the increase of electricity cost per kilowatt-hour (kWh).

When an average on-premise solution uses ~ 10-20% of a server’s power, but the server consumes 100% of energy needed for its operation, small and medium enterprises end up paying electricity bills to manage servers they rarely use to their full potential. This is not cost-efficient and can become a deal breaker per se.

In case of the cloud, electricity and maintenance are the responsibility of the service provider.

To reduce power consumption, corporate businesses have started to adopt new airflow management techniques. The liquid-based cooling is getting popular, too. It is efficient and allows to consume less energy than the air-based cooling.

Microgrids are another energy-saving solution. According to GTM research, in 2018 companies will invest $12 million dollars in microgrids to cut their electricity bills. In that regard, the energy cost of cloud and on-premise servers will likely to level up.


#5 Bandwidth and Capacity

Every now and then, technical and IT staff lack bandwidth to deploy apps, or a certain amount of data while using the computing environment.

Cloud solutions enable companies to increase the size and capacity of storages by adding virtual servers, networks, and installing virtual routers. Note that virtual routers can be chosen as a more reasonable and cheap solution, rather than upgrading a cloud plan.

In case of on-premise solutions, bandwidth and capacity can be increased physically by putting new servers in operation.

While this can be challenging, on-premise allows companies to build customized configurations to resolve specific issues, especially when it comes to security. In the cloud, however, businesses are usually given a choice from the vendor and may not find the required configuration.

Google or Microsoft prefer to compute cycle because their traffic is steady, massive, and reliable. They can run any soft they need to use an old OS or application.

#6 Deep Freeze

Malware, critical situations, and technical issues can cause problems in using both cloud and on-premise.

Deep Freeze Cloud allows to reboot or restore software and data in the virtual environment. Any employee can easily deploy and complete the process, install upgrades either on-premise or on cloud.

Opting to use the on-premise infrastructure, however, the owner is totally responsible for their company’s security and privacy needs, access control and instant access to the data.

Cloud vs. On-Premise Infrastructure: What to Choose?

AWS is a leading cloud environment. With 1,000,000+ active users, its quarterly revenue grew at a solid clip of 49% to reach $6.1 billion in Q2, 2018.

While Microsoft does not reveal figures for Azure, it benefits from companies that use Windows, which helps Azure build a strong ecosystem and enter into lucrative agreements.

With that in mind, data centers continue to increase investment in building cost-efficient infrastructures using AFM, DCIM, liquid cooling, and microgrids. Since edge data centers are becoming more efficient, companies remove legacy hardware and replace it with converged systems.

With mass appeal of cloud integration, data centers become a vital part of a growing cloud infrastructure. Small and medium businesses find installing their own data centers expensive and useless, since they do not use them to their full potential.

With that said, it is clear why companies should choose cloud over on-premise, or opt for on premise vs. cloud systems wisely.

Cloud is a great tool for development, processing big data, and urgent scalability at an affordable cost. And yet, while it is making a bigger splash than on premise, data centers are still in demand. They are improved and customized to get integrated with the cloud, which creates a natural convergence of cloud and on-premise infrastructures called hybrid cloud.

Choose which infrastructure suits the needs of your business best with this simple framework in mind.

Nick Kartman

Technology evangelist passionate about DevOps, Big Data, ML, and Cloud. An avid contributor to the Squadex blog.