We build powerful dedicated teams depending on your needs: extending the lacking technology of your existing departments or providing full-cycle development.
Why do some companies still choose on-premises over cloud in 2024? Cloud vs. On-Premises Comparison
Jul 16, 2024
12 mins read
Roman Muzyka
Market Data Analyst
Serhii Harntsarik
SDO Director at Leobit
With a cloud technology market expected to exceed $1 trillion in 2027, we are witnessing the cloud-first era. Given this fact, the examples of reverse cloud migration (migrations from cloud to on-premises) may seem unusual. However, such cases exist and they are not as rare as we may think. In specific cases, a decision to migrate from cloud to on-premises proves to be very beneficial to businesses.
For example, a particular company was spending $3.2 million per year on cloud computing. By establishing an on-premises infrastructure with an upfront cost of $600.000 and migrating their entire system there, this enterprise managed to reduce their annual infrastructure costs to $720.000. And it is definitely not the only valid example.
On-premises is still alive, and there are particular cases when it fits businesses better than cloud solutions. In this article, we will explore the pros and cons of both cloud and on-premises models, compare their strengths and use cases, and prove that on-premises still remains a viable option in the software development industry.
Cloud vs. On-premises: Pros and Cons of Both Approaches
Let’s start with a general on-premises vs. cloud comparison. The amount of disadvantages can be minimized with the right approach to both deployment models. However, particular benefits and downsides are generally relevant to each of the two approaches.
Pros and cons of the cloud model
Cloud technologies are often displayed as supreme compared to on-premises. The cloud model offers numerous significant advantages over on-premises. However, it also has certain downsides that are relevant in the context of this comparison. The table below outlines both pros and cons of the cloud model.
Cloud model pros
Scalability and pay-as-you-go model that minimizes waste and optimizes costs
Reduced upfront cost (great for startups)
24/7 availability and accessibility from anywhere, top providers, such as Azure, AWS, or GCP grant 99.5% or even 99.9% availability
Maintenance and updates are handled by the provider, which reduces the burden of in-house IT staff
Security needs are covered by the provider
Disaster recovery, built-up redundancy, and backup solutions
Rapid deployment of new features offered by the provider
Cloud model cons
Less flexibility for implementing custom security measures
Lack of performance predictability because performance depends on the latency of your cloud providers infrastructure
Pros and cons of on-prem
Now, let’s proceed with the advantages and disadvantages of the on-premises model. While the modern boom for cloud migration has highlighted the cons of the on-premises approach, this model still has some significant benefits that help on-prem remain a viable rival to the cloud.
On-Premises Model Pros
Complete control over system customization
Physical control over data and infrastructure
Customization opportunities for better security
Generally faster performance with better performance predictability
Greater cost predictability
Cheaper cost in the long run
Easier integration with existing legacy systems
On-Premises Model Cons
Bigger upfront cost and cost of upgrades and maintenance
In most cases,the system is harder to scale
More staff and expertise are required for system maintenance and updates
Need for robust data backup and disaster recovery planning
Takes more time to implement
Physical space, servers, and computers required
Summarizing the Cloud vs. On-Premises Comparison
To sum up all of the above-mentioned factors, here is an ultimate comparison table presenting the cloud vs. on premises rivalry by the most critical parameters.
Cloud model
On-premises model
Costs
The upfront cost of cloud deployment is minimal, but cloud fees, which are often far from cheap, can mount over time and require cloud cost optimization.
Building an on-premises infrastructure requires a significant upfront investment, which many businesses may not have available. However, this investment may pay off over time compared to the cloud deployment model.
Security
Cloud offers you excellent system security, as all security concerns are handled by a cloud provider implementing the most up-to-date data protection practices.
Building a secure on-premises infrastructure requires much expertise because there are many configurations and practices to implement. However, companies relying on the on-premises model have more control and flexibility in terms of security, which is essential in the context of particular regulations and organizational requirements.
Availability
Cloud providers grant their clients 99.5% or even 99.9% availability of the system.
Availability of an on-premises model depends entirely on your data center or centers and your staff responsible for managing them. Generally, achieving the cloud-like levels of availability is challenging with this model.
Flexibility and scalability
The cloud model offers simple or even automated scaling. In addition, cloud systems are rather flexible and easily manageable within the extent of functionality offered by a cloud provider.
Scaling on-premises systems is more challenging than cloud systems. At least, you need to rely on your own specialists to handle it, as well as introduce any other changes to the system. However, in case you have the required expertise, there might be more system customization opportunities compared to the cloud model.
Expertise required
While dealing with the cloud model, you need specialists to deploy and configure your solution. However, many tasks, including system maintenance are covered by the provider, which means that there is no need to find specialists for many potentially challenging tasks
Your on-premises system entirely relies on the expertise and skill of your team. However, in case you have a solid team of experts, your flexibility in terms of configuring, optimizing, and controlling the system is almost unlimited.
Cloud vs. On-Premises: What to Choose?
With their pros and cons, both cloud and on-premises architecture models have ideal use cases. A clear understanding of your needs and capabilities helps you determine which approach fits you better and will benefit you in the long run.
When to opt for cloud deployment?
Let’s proceed with an overview of cases when cloud deployment is a fitting model for your business.
You are running a startup
Cloud-first strategy can be a great choice for startups. The primary notable benefit is that the upfront cost of deploying software to the cloud is much lower than the one of implementing an on-premises data center. In addition the cloud provider offers a ready-to-go infrastructure and handles all the maintenance tasks, which saves time and resources, things that are very limited in most startups. Also, startups often face unpredictable growth and fluctuating demands, which the cloud’s pay-as-you-go model accommodates seamlessly.
Another notable benefit of the cloud for such businesses is that it enables remote work and collaboration. Such things are essential for dynamic environments and startup teams with members working from different locations. No big staff is required to manage and maintain a cloud-based system, which means that startups can focus their limited resources and time on innovation and core business activities rather than IT infrastructure management. Such flexibility and efficiency make cloud computing an ideal choice for startups aiming to grow rapidly and adapt quickly to changing market conditions.
You can’t afford to pay a solid sum of money at once
Not only startups operate with limited resources. Many small-to-medium-size businesses also experience budget and staff limitations preventing them from establishing their own on-premises infrastructure. They just don’t have enough resources to buy premises, physical infrastructure, and hire a team of specialists responsible for system configuration, maintenance, monitoring, and security measures. For such businesses, the cloud is an opportunity to save upfront costs, get a manageable and flexible architecture, delegate most system maintenance and security management tasks to a cloud provider, and obtain access to the most recent cloud technologies allowing them to make a technical breakthrough at some point.
You are running a highly-dynamic businesses
Cloud means great flexibility because it allows businesses to easily scale their operations up or down on demand. In addition, cloud technologies allow companies to dynamically expand their data infrastructures by adding new services and technologies.
Cloud development is also a very appropriate approach for building a flexible microservices architecture and containerization that are quite efficient approaches for dynamic business development. With such architectural approaches, the system consists of isolated services that can be modified without altering the entire infrastructure, ensuring great flexibility and ability to respond to the emerging needs as fast as possible. Scalability and flexibility of the cloud make it a perfect choice for highly dynamic solutions belonging to either small businesses or large enterprises.
You are working in the geographical area exposed to emergencies
Data centers are exposed to emergencies, such as natural disasters, blackouts, etc. In case you don’t distribute your data centers, an emergency can be catastrophic for your on-premises system. Meanwhile, cloud providers have data centers all around the world, ensuring system continuity even in the most critical conditions. As a result, cloud providers offer robust disaster recovery and backup solutions. Many businesses operating from geographical areas with extremely unstable weather or sociopolitical conditions embrace on-premises to cloud migration in order to maintain operations in conditions of unexpected local disruptions.
When to opt for on-premises deployment?
As for the on-premises model, choose it in the following circumstances.
You are running an enterprise with a solid budget
For some enterprises, the upfront cost of establishing an on-premises data center is fully accessible. These are the companies with long-term development goals that want to save money in the long run. After all, contrary to popular belief, cloud technologies are far from being cheap. Cloud costs can mount over time, and, at some point, the cost of cloud services will overwhelm the potential cost of establishing an on-premises data center. Unfortunately, the upfront cost of such an initiative might be too big for many companies to afford all at once. This is why such an approach is more favorable for enterprises with significant budgets.
So, if you are running a well-established enterprise with long-term goals, the ability to spend a solid sum of money at once for building an on-premises data center, can easily handle any scaling activities on demand, and have specialists knowledgeable with the best security standards and capable of implementing them, you can opt for the on-premises model. This will bring you several benefits and, as has been already mentioned, help you save money in the long run.
You are running a company with steady long-term development goals
The on-premises model fits companies with long-term strategies planned in advance. The point is in predictability and control over the system this approach offers. Businesses benefit from the substantial initial investment in hardware and infrastructure by gaining complete control over their IT environment. This allows them to obtain tailored solutions adjusted to their unique business needs. For example, the on-premises model leaves much space for implementing customized security protocols and compliance measures for the protection of sensitive data.
Another important point is that on-premises infrastructures tend to be more predictable in terms of cost management. Such systems also offer superior performance and lower latency compared to cloud-based apps. High levels of stability and control are ideal for companies with a clear, steady strategy for continuous development over many months or even years.
You are launching an app that doesn’t require 24/7 availability
Contrary to popular belief, high application availability is, actually, not essential for all software products. Some solutions can easily have downtime for a few minutes a day without impacting the final user. While high availability is often cited as a very important benefit of cloud migration, there are cases where this parameter is far from being necessary.
Establishing high availability with the on-premises model is a much more challenging task than ensuring it with cloud technologies. Too much time should be spent on backup planning and control over the state of your infrastructure. However, in case your solution has a proper offline mode or its purpose and functionality just don’t require 24/7 user access, system downtime won’t be such a problem for you. So, if you are running such an app, for example, offline navigation software or a mere information page, you may opt for the control and strategic planning of on-premises servers rather than for the cloud infrastructure.
Your company is dealing with very specific security requirements
The on-premises model is ideally suited for companies operating under stringent regulations. The key point is that such an approach provides complete control over data security and compliance. This is peculiar to businesses working in healthcare, finance, and governmental domains. Quite often, such organizations need to keep their infrastructure and data in-house due to their high sensitivity. Such an approach allows them to implement customized security protocols and direct oversight, ensuring full compliance with industry-specific regulations. Physical control over the hardware ensures that sensitive data remains within a defined perimeter, which is also very important in terms of security.
Particular organizations, such as hospitals can go even further and create their internal network isolated from the rest of the Internet. Such networks, known as intranets, allow organizations to ensure efficient cooperation between the departments, keep all valuable information accessible to the employees, and provide shared access to valuable resources while keeping all parts of the system secured from external interventions. A quality intranet brings you many benefits, but this model also requires you to allocate reliable on-premises infrastructure with several backup servers and efficient system durability strategies.
Conclusions
Consequently, both cloud and on-premises models have their pros and cons, as well as ideal use cases. Cloud technologies bring more flexibility and are more suitable for startups and dynamic businesses, making more and more businesses choose cloud-first strategy or migrate to the cloud. However, some companies are leaving cloud because on-premises might be a better choice in terms of control and predictability, which makes it a perfect fit for enterprises with steady growth strategies or organizations operating under strict regulations. The key point is that it is still hard to pick the winner in the cloud vs. on-premises rivalry because both models remain viable.
And Leobit is ready to offer you teams that can implement both models. Depending on your needs, we will find the most suitable approach and help you leverage the most critical benefits of either cloud or on-premises systems tailored to your needs. Contact us and let’s find the way to build your ideal software infrastructure!
Authors
Roman Muzyka
Market Data Analyst
Roman has a deep passion for a wide array of subjects, spanning from market insights to in-depth technical examinations of complex projects. He dives deep into technical aspects of various solutions to extract valuable insights for business purposes, and he enjoys sharing tips and tricks with business owners to help them leverage advanced technologies effectively.
Serhii Harntsarik
SDO Director at Leobit
Serhii is an SDO director with over 13 years of experience. He has contributed to diverse projects across various technology stacks revolving around .NET and cloud computing. He is passionate about leveraging modern technologies, including AI, Blazor, MAUI, Svelte, developing flexible and robust architectures and is eager to assist others in advancing their tech skills.