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Many big companies are still afraid to make the leap into the cloud, instead preferring time-tested legacy and on-premise apps. Some young companies doubt if it’s a good decision to invest their early capital in on-premises systems.

A one-size-fits-all approach is not the solution in this case.

To make informed decisions, company leaders need to understand cloud vs on-premise pros and cons, and where they fit into their business IT strategy. 

So, let’s start our on-premise vs cloud comparison.

On-Premise Software

on premise software pros and cons

On-premise software gives businesses more control over IT assets as the whole IT infrastructure (hardware and software) is hosted on-site. This way, organizations can maintain performance, security, and upkeep without third-party access.

Most frequently, organizations in highly regulated industries or those that keep confidential data use on-premises software to some degree. A common example is healthcare providers and hospitals that must strictly follow HIPAA compliance standards.

Benefits of On-premise

Despite the growing popularity of cloud computing, many companies choose on-premises as it gives business owners full physical control over infrastructure, and doesn’t require third-party access and monthly payments. Here are the key advantages of on-prem:

  • Full User Control

An on-premise setup provides users with full authority and control of assets which is in particularly important for organizations operating in tightly regulated sectors where privacy stands as a primary priority.

  • Individual Security Practices and Policies

Sectors handling highly sensitive data often opt for on-premises software due to the increased control it provides over security. This enables them to keep information contained within their own infrastructure.

  • Works Without Internet Connection

On-premises software remains accessible even without an internet connection, making it beneficial for locations with unreliable internet access. Additionally, multiple users can simultaneously access the system without compromising speed.

Limitations of On-premise

  • Dedicated Tech Support Required

Having complete control and management over all assets in an on-premises environment means the need for a dedicated IT support team within the organization. This internal IT support team plays a crucial role in implementing customized security policies devised by users, ensuring a tailored and robust approach to data protection and system management.

  • Initial Capital Investment and Ongoing Expenses

Users of on-premises software face both initial and ongoing expenses associated with space, servers, and additional equipment, including ongoing power consumption. The initial expenses involve the upfront investment in purchasing the necessary hardware and setting up the infrastructure. Beyond the initial software investment, ongoing costs must be carefully considered to ensure efficient and cost-effective long-term management.

  • Limited Remote Access

Setting up remote access could be challenging as users must be able to access on-premises systems from close to their place of employment. 

Cloud Computing

cloud computing pros and cons

Contrary to on-premises servers with storage, the cloud uses external servers that are managed by a third-party vendor. It’s a popular option among many companies due to its cost-effectiveness, scalability, and regular data backups. 

The cloud market falls mostly on the top three providers: AWS, Microsoft, and Google. According to Statista, as of the second quarter of 2023, Amazon takes 32% of worldwide cloud market share, Microsoft - 22%, and Google - 11%.
cloud computing market statistics

Benefits of Cloud

  • Control is Delegated to Vendor

A software vendor is taking responsibility for software updates and backups so the company doesn’t need an in-house IT team.

  • No Capital Expense

Unlike on-premises which is considered a capital expense and requires a big initial investment for equipment and installation, the cloud refers to operational expense. Users of the cloud pay only for the infrastructure they use without capital investment, only monthly subscriptions.

Public cloud also doesn’t require costs for system improvements, data center environmental controls, regulatory compliance certifications, and energy consumption.

  • Flexible Budget

Businesses can minimize their initial expenses by opting for monthly payments for cloud storage. Whether scaling up or down, most cloud-based storage providers can adapt their pricing to align with their budget. Moreover, the features of cloud storage can be customized, added, or omitted from plans, offering flexibility that suits companies anticipating changes and avoiding being tied to paying for unnecessary services.

  • Possible Remote Access

Users have the flexibility to access the system and their data from anywhere when there is an internet connection.

  • Regular Data Backups

Cloud-based servers provide a more straightforward data backup solution compared to on-premises servers. Even if users’ local files are deleted or their computers malfunction, they can retrieve the information. This capacity to access data that might otherwise be lost allows companies to reduce the risk of losing vital information. Additionally, regular data backups in the cloud contribute to a robust and secure data management strategy.

Limitations of Cloud

Though cloud computing offers numerous benefits, there are also some disadvantages:

  • Security Concerns

Moving to the cloud means handing over confidential data to a third-party vendor. Unfortunately, there also remains a risk of cloud software being hacked. For example, in 2014, Dropbox, a major storage provider experienced leakage of its customers’ confidential data as a result of a security glitch in its systems.

  • Works Only With Internet Access

In case of Internet connection failure, there is no access to remotely stored data which results in potentially costly downtime for businesses heavily dependent on cloud storage. Moreover, a slow Internet connection may lead to extended waiting times when attempting to access remotely stored data.

  • Complex Pricing Structures

There are subscription tiers and pricing models that make the total cost of ownership analysis tricky and time-consuming. 

Now, let’s sum up cloud vs on-premise pros and cons.

Cloud Categories

There are four main types of cloud computing: private clouds, public clouds, hybrid clouds, and multi-clouds, and three types of cloud computing services: Infrastructure-as-a-service, Platforms-as-a-service, and Software-as-a-service.

Some time ago, the difference among the types of cloud computing was exclusively in their location and ownership. However, it’s not that simple anymore.

cloud categories

Private Clouds

Private clouds are cloud environments dedicated to a single end-user or a group which are further divided into managed private clouds and dedicated clouds.

Before, private clouds were sourced exclusively from on-premise IT infrastructure. However, nowadays some organizations are investing into private clouds on rented, vendor-owned data centers located off-premises.

Such clouds provide advanced data security and make disaster recovery and system management more effective. However, they are quite expensive to maintain and require high costs for setting up IT infrastructure.

Public Clouds

Contrary to private clouds that provide computing services only to one organization, public clouds are managed by third-party vendors that sell computing services to multiple companies. The most popular examples include Google, Amazon Web Services, and Microsoft Azure.

Public clouds are very popular, especially among small businesses as they offer easy maintenance and scalability, and eliminate the need for businesses to set up their own IT infrastructure. However, in comparison to private clouds, offer limited flexibility and control for their customers.

Hybrid Clouds

While cloud-based vs on-premise in most cases are considered as competitors, they can also effectively work together.

Hybrid clouds enable the integration of private and public cloud features into one unified IT infrastructure. Private and public cloud environments from multiple vendors are united to provide users with scalable and flexible cloud environments and enhanced data security. While hybrid clouds reduce the costs of setting up IT infrastructure, they are still expensive as creating a complex IT environment leads to high operational expenses.


Multi-clouds bring together different public clouds from various cloud service providers. They are frequently confused with hybrid cloud that integrate the features of private and public clouds. Multi-clouds allow businesses to benefit from cloud services from different vendors, however, such inconsistent infrastructure creates bottlenecks in operational processes and has high-security risks associated with multiple third-parties being involved.

Key Differences between On-premise vs Cloud


In an on-premises environment hardware and software are deployed in-house within the company’s IT infrastructure.

In the public cloud, the company’s resources are hosted on the premises of the service provider but the company has the ability to access them at any given time.


On-premise data storage gives enterprises full control over their data. Consequently, industries that require additional privacy are more likely to opt for an on-premise environment.

In the cloud, the data and encryption keys are managed by the third-party provider. 


Comparing cloud vs on premise security is a loaded question.

Organizations that deploy on-premise data storage are responsible for the hardware and software stack. On the other hand, organizations that decide to migrate to the cloud share this responsibility with a software vendor. It’s important to remember that you don’t completely shift the responsibility for the security of your data to a vendor as some of the aspects are still handled by customers. The industry surveys name unauthorized access and the misuse of employee credentials as the biggest vulnerabilities in the cloud.

Sharing confidential data with a third-party vendor also brings some associated risks such as data loss and data leakage. However, modern cloud providers invest a lot of money and effort to ensure that their platforms are secure.


If to make a cloud vs on-premise cost comparison, it’s obvious that the deployment and maintenance of on-premise data centers is much more expensive than usage-based payments from cloud providers.

Cloud computing lowers overall operating costs as the cloud vendor is responsible for a lot of equipment and software management tasks. This includes servers, networking gear, software and security updates, cloud storage, etc. Using the public cloud also eliminates costs for system improvements, data center environmental controls, regulatory compliance certifications, energy consumption, and disaster recovery configurations.

However, cloud computing includes some non-trivial operating expenses. For example, IT teams often fail to adapt to complex pricing and security models. Costs for using compute memory and disc resources can add up very quickly in case of unexpected workloads increase.

It’s also important to take into account the labor costs in both models. While om-premises infrastructure requires in-house IT teams, cloud computing doesn’t completely eliminate support costs as there is still a need to handle administrative tasks. However, such costs are usually much lower in the cloud.


Compliance, like security, is a shared responsibility between the customer and the cloud provider. Typically, vendors provide compliance reports and attestations from third-party auditors for frameworks such as HIPAA and GDPR. However, organizations must collaborate with the vendor to gather the necessary supporting evidence to validate the data warehouse system's compliance with specific frameworks, aligning with the organization's unique auditing requirements.

While it might take more time to obtain the required evidence in a cloud environment, the advantage of shifting some regulatory compliance costs to the cloud vendor should outweigh any inconvenience.

Comparison of Cloud and On-premise

Now, let’s sum up. There doesn’t exist the same solution for two different organizations. The choice depends on a number of factors. For example, what your business is doing? How much can you spend? Do you want to invest in capital expenses or operating expenses? Do you have an IT team to support the infrastructure? And so on.

cloud vs on-premise

The best idea is still to advise a tech vendor who will analyze your specific case. Here is a table of comparison to guide you.

Find the Best Solution with inVerita

The choice between on-premise vs cloud depends on various factors. 

We believe that in the right hands, the cloud can be a fantastic means to keep the data safe from human error, and natural disasters, and save costs at the same time.

inVerita doesn’t just help businesses get into the cloud but also stay productive and secure there. If you need any assistance in choosing on-premises vs cloud, feel free to reach us for a consultation.
Frequently asked questions
Is cloud faster than on-premise?
The speed of cloud-based vs on-premise solutions depends on various factors, including the specific technologies used, network conditions, and the nature of the applications. In some cases, cloud solutions can offer advantages in terms of scalability and accessibility, but the actual speed comparison can vary based on the context and implementation details.
What is an example of an on-premise software?
Microsoft Office Suite is an example of on-premise software, where the software is installed and runs on the user's local computer rather than being accessed through a web browser or cloud service.
What is cheaper - an on-premise or cloud solution?
If to make a cost comparison cloud vs on-premise, cloud solutions generally have lower upfront costs and offer more scalability. Whereas on-premise solutions have higher initial expenses but could be more cost-effective in the long run for certain organizations with specific requirements. The choice depends on the specific needs of the organization, scale, maintenance requirements, and industry regulations. Sometimes, rather than choosing cloud versus on-premise, the best idea is to use a hybrid solution that combines both approaches.
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