Cloud vs. On Premise: Which is Better?

Steve Manjaly February 18, 2022
- 9 min read

With the wide range of services and flexible pricing models offered by providers, more and more organizations are moving their businesses to the cloud. According to Gartner, enterprise spending on the cloud has grown 18% in 2021 and is expected to be around 14.2 % of the total enterprise IT spending by 2024. With the growth of IoT, AI, and machine learning, we can expect more computing to shift to the cloud. 

But even with this widespread adoption, some organizations are still hesitant to switch from on-premise solutions. In this article, we explore the differences between cloud and on-premise solutions and why you should consider switching to completely cloud solutions.

How does a cloud solution work?

In very simple terms, a cloud solution delivers on-demand computing power or storage through a browser or a simple desktop interface. Here the software is installed in the vendors’ hardware and the vendor will manage the server systems, update the hardware, and make sure the solution is running, from a hardware perspective. The vendor will also handle the virtualization aspect in most cloud solutions, where virtual instances of a computer or software are generated from a single piece of hardware.

The specific implementation of a cloud solution varies according to the specific use case; most of the commonly used cloud solutions tend to be SaaS (Software-as-a-Service) where the vendor provides the software and the hardware through an internet connection. Software like Asana, Trello, Canva are all SaaS solutions. 

Another rising trend is PaaS or Platform-as-a-Service where the vendor essentially delivers computers through a browser. The organization can decide the operating system they want and install or develop their own software here. The PaaS market worldwide in 2021 was estimated to be around 80bn USD. With IaaS, the vendors give companies complete control over the hardware and software, including the virtualization. 

How does an on-premise solution work? 

In an on-premise solution, the organization maintains its own servers and hardware and purchases the license for the software (or develops it in-house). The organization will have a server management team who will take care of the physical hardware and its maintenance. The company will also have to manage the software deployment and security patches.

Depending on the licensing agreement, the organization may have to make periodic payments to get the next update or the vendor may offer free updates during the agreement.  

In the on-premise model, both the software and the data remain in companies’ hardware and are not handled by a third party. There are also some industries and sectors that have to use on-premise solutions to be compliant with regulatory norms. But often cloud vendors are able to afford better security compared to organizations deploying their own software on-premise. Traditionally, until the mid-2000s, most companies were reliant on on-premise solutions. And even now, most of the companies who use on-premise solutions are traditional enterprises that never switched, for varying reasonsAdvantages of cloud solutions

Cloud vs. on premise installation

Advantages of a cloud-based solution

Easier to avail the services

With a cloud solution, there’s no complicated installation process (mostly) and you don’t have to buy dedicated hardware or other equipment. Simply sign up, make the payment, and you’re good to go. This makes the cloud easily accessible, even for small businesses who otherwise will need their own IT team or server systems. 

Easier to manage - updates, patches

With cloud solutions, most vendors offer unlimited updates throughout the license period. But the best part is you don’t have to manually install and distribute the latest update in your organization. 

In an on-premise solution, it may not be easy to roll out an emergency update or a security patch. With a cloud solution, the vendor will take care of the whole process, and you can drastically reduce your security risk from delayed updates. 

Access from anywhere, anytime

Cloud solutions empower businesses to manage their expenses more efficiently. They don’t have to buy or update their servers or maintain their own server management team. And handling the licenses and the installation process is also pretty straightforward. 

No unnecessary investment

Organizations don’t have to invest in server hardware, networking equipment, server management team, or other expenses. They only have to take care of the software license fee, therefore reducing your IT asset management spend. And if a solution doesn’t work out, or if you need more features, it's mostly a case of canceling one subscription and starting another one(migration costs aside). Many cloud vendors also offer a pay-as-you-go model which means you don’t have to pay for the computing power you don’t use. 

Cloud solutions are highly scalable

When your organization is growing fast, an on-premise solution may find it difficult to catch up or apply continual improvement. You’ll have to make a lot of quick investments, get new hardware and software licenses, and deploy them throughout the organization. And the IT expenses alone can become a major investment during scale-up. 

With cloud, it's as simple as upgrading your license. No server updates, no installation. If needed, an organization may have to invest in new PCs to access the software, but that’s it. 

Advantages of on-premise solutions

Enhanced security and regulatory compliance

This is one of the prominent reasons why organizations in the government, financial, and health sectors have been reluctant to move to the cloud. But this is being contested by experts, as more vendors are offering highly secure and private cloud solutions. The argument is that, unless an organization has enough resources to maintain the servers, roll out the security patches on time, and ensure the physical safety of the servers, on-premise may not be safer than cloud. 

But on-premise certainly helps with regulatory compliances. Most authorities mandate on-premise solutions, and have specific criteria and specifications the cloud solutions of organizations in different industries have to adhere to. While it is possible to perform enough due diligence on your vendors, it may be easier to go with on-premise to ensure compliance. 

No dependency on internet connectivity

This is a major plus for organizations that need consistent access to their applications and simply cannot afford to have downtime. On-premise solutions are accessible even in the absence of internet connectivity, and systems that are isolated from the internet may even benefit from a security perspective. 

Disadvantages of on-premise solutions

Tend to be expensive 

There’s a lot of initial expenditure when you go for on-premise solutions. Organizations have to invest in hardware, physical security, and significant human resources before they even get started. Then there are the hardware maintenance costs, energy costs, and long-term expenses.  

Difficult to update and patch

In a cloud solution, updates and patches happen behind the scenes, often with the organization's knowledge. With on-premise solutions, the IT team has to manually install the updates and test all the devices to ensure they’re functioning properly. 

Takes longer to install and implement

Since setting up the hardware takes time, on-premise solutions generally take longer to implement when compared to cloud solutions. 

Difficult to scale

On-premise solutions are notoriously difficult and expensive to scale up, simply because of the time and resources needed to set up additional hardware. 

Benefits of cloud technology

Cloud vs on-premise: which is safer?

For a long time, the general consensus was been on-premise solutions offer more robust safety. But with more vendors offering cloud solutions, this has shifted rapidly. Cloud providers spend a significant amount of resources to ensure continued service delivery. And here’s how they’re changing the safety and security aspects of the debate. 


Most cloud services have multiple redundancies built into them. A single data center has multiple redundancies built in, in terms of power supply, computing power, and connectivity. And even if a natural disaster or sabotage wipes out an entire data center, cloud providers usually have copies of your data in multiple geographic locations. This level of redundancy is not easy to achieve on-premise, and certainly will be very expensive.  

Risk management 

In short, cloud providers have more resources for risk management. It may be prohibitively expensive for an individual organization to develop security measures, fail-safes, and contingencies like cloud providers do. 

Every data center have multiple levels of security baked into them, starting from physical security with 24/7 surveillance. They also have dedicated cybersecurity teams performing security tests and rolling out patches continuously. Every provider have analysts carefully managing the risks for all kinds of scenarios. 

Why should you consider moving to a fully-cloud solution?

Cloud simplifies IT for organizations in all senses. From a financial perspective, cloud solutions are less expensive compared to on-premise solutions. And there’s no initial investment or unexpected expenditures; it's fairly straightforward to calculate the expenditure from cloud solutions every month or every year. 

With cloud services, you pay for exactly what you use, unlike on-premise solutions which may need redundant hardware which will incur expenses even unused. 

It’s easy to install, maintain, and access a cloud solution. They are easier to update and they can be accessed through an internet browser. And organizations don’t have to worry about maintaining their hardware or dedicated human resources for ensuring continued IT services. 

Ease of use also means that organizations can rapidly deploy new solutions, test them, and if they're not working roll them back without significant losses. 

Cloud solutions also tend to be more secure with robust risk management protocols. Cloud providers have dedicated teams and resources to ensure a high level of redundancy and availability. Unless your organization have huge resources, migrating to the cloud will improve your digital security

Cloud solutions also offer more flexibility for organizations. During the pandemic, they provided organizations the flexibility to work remotely. Most SaaS solutions let teams collaborate in real-time right after signing up, without complex installations or network configuration. If you want to offer your SaaS product to multiple users, you need to choose either a single-tenant or SaaS multi-tenant architectural model.

Simply put, cloud solutions keep organizations robust and ready for change. In the fast-evolving world of IT, cloud helps you keep up with your competition, helps you scale up or adapt according to the business situations. 

Frequently asked questions

Are cloud solutions safe?

While cloud does have its risks, cloud providers dedicate extensive measures to keep customer data safe. They have dedicated risk management resources to mitigate all kinds of risks and come with multiple levels of redundancies. It’s difficult for an organization to achieve this level of security with on-premise. 

What are the benefits of moving to the cloud?

There are significant savings - both long term and short term - in terms of cost and human resources when an organization migrates to the cloud.

Organizations also tend to become more robust and flexible to adapt to rapidly changing market environments, they’re able to shift from one solution to another, or try out multiple solutions before deciding on one, without incurring huge expenses. There are also huge gains in the cybersecurity front when switching to the cloud. 

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