As IT teams consider the best resources for deploying cloud workloads, the choice often comes down to on-premises vs. cloud infrastructure. Public cloud resources offer extraordinary scalability, lower costs and access to next-generation technologies. Private cloud or on-premise infrastructure provides more control, security and visibility.
However, when it comes to software computing, there is not much difference. Simply put, the difference between on-premises vs cloud software is the location.
On-premise software is installed and runs on a company’s own hardware infrastructure, and is hosted locally, whereas cloud software is stored and managed on the provider’s servers, and accessed through a web browser or other interface.
Understanding on-premises computing
On-premise infrastructure, or private cloud, is a cloud environment that is available for use only by one client. Rather than sharing a pool of resources with multiple customers, companies have complete access to all the resources that a private cloud provides.
Private clouds may be located within an organization’s data center, or located off-site and managed by a third party. They provide a more secure environment that can simplify compliance with stringent regulations. They also simplify data governance and data locality issues and can deliver high SLA performance and efficiency.
This computing model consists of software downloaded to a physical device an organization owns. People often use the term in reference to an organization’s data centers, including corporate-owned servers, networking systems, and system components. Additionally, on-premises can refer to internally designed applications specific to the organization’s use cases.
Understanding cloud computing
Cloud computing is a model where another organization owns the servers, storage, databases, and software, delivering them “as-a-service” to customers. Instead of owning the hardware and software, the organization pays to use the services when it needs them.
Cloud infrastructure, or public cloud solutions, provide elastic computing resources on demand with pay-as-you-go pricing that offers considerable cost savings for enterprise computing. Public cloud solutions are fully managed by third-party providers, relieving IT teams of the need to purchase, install, manage and upgrade technology on-site.
Public cloud offerings can scale easily to meet unpredictable workload demands and provide high-reliability thanks to a great amount of redundancy. Also, public clouds can provide access to next-generation services like AI/ML, containers, blockchain, serverless computing and cloud-native applications.
Some services that organizations pay for using this on-demand model include:
- Computing power
- Storage
- Databases
Three types of cloud service models exist:
- Infrastructure-as-a-Service (IaaS). Pay to use the servers, virtual machines (VMs), storage, networks, and operating systems.
- Platform-as-a-Service (PaaS). Pay to use on-demand services for developing software, including testing, delivering, and managing software applications.
- Software-as-a-Service (SaaS). Subscription-based software accessed from the internet that includes maintenance as part of the cost.
Additionally, cloud computing incorporates the following types of technologies:
- Workloads. Cloud-deployed applications, services, or other resources running in the cloud, including VMs and databases.
- Serverless. Also called “Function-as-a-Service” (FaaS), serverless breaks up cloud-hosted applications according to components to be used on an as-needed basis as a way to reduce compute resources when the application is not in use.
- Containers. An alternative to VMs that integrate all software component dependencies, running them in an environment isolated from the physical environment.
On-Premises vs Cloud: Understanding the differences
Cloud and on-premises deployments both run applications and enable business operations. However, they have several important differences. These include security, maintenance and management, resource availability, payment models, and financial accounting.
Security
Security across cloud and on-premises deployments is one area with no clear winner. Each deployment has its own benefits and costs which is why leadership needs to understand them before making a decision.
On-premises
In an on-prem deployment, the organization has total ownership over security. If the company has the security resources, this gives it a better way to mitigate risk. However, it also makes them entirely responsible for maintaining and monitoring security continuously.
Many organizations looking to improve on-premises data center security leverage managed detection and response service providers.
Cloud
Cloud application security is a shared responsibility. Under this model:
- Service providers are responsible for the security of the cloud resource, meaning responsible for any vulnerabilities impacting the infrastructure or hardware they own.
- Buyers are responsible for security in the cloud resource, meaning responsible for access to sensitive information within the resource.
For example, if a threat actor exploits a vulnerability in a server owned by the cloud provider that leads to a data breach, the provider is responsible. If the threat actor exploits a misconfiguration managed by the buyer, then the buyer is responsible.
Maintenance and management
Understanding the different maintenance needs for each deployment type can help you make informed IT decisions.
On-premises
Since the organization owns the software, firmware, or hardware, it is responsible for all maintenance activities. These activities include installing security patch updates, maintaining data center availability, and responding to service requests.
Cloud
When utilizing SaaS, the service provider pushes updates to the cloud resource without end users needing to act on their own. Organizations transfer responsibility for vulnerability patches, uptime, and backup to the service provider.
However, when using an IaaS or PaaS provider, organizations are responsible for maintaining and securing applications and workloads within the cloud environment.
Resource availability
Resource availability is the primary differentiation point between cloud and on-premises deployments.
On-premises
On-premises resources offer finite storage and computing power. Since on-prem resources like servers have limited memory, organizations need to consider the way in which they want to use them and how long they think they will maintain them. Often, this leads to underspending or overspending.
It also limits things like application, database, and storage use.
Cloud
When companies move to the cloud, they often do it because the cloud is “scalable.” Gartner defines scalability as a system’s ability to increase or decrease in performance and cost in response to changes in application and system processing demands.
In other words, organizations can use as much computing power, storage, and services as they need at any given time. Since the cloud provides on-demand services, companies are not limited to the capabilities of their existing hardware. As the company’s computing needs grow, they can add more resources.
Payment model
Many organizations struggle when they move to the cloud because of how they pay for services.
On-premises
On-premises software often uses a licensing model. With licenses, an organization pays a flat usage fee, giving them the ability to distribute the software to as many workforce members as they want during the license period.
The main license models are:
- Perpetual: usually applied to a specific software version based on a one-time purchase with unlimited use forever
- Floating: defined number of licenses that can be used by anyone who needs them until are licenses are in use
- Subscription: periodic payment model that automatically renews at the end of the payment period
While most organizations can manage license models easily, they often come with their own problems, including:
- Inability to obtain security updates or customer support for operating systems or software after provider-supplied end-of-service data
- Increased upfront costs
- Data loss risk
Cloud
Cloud resources use either a subscription-based or usage-based pricing model:
- Subscription: either a flat fee per organization or person for a year
- Usage: amount of computing resources consumed during a given time period, often monthly
As organizations migrate to the cloud, many find they may include:
- Unexpectedly need to add more users (seats) as new workforce members are onboarded
- Inability to track cloud usage
- Inability to right-size or appropriately estimate usage
- Improper auto-scaling, or inability to automate the appropriate amount of usage needed for tasks
Financial accounting
The differences in computing decisions also impact financial reporting and forecasting. In many ways, this difference is one of the most difficult paradigm shifts organizations face.
On-premises
On-prem technologies are considered capital expenditures (CapEx). The organization pays the total cost for the technology upfront, then the value reduces over time.
While OPEX offers flexibility, the variability can be difficult to manage, especially if the company struggles to manage cloud costs efficiently. CapEx is a fixed cost with quantifiable depreciation values, making long-term financial forecasting easier.
With CapEx linked to income and profitability, moving away from on-premises computing requires an accounting paradigm shift that many organizations struggle with.
Cloud
Operating expenditures (OPEX) are the everyday costs businesses incur. Generally, these costs cover products and services with a limited lifespan that an organization consumes regularly.
The cloud’s scalability and shorter-term subscription-based pricing mean many organizations report these services as OPEX. In doing so, organizations have greater flexibility and more opportunity to make changes to their IT services than they would otherwise. If the organization can appropriately control cloud costs, then it can reduce its operating ratio, indicating financial efficiency.
On-premises vs cloud computing: cost differences
Cloud and on-prem technologies differ as do the costs associated with them. Although many of the cost differences arise from how the technologies work, drilling into them more specifically provides additional insight as an organization looks to migrate its operations.
Hardware
Hardware consists of the physical devices an organization uses to run the technology.
On-premises
With on-prem deployments, the organization needs to pay for the hardware. This means that despite the depreciation over time, the organization has to consider the longer-term replacement costs. This can create a challenge when hardware fails earlier than expected or is compromised.
Cloud
The good news for organizations — and one of the reasons for increased cloud adoption — is the cloud requires no physical hardware. Fundamentally, the organization gets to take advantage of the benefits while the cloud takes care of the hardware.
Maintenance
Maintenance costs also differ between cloud and on-prem deployments, especially when considering the cybersecurity and IT skills gap.
On-premises
Since the organization owns and controls the hardware, it pays all maintenance costs. These costs include:
- Hiring staff to maintain uptime and ensure secure hardware, software, and firmware configurations
- Hiring security staff to monitor for new risks
- Time spent pushing security updates to devices
- Time spent responding to service issues
Cloud
The cloud services provider pays for the hardware, software, and firmware upkeep, passing that on in the subscription cost. However, organizations should consider the costs associated with:
- Meeting shared responsibility security requirements
- Hiring staff with expertise in specific cloud environments (e.g., AWS or Azure)
- Leveraging a third party to identify and manage cloud vulnerabilities and threats
On-Premises vs Cloud: Benefits and drawbacks of on-premises computing
Advantages of computing on-site
- Controlling and protecting data in on-site setups. On-premises setups let companies handle their data and security steps directly. This can be especially important for businesses that must follow strict rules or take private data. By having their data in their own physical surroundings, organizations can put in place and adjust security measures to their exact needs.
- Predictable Performance and Low-Latency Access to Data. With on-premises technology, businesses have direct control over hardware and network settings, which makes performance predictable.
- Customizable and Flexible On-Premises Infrastructure Organizations can change their on-premises architecture to fit their needs. This includes choosing hardware components, networking gear, and software solutions that meet their needs. This level of personalization can help improve speed and better use of resources.
Drawbacks of on-premises computing
- High initial costs and capital expenses. Setting up a system on-premises requires a lot of money upfront. Organizations must spend money on tools, networking equipment, and other systems parts. This investment can be expensive, especially for small enterprises or businesses with limited funds.
- Limited scale and the possibility of overprovisioning. On-premises setups may have trouble scaling significantly when resource demand increases quickly. Organizations must correctly predict what they will need in the future. If they overestimate, they may have more resources than they need; if they underestimate, they may run into performance problems.
- IT management and maintenance complexities. On-premises equipment must be managed and maintained constantly. This means keeping the hardware in excellent condition, updating the software, adding security patches, and fixing problems. Organizations need skilled IT staff to handle these jobs, which can add to business costs and resource use.
On-Premises vs Cloud: Benefits and drawbacks of cloud computing
Advantages of Cloud Computing
- Cost-Effectiveness and Flexible Pricing. Cloud computing offers an intelligent way to manage costs, as you only pay for what you use. This eliminates the need for significant upfront investments in hardware. The pay-as-you-go model allows for flexible resource scaling to manage expenses.
- Easy Scaling and Adaptability. The cloud’s scalability is a game-changer. You can quickly adjust your resources to match demand, avoiding wasteful overprovisioning. This flexibility is beneficial during busy times or growth spurts.
- Global Access and Collaboration. Cloud services are accessible from anywhere with an internet connection. This opens up opportunities for remote work and seamless collaboration across different locations, supporting modern business methods.
Drawbacks of Cloud Computing
- Security and Privacy Considerations. Entrusting sensitive data to the cloud raises valid security and privacy concerns. While cloud providers have strong security measures, you still need to place confidence in them. Adhering to industry standards and regulations is vital to manage these risks.
- Reliance on Internet Connectivity and Downtime Risk. Cloud services rely on Internet access. Operations can halt if your connection goes down or the cloud provider experiences an outage. This underscores the importance of backup plans and ensuring continuous access.
- Navigating Compliance in a Global Context. Data hosted in the cloud might be subject to the laws of the countries where the cloud provider operates. This can lead to complexities, especially if data spans various regions with differing legal requirements.
On-Premises vs Cloud: In conclusion
Deciding between managing your infrastructure and embracing cloud solutions is about finding the best fit for your needs. Some companies opt for a mix of both approaches, benefiting from the cloud’s agility while addressing concerns through hybrid strategies.
By understanding the benefits and challenges of on-premises and cloud computing, you can make well-informed choices aligned with your goals and resources.
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