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On Premises vs Cloud: Differences, Benefits, and Risks

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Organizations must make a number of decisions related to on-premises vs. cloud deployments. References to on-premises vs. cloud deployments are mostly related to software or infrastructure (i.e., the systems needed to support an organization’s IT needs, including storage, web and application servers, and networking resources).

For many organizations, the on-premises vs. cloud decision is an easy one—cloud. There are advantages and disadvantages of both.

On-premises vs. cloud decisions come down to where software and systems reside and who oversees operations. On-premises software and infrastructure are deployed locally with support, maintenance, and management that are handled by internal IT teams or consultants.

With cloud deployments of software and infrastructure, cloud software providers take care of operations and give organizations access to managed services.

On-Premises vs. Cloud Software Comparison

The most significant difference between on-premises vs. cloud software is that a cloud software provider hosts and maintains cloud software, while on-premises software is hosted and maintained in-house. A comparison of on-premises vs. cloud software deployment shows why one option might be a better fit than the other based on an organization’s specific requirements. 


  • Cloud software is noted for its low cost of entry. Organizations can access and use cloud software quickly and easily without an initial budgetary outlay to support implementation. However, it is important to consider the ongoing expense of the service. 

Cloud software is usually provided as a subscription and is based on the number of users. As users increase, costs go up, and even if licenses are not in use, the organization is charged. Additional fees come into play with customizations and increased storage requirements.

  • On-premises software represents the traditional implementation model. Organizations have an up-front cost for procuring hardware and funding the deployment efforts. The ongoing expense for on-premises software is mainly related to maintenance and support, as well as increased storage capacity if needed.  

Backup and Recovery

  • Cloud software usually includes automated backups. With cloud software, recovery is fast and easy for IT and users.
  • On-premises software requires organizations to invest in recovery systems, which can be costly. Additionally, IT is responsible for managing all backup operations and handling recovery in the event of an incident.

Customization and Upgrades

  • With cloud software, upgrades are usually included with the licenses. If customization is required, some can be performed independently. When more complex customization is needed, cloud software providers have expert resources to address organizations’ requirements.

    However, it is important to note that there are limits to what customization can be done to cloud software.
  • Upgrades to on-premises software require IT to handle the process, including planning, testing, and deployment. With regards to customization, on-premises software provides more flexibility and options. Organizations are able to develop highly-customized features to meet unique requirements.

Features and Functions

  • Cloud software provides a robust set of features and functionality that are available at the time of the initial roll-out. Or, most functionality can be easily added or removed at any time without requiring IT support. Many cloud software applications also offer analytics, which can mine the data to provide actionable insights. Analytics can also be used to gather information about usage patterns.
  • On-premises software comes with whatever out-of-the-box functionality is available. Additional features and functionality need to be developed and integrated by IT.   


  • A basic implementation of cloud software is fast and easy. Once licenses are in place, it is simply a matter of assigning admins, setting security parameters and permissions, then granting access to users.
  • On-premises software implementations are generally a longer process. IT teams must plan the implementation, identify resources, prepare hardware, test the software, roll it out to users, and provide support. If remote access is required, provisions will need to be made to support that functionality, since it is not part of the software package.

Maintenance and Support

  • Cloud software is fully supported by the cloud software provider. All maintenance and basic support are provided with licenses. This includes ensuring availability for day-to-day operations as well as meeting return-to-service commitments related to disaster recovery. If additional support is required, cloud software providers have experts available to assist.
  • On-premises software maintenance is the responsibility of the IT team. Depending on the organization and the software provider, support can be outsourced to the vendor. With on-premises software, organizations have more control over their solutions.


  • Cloud software is highly scalable. As capacity increases are needed, it is as simple as adding additional licenses and capacity to the subscription. Cloud software providers have the resources to accommodate this growth without impacting users or IT teams significantly.
  • On-premises software is more difficult to scale as it often requires significant IT support and could require additional hardware.

Security and Compliance

  • Experts agree that cloud software is not riskier than on-premises deployment from a security and compliance perspective. In fact, cloud software providers employ best-in-class security technologies to protect customers’ data and systems. In addition, most cloud software providers also provide reporting capabilities to meet various compliance requirements.
  • On-premises software is often considered more at risk, because many organizations do not have the resources to deploy or manage all of the required security solutions. Because of gaps in security coverage, many experts consider on-premises software to be at greater risk than cloud software.

Additional On-Premises vs. Cloud Comparison Considerations  

Deployed in a local environmentDeployed over the internet from a location determined by the cloud software provider  
The organization is responsible for maintaining the software The cloud software provider is responsible for maintaining the software 
The enterprise has complete control over the softwareThe enterprise does not have full control over the software
The organization bears the set-up and maintenance costsThe cloud software provider bears the set-up and maintenance costs
On-premises infrastructure is not easy to scale Cloud infrastructure is easy to scale 
Organizations have direct control over meeting compliance requirementsOrganizations must rely on cloud software providers to adhere to compliance requirements
On-premises software requires investment in hardware (i.e., purchase, support, and maintenance)Cloud software does not require hardware investment (i.e., purchase, support, and maintenance)
Software is licensed, and organizations have full access to itAccess to the software is provided on a subscription basis, and organizations have limited access to it
The organization is responsible for hardware and software updatesCloud software providers handle all hardware and software updates
Data resides locallyData is stored in the cloud software provider’s systems
Data is easily portable to and from other applications and servicesData is not easily portable to and from other applications and services
Internal standards are adhered toCloud software providers’ standards may not match internal standards

Cloud Software Advantages and Disadvantages

7 Advantages of Cloud Software

1. Ability to manage IT resources as operating expenditures (OPEX) versus capital expenditures (CAPEX)

2. Additional features are often on-demand, so only pay for what is needed

3. Data security provided 

4. Easily scalable

5. No need for onsite hardware or capital expenses 

6. Regular data backups to minimize data losses in disaster situations 

7. Users can connect from anywhere, using any computer, tablet, or smartphone 

7 Disadvantages of Cloud Software

1. Access contingent on having an internet connection

2. Cost can outweigh the benefits for organizations without uptime requirements

3. Data can be vulnerable when transferred between users and cloud software providers

4. Limited to no support for older versions of software

5. Third-party cloud software providers could have direct access to data 

6. User experience is limited by the speed of the internet connection 

7. Complications with adherence to compliance requirements

Advantages and Disadvantages of On-Premises Deployments

8 Advantages of On-Premises Deployments

1. Ability to implement any customizations

2. Adherence to compliance requirements

3. Control of the upgrades

4. Critical data kept in-house  

5. Data protection managed directly

6. Internet connection is not required to access data 

7. More cost-effective, if uptime is not a priority

8. Physical control retained over systems 

8 Disadvantages of On-Premises Deployments

1. Appropriate space required to store servers

2. Capital investment in hardware and infrastructure

3. Data protection limited to available resources

4. Dedicated IT support required

5. Expensive hardware is required to run software optimally

6. Knowledge base needs to be developed and maintained 

7. No uptime guarantees

8. Ongoing testing required

Is Cloud Better than On-Premises Software?

Most experts agree that cloud software is better than on-premises. A few exceptions are for organizations that handle highly-sensitive information or systems (e.g., some government and banking organizations) that cannot interact with the public internet. 

Arguably the most compelling reason is security. Few organizations have the budget or expertise to implement the security measures required to defend against advanced persistent threats or meet most compliance requirements. Providing security for on-premises is so costly that it is deemed virtually impossible. 

Several reasons why on-premises vs. cloud software assessments determine that the cloud is better are as follows:


High availability is a must-have, and cloud software delivers. This is because cloud software providers can store data in multiple, geo-diverse data centers with redundancy embedded in all systems. Cloud software providers can also provide virtualization on demand, which allows them to easily migrate between multiple servers in the event of a failure or a need for increased storage.

Physical security  

Cloud software providers host software in highly-secured data centers that are built with physical protections, such as guards, mantraps, and locked cages for hardware.

24/7 staffing

Cloud software providers can provide around-the-clock staffing to monitor security systems and respond to potential threats.

Network segmentation  

When software is hosted in the cloud, workstations are segmented. This network segmentation discourages phishing or other email-based attacks from spreading.  


Most cloud software providers offer encryption capabilities that organizations struggle to manage and support.

This results in increased use of encryption, which helps prevent data exposure.

Consistent security updates

Cloud software providers have the systems and resources to keep up with patches and other system updates. This reduces vulnerabilities that are commonly exploited by cybercriminals.  

Other notable reasons for experts’ position that the cloud is better than on-premises software are:

  • Agility
  • Cost reduction
  • Ease of use
  • Efficiency
  • Flexibility
  • Rapid deployment
  • Resource optimization, especially for IT staff
  • Scalability
  • Flexible storage capacity

Choosing Between On-Premises and Cloud

The debate between on-premises vs. cloud is ongoing and driven by advocates on both sides. The reality is that there are pros and cons to on-premises vs. cloud deployments. Organizations need to assess their requirements and choose a model that best addresses their particular needs.


On-premises vs. cloud budget considerations include:

  • What is the total cost per user for on-premises vs. cloud software?
  • What are projected data storage requirements?
  • Can existing resources take on the management of on-premises software?
  • What is management’s position on on-premises vs. cloud software?

Backup and Recovery

On-premises vs. cloud backup and recovery considerations include:

  • Does the organization have to adhere to service level agreements (SLAs)?
  • Does the solution meet the organization’s backup and recovery requirements (e.g., redundancy, recovery time)?
  • Does the solution provide the necessary security to meet privacy other requirements for sensitive data?
  • Does the solution offer ransomware protection?
  • Does the backup support data governance requirements?

Customization and Upgrades

On-premises vs. cloud customization and upgrades considerations include:

  • Are internal resources available to support customization and ongoing upgrades?
  • Does existing hardware have the capacity to support upgrades and customizations?
  • Will software upgrades impact users? 
  • Is the timing of software upgrades a concern? 
  • Can upgrades be tested before being implemented in cloud software?

Features and Functions

On-premises vs. cloud functionality considerations include: 

  • What kind of features do users require today?
  • Will these requirements change over time?
  • Can future changes be accommodated with the solution?
  • In the case of on-premises software, are resources (i.e., people, budget) available to make changes and updates as well as provide ongoing maintenance?


On-premises vs. cloud implementation considerations include: 

  • How many users will access the application?
  • Is remote access required?
  • Are resources available to support an on-premises deployment of the software?
  • Who will establish the security parameters for the software, including permissions and access controls?
  • Are there data governance considerations for the software deployment?
  • Is sufficient connectivity (i.e., high-speed internet) to support cloud software?

Maintenance and Support

On-premises vs. cloud maintenance and support considerations include: 

  • Does the software vendor offer support for on-premises deployments?
  • Does the organization have special requirements for data handling in cloud deployments? 


On-premises vs. cloud functionality considerations include: 

  • What is required to adjust the storage capacity as needs grow?
  • Are there resources available to fund and deploy additional systems (e.g., servers, hardware, migration workloads, storage capacity, CPUs) to provide increased capacity?

Security and Compliance

On-premises vs. cloud security and compliance considerations include: 

  • How much budget is available to procure and support security solutions?
  • Do the security solutions meet the compliance requirements (e.g., government, industry, internal)?

Understand On-Premises vs. Cloud to Find the Right Solutions

Both on-premises and cloud solutions have their advantages and disadvantages. For many organizations, the on-premises vs. cloud decision is an easy one—cloud. This is because cloud solutions offer robust capabilities and scalability that give many organizations what they need to run their operations. 

For other organizations, the sensitivity of their work and data makes on-premises solutions the right choice. Most organizations find hybrid deployments to be the best way to serve their users and effectively support operations. Regardless of which option is selected, or if a combination of both options is selected, understanding the whys behind on-premises vs. cloud is a valuable exercise that will ensure that the right option is selected.

Egnyte has experts ready to answer your questions. For more than a decade, Egnyte has helped more than 16,000 customers with millions of customers worldwide.

Last Updated: 9th June, 2022

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