Cloud vs. On-Premise: Which Is Better For Your Business?
Cloud adoption rates have been on a constant upward trajectory ever since the pandemic.
What began as 61% of businesses migrating their workloads to the cloud in 2020 quickly rose to 94% in 2022. Unsurprisingly, the cloud computing market is projected to grow at a Compound Annual Growth Rate (CAGR) of 16.3% and reach $947.3 billion by 2026.
Though the cloud is remarkable in several aspects, many businesses still leverage traditional on-premise solutions to safeguard sensitive data and control critical business systems. In such a scenario, which approach should you choose for your enterprise? Should you transition to the cloud, or stick to the traditional on-premise systems?
The key to reaching a decision lies in understanding the major differences between cloud vs. on-premise computing and how they compare to your business needs. There will always be trade-offs to either option—so, a clear idea of your business goals and the aspects you are willing to compromise will help you narrow down to your ideal solution.
Source: Statista [Cloud Computing Growth]
What is On-Premise Computing?
On-premise computing is a tried-and-true approach that has stood the test of time in information technology. It refers to housing and managing your computing infrastructure (hardware and software) on-site, typically in a room or closet full of servers. So, instead of using remote servers connected via the internet, everything is located within your office or data centre, giving you complete control over the infrastructure and data.
Pros of On-Premise Computing
While the cloud has been all the rage for the past decade, some companies still prefer on-premise solutions. If you resonate with any of the following scenarios, on-premise computing may be a viable option for your organization.
1) You value control and data security
With on-premise computing, all your IT infrastructure is physically located on-site. This means the data is also stored locally and doesn’t leave your enterprise, giving you complete control over your data and its security.
This level of control is particularly great for organizations that handle sensitive data or operate in highly regulated industries, such as healthcare or finance. For instance, all healthcare organizations handling sensitive patient data must adhere to stringent regulations such as HIA (Healthcare Information Act of Canada) and HIPAA (Health Insurance Portability and Accountability Act of the US). So, keeping their systems on-premise can ensure compliance with confidentiality regulations and data protection throughout its entire lifecycle.
2) You don’t want external factors hindering your business processes
A significant upside of on-premise computing is that it isn’t dependent on external factors to function (with some caveat, covered below). Local storage of data means that the Internet isn’t required to access data. Instead, on-premise servers feature an internal network that can be accessed anytime, regardless of internet connection. This makes it an ideal choice for enterprises that fear the loss of internet connection could harm productivity.
Furthermore, businesses that have their dedicated servers on-site enjoy the ability to decide when maintenance and upgrades happen. With the cloud, maintenance, and repairs are scheduled and executed by the service providers and might happen at a time inconvenient for your business, potentially disrupting operations.
Cons of On-Premise Computing
Despite the advantages, on-premise computing has several drawbacks to consider as well (remember those caveats we mentioned?). Let's dive in.
1) Higher total cost of ownership
Installing an on-premise infrastructure requires a significant upfront investment in hardware, software, and other equipment. Though you only pay for these expenses once (until the equipment reaches end of life), it can be a substantial challenge for small-to-medium-sized businesses or newer companies.
Apart from the initial investment, you are responsible for ongoing maintenance, upgrades, and repairs of your on-premise solution. This means constantly purchasing the necessary servers, licenses, and hardware and employing dedicated staff to oversee the process. These costs can add up—major!
2) There’s a limit to scaling the infrastructure
Unlike the cloud, scaling on-premise servers is costly, requiring additional hardware procurement and setup. It's also a time-consuming process, which limits your ability to quickly respond to major fluctuations in demand—often leading to over- or under-spending.
3) Limited geographical flexibility
On-premise solutions are tied to physical locations. In the age of remote work, this can be a significant hurdle that limits remote access and collaboration. If your business model relies solely on employees working in the office, on-premise may be a viable solution. But if you're living in the modern world where employees prefer to work anywhere, anytime from internet-connected devices, on-premise will only be a hindrance.
What is Cloud Computing?
Cloud computing refers to the delivery of services (servers, software, databases, etc.) over the Internet. In other words, instead of setting up an IT infrastructure, enterprises rent space to store data and systems from a cloud services provider, such as Microsoft Azure.
Pros of Cloud Computing
To better understand cloud computing and why it would make a perfect choice for your business, let’s look at its best features.
1) It scales with your business
Cloud computing offers unparalleled scalability, allowing you to effortlessly expand or shrink your resources based on your business needs. For instance, a retailer preparing for a sudden surge in demand can quickly scale up their server capacity for a chosen period of time. On the other hand, during periods of low activity, the infrastructure can be scaled down for cost optimization.
This much-needed flexibility makes the cloud a perfect choice for small-to-medium-sized businesses, as they can easily eliminate the need for costly over-provisioning or under-utilized servers.
2) It helps you cut down on costs
With on-premise solutions, businesses often have to invest heavily at the initial stage for procuring and installing the hardware and software infrastructure. In addition, there will be costs associated with maintenance and upgrades. Cloud, on the other hand, features a pay-as-you-go model so you don’t pay a hefty fee upfront. Instead, you'll choose a plan that aligns with your actual usage and pay for it on a monthly or annual basis.
And since cloud computing leverages the internet, there is no associated hardware or software that the enterprise should maintain in-house. This further eliminates repair and upgrading costs.
3) It paves the way for remote collaboration
Cloud computing breaks down geographical barriers and helps team members collaborate regardless of location. In the age of remote working, this is a much-needed feature to enhance productivity and flexibility. Rather than needing to be in the office to access files through ethernet-connected devices, employees can simply logon through secure, MFA-enabled systems and access all the data they need at their fingertips.
Cons of Cloud Computing
Is cloud computing the perfect choice for your business? Here are some considerations before you make the final call.
1) External factors may interrupt productivity
Cloud computing heavily relies on stable, high-speed internet connectivity and shared resources. An internet outage can easily block access to data, and so can performance issues during peak usage periods. The result is decreased application responsiveness or slower data processing, which can impact productivity.
Though cloud computing frees you up from the hassle of worrying about maintenance and upgrades, it may also lead to unplanned downtime. Since upkeep and maintenance are planned by the cloud services provider, upgrades may be scheduled at a time inconvenient for your business.
2) Small costs can add up quickly
Cloud computing requires a smaller up-front investment, but it may not be the most cost-effective option—especially in the long run. This is because monthly subscription fees, high-speed internet charges, data transfer costs, and customization charges can accumulate over time. Nonetheless, cloud is typically more cost-effective than on-premise solutions on average.
Cloud Vs. On-Premise: Making The Right Decision
The right computing approach for your enterprise will depend on your unique business needs. The key is to identify your specific and hierarchical needs and challenges and compare them with the strengths and weaknesses of each approach. For instance, an on-premise server makes a great option for enterprises that deal with a vast amount of sensitive data daily. On the other hand, cloud computing is a better option for businesses with employees working remotely.
Can't decide? Luckily, there are Hybrid Computing Solutions that combine the two approaches to meet you wherever you are.
Before deploying any strategy, it's critical to perform a strategic analysis and consult with IT specialists that will put your needs first. Leveraging our expertise, IX Solutions can help you build a fast, secure, and scalable hybrid IT infrastructure from scratch. Reach out to us for a quick chat!
