On-premise vs. cloud computing: definition and differences

On-premise vs. cloud cover

Businesses are increasingly conducting operations online, thus, when organizing IT infrastructure to support this modern, internet-connected way of working, a decision must be made on keeping systems hosted locally or utilizing external cloud computing servers.

Given this shift to online operations, companies must determine the best approach for managing their IT resources continuously. Whether you store your valuable business data locally or in the cloud environment, there are important factors to consider. For many, figuring out the optimal solution is an ongoing challenge.

Key takeaways

  • On-premise infrastructure involves hosting all IT resources locally on your organization's hardware, allowing full control but requiring more hands-on maintenance. Cloud computing relies on third-party hosting of resources accessed remotely via the internet.

  • On-premise has higher initial setup costs but more security and independence, while cloud computing has lower costs and instant scalability but dependence on an external provider.

  • Security and regulatory compliance favors on-premise, while flexibility, scalability and cost favor cloud computing.

  • Both approaches can distribute workloads and utilize similar foundation technologies like virtualization, but the cloud provides easier damage control while on-premise allows more bandwidth control.

  • Choosing between on-premise and cloud depends on factors like existing investments, growth plans, data sensitivity, and using hybrid cloud options for a balanced approach. NordLayer can help integrate security across environments to balance the tradeoffs of each model.

What is on-premise software?

The on-premise model is a traditional method of IT asset management when all the resources are held in-house. In these cases, software, hardware, and infrastructure are used and held in the organization’s physical office.

As everything is running from the confines of your organization, your network administrators have full control of the infrastructure. No third parties are involved, which allows tight security mechanisms to keep the data confidential.

Advantages of on-premise software

When it comes to locally hosting systems and applications rather than utilizing cloud computing services, there are a few key advantages to consider:

  • Greater security: When your systems and data are entirely on your own private infrastructure, you avoid exposing confidential information to outside cloud providers—your organization maintains full visibility and control

  • Easier compliance with regulations: Rather than trusting that a cloud vendor appropriately secures data according to your industry's rules, on-premise environments allow direct verification that all controls and policies are followed

  • Independence from internet issues: Since your resources are on-site rather than in a remote data center, downtime risks from internet failures or regional outages do not impact your ability to use business-critical systems and information—local access provides reliability.

Disadvantages of on-premise software

While on-premise systems offer important benefits, there are also drawbacks to consider. Maintaining all IT resources locally places ongoing administration burdens on internal teams and brings less flexibility compared to the cloud computing environment. The key disadvantages include:

  • Local maintenance burden: When your whole infrastructure is on-site, your IT staff are responsible for all maintenance tasks like data backups, software updates and hardware fixes, which takes time away from other priorities

  • Limited scalability: It's difficult to perfectly match your constantly changing infrastructure needs to physical hardware resources because demand may outgrow capacity, burdening systems, or resources could sit underutilized if demand decreases unexpectedly

  • Hardware costs: On-premise software requires initial expenses to set up all necessary equipment, software licenses, and storage space are typically higher than cloud deployment's pay-as-you-go model

  • Inflexible resources: On-premise IT is not as adaptable to dynamic business needs—it's challenging to quickly scale resources up or down as demands fluctuate over time.

Cloud computing

Cloud computing means relying on a third-party provider to host all your data. In this case, a third-party provider is a direct supervisor of your infrastructure maintenance, while businesses only pay a subscription fee for the resources they use.

The used server hardware components reside in the provider’s data center, which means they are responsible for data backups and maintenance. This frees up businesses and helps them to have better flexibility when upscaling or downscaling their operations. The service itself is delivered via the internet and is accessible only remotely.

Advantages of cloud computing

Some major benefits of utilizing cloud computing services include greater flexibility, efficiency, and cost-savings for businesses.

  • Instant provisioning: Resources are provisioned quickly since cloud providers have servers already configured, eliminating the lengthy setup and deployment process

  • Reduced costs: Businesses do not need to purchase or maintain their own hardware, data centers, or employ dedicated IT staff as they only pay for computing resources consumed on a flexible, as-needed basis

  • Automatic maintenance: The cloud provider handles maintenance and software updates for systems to run optimally with the latest security and functionality, freeing up internal IT staff

  • Flexible remote work: Employees can access company applications and data from any internet-connected device, improving productivity through mobility

  • Adaptive infrastructure: The cloud infrastructure dynamically scales resources up or down as needed to match traffic or usage patterns and avoid under or over-provisioning.

Disadvantages of cloud computing

That said, cloud computing has its fair share of disadvantages.

  • Provider dependency: Reliance solely on a cloud provider—if the provider has issues managing traffic loads—can negatively impact your business until resolved

  • Internet reliance: Since delivery relies solely on internet connectivity, interruptions cut off access to work resources, allowing potential disruption from hackers as well

  • Regulatory compliance: For companies subject to various data directives, procedures must ensure the provider complies—lack of provider compliance reflects poorly on the company with little recourse 

When it comes to cloud computing, businesses have the option of utilizing public cloud services, private clouds, or a hybrid cloud infrastructure.

Public clouds are owned and operated by third-party cloud service providers and offer a shared computing environment for multiple organizations. While this option can be cost-effective and scalable, it may not suit businesses with sensitive data or strict compliance requirements.

A private cloud, on the other hand, is dedicated to a single organization and can be hosted on-premise or off-premise. This option offers greater control and security but can be more expensive to implement and maintain.

Hybrid cloud solutions combine the best of both worlds, allowing businesses to leverage the scalability and cost-effectiveness of a public cloud for non-sensitive workloads while keeping sensitive data on a private cloud or on-premise infrastructure. Ultimately, choosing these options will depend on a business's specific needs and requirements.

Differences between on-premise and cloud

As you’ve seen from the examples, on-premises and cloud computing provide different strategies to manage core IT infrastructure. While both approaches aim to solve the same business issues, their methods fundamentally differ.

Upfront cost

On-premise. You will need to purchase and set up in-house dedicated servers. This involves determining appropriate on-site storage, implementing physical security measures, acquiring software licenses, and developing maintenance costs and support plans.

Cloud. Simply put, the cloud computing model has no upfront costs—you only pay for what you’re using. Investing in the maintenance team is unnecessary as all these expenses will most likely be included in the cloud provider’s contract.


On-premise. No external or third-party providers can access your confidential data, which is a big plus security-wise. It’s usually better when various regulatory compliance requirements apply to your company.

Cloud. Although only the third-party provider and your company can access the data on paper, the reality might differ. The maintenance of your company’s security in the cloud falls on the provider completely. In such cases, it’s always easier to overlook something when additional clients are lined up.


On-premise. Since you’re dealing with a physical server, flexibility will be minimal. Upscaling your setup as your organization grows would mean additional server racks and figuring out physical storage possibilities. This may also be a bottleneck as your physical infrastructure might not keep up with the demand from your customers.

Cloud. Within a cloud environment, scalability is as easy as flicking a switch. If needed, you can align with the cloud service provider to allocate more servers. Even if you need to shrink your operations, it will be easier, and you’ll likely pay less for your subscription. To top it off, this switch only takes a few moments, so it’s easy to complete this transition and move on with business operations.

Required involvement

On-premise. Not only will you need to have in-house staff to deploy everything, but the on-premise system infrastructure will also require periodic maintenance. Your staff must be experts in their field to set up everything correctly. Therefore not only will you have to deal with the procurement of server hardware, but you’ll also need a technical team available 24/7 to respond to emergencies.

Cloud. The burden of setup and maintenance is passed on to the third-party provider. Little involvement is required from the client’s side. You don’t have to maintain an active technical team focused solely on maintenance. In addition, your technical department can focus on various other business areas as external infrastructure is managed.

Bandwidth performance

On-premise. If you want to improve bandwidth from your local servers, you’ll need to look into upgrades for existing ones or buy additional units. If your remote employees want to connect to your servers, they may experience slowdowns due to the single point of presence on the network.

Cloud. If you’re unsatisfied with the bandwidth, you may work with your provider to rent higher-performance servers. In addition, if your provider oversees multiple data centers, it can likely offer you multiple points of presence to connect to, making your connections flow easier.

Damage control

On-premise. Critical system failures and data breaches are possible for any system; in this case, the responsibility rests solely on your part. Another challenge is data recovery, especially if your local backup options only mirror data from one server to another. That way, malware could wipe out your total database.

Cloud. The key difference is that the cloud software heavily relies on a virtual environment. This means that data can be recovered from virtualizations instantly, so it provides more options. On the flip side, there could be various gaps in the data center management system, which the hackers could also exploit, so there’s no option without flaws.

When considering cloud vs on-premise environment, it's important to note that cloud technologies can be more cost-effective in the long run due to eliminating ongoing maintenance and hardware costs. However, don't forget to factor in the subscription cost when comparing the total cost of ownership.

Additionally, cloud computing can offer on-demand services and managed services, allowing businesses to only pay for what they need and offload IT tasks to the third-party service providers.

However, businesses should also consider integration capabilities with existing operating systems and software-as-a-service (SaaS) applications. Cloud migration can also be a complex process, and organizations should carefully consider external factors such as power consumption and the potential for vendor lock-in.

Ultimately, deciding between on-premise vs cloud will depend on a business's core strategies.

On-premise vs. cloud—how to choose the right one?

While both options have their strengths and weaknesses, the best approach for your company can depend on several factors. For instance, if you have already invested funds into setting up an in-house server stack, it wouldn’t make too much sense to discard it and go with the cloud systems. You have to evaluate your strengths and weaknesses critically.

On the other hand, if you’re a startup and are highly focused on growth, then in that case cloud approach would be a much better starting point. That way, you can maximize the ratio between the money spent and the value gained. Plus, instant deployment time would also be very beneficial.

However, if your businesses are subject to large amounts of confidential data, you should consider all the options. Ensuring compliance with local laws can be difficult, so don’t risk one of your most important assets.

Don’t forget that using hybrid cloud options is also a viable strategy. The latter can provide the benefits of both on-premises software and cloud computing, allowing businesses to keep all the data on-premises while taking advantage of the scalability and cost-effectiveness of the cloud.

How can NordLayer help?

NordLayer provides tools for better data security within the Secure Service Edge framework. It provides site-to-site capabilities, extending your network and creating a channel to deliver network security point solutions.

Our adaptive network security solution easily integrates with your existing cloud and on-premises infrastructure, helping to achieve greater security and data privacy and facilitate remote working. NordLayer is an active collaborator when tackling modern cybersecurity issues that are burdening businesses.

Get in touch with our team and discover the easy route to increase your cloud data security wherever you’re hosting it. Our cloud software solutions can help you manage and secure your data in any environment, whether it's on-premise or in the cloud.

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