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On Premise vs. Cloud Computing: Pros and Cons

Although cloud computing has been around over 20 years in various forms and fashions, I still get many questions whether cloud or on-premise deployment is better. The real question is which technology model is better for you and your organization. The answer is not so simple.

Many “experts” will say the cloud is better for anytime-anywhere access, better security, operating vs. capital expenses etc. As a cloud evangelist since 1999, I know that the cloud is not one thing. Furthermore, nobody is 100% in the cloud. We all live here on the ground! However; cloud adoption has been steadily increasing and as has matured and become more advantageous to a larger audience.

On Premise

The most common definition for on-premise computing is when the technology infrastructure and related software are owned and managed within an organization’s physical site. I prefer to broaden the definition to when a company owns and manages the physical infrastructure and related software regardless of the location of the equipment. Many companies choose to co-locate their equipment in a data center for increased security and to take advantage of the power, connectivity and temperature controls of these facilities.

Cloud Computing

The Cloud is a collection of software, servers and services used to deploy applications and functions to end users using the internet. Notice that the words included both applications and functions because in today’s cloud you can get many services via the cloud that are not traditional applications. Functions could include:

  • Foreign currency feeds, or tax rate calculation as a service
  • Technical functions like DNS, SMTP or similar

There are four major types of cloud computing platforms, each with different costs, benefits and use cases:

  1. Public Clouds are typically very large pools of IT infrastructure, partitioned and redistributed to multiple “tenants.” Most are sold based upon resource consumption with discounts for guaranteed minimums over longer terms. The most well-known public clouds include Amazon’s AWS, Microsoft Azure and Google Cloud
  2. Private Clouds are resource pools which are dedicated to a single customer or group. Often managed private clouds are offered by niche service providers specializing in a type or specific of application or by an IT consultancy which builds clouds as a service. These are quite often described as Dedicated Clouds.
  3. Hybrid Clouds blend aspects of public and private clouds. Typically, a hybrid cloud will have some components shared amongst several private clouds. This can include the Windows Active Directory service or backup facilities.
  4. Multi-Clouds are newer models where companies use more than one cloud service or vendor including either public, private, hybrid or some combination of clouds. On example could be a mix of public clouds with an internal private cloud which are orchestrated through one of the cloud providers or software managed by the company.

Pros and Cons – Cloud vs. On-premise

There’s an old adage: “If you put 5 network engineers in a room you will come out with 6 different designs.” Clearly with all of the variety of clouds, there is not one clear answer for which is best. An alternative evaluation method is to look at attributes that guide the selection process:

Level of Control

Controls are multi-faceted. When on-premise physical access controls for environments is crucial. Defining access to applications and data is key in all deployments.

  • On-premise – When a company owns all the IT infrastructure and manages their own applications, they have the most control. This also adds the most risk unless your company is big enough to have multiple experts on all the required technical competencies.
  • Private Cloud – Many of these environments are specifically designed for purpose. Under these circumstances, the company typically can define parameters within security parameters of the cloud provider. For example, most private clouds will require operating systems to remain patched and running at currently supported levels to protect from liability.
  • Public Cloud – These cloud computing platforms typically provide the infrastructure or platform as a service for the individual customers to manage for themselves. This allows for a great deal of autonomy within the parameters of compatibility with the platform.
  • Other Clouds – Many other types of clouds are managed for a specific purpose or function. For example, clouds that operate a particular Software as a Service (SaaS) will have many more restrictions to ensure their so their software remains operational.

Computing Power

A typical on-premise environment will be “sized” based upon current requirements and anticipated future growth over the expected useful life of the equipment. Reputable clouds of all kind are constantly updating their equipment and maintaining excess capacity for growth to ensure scalability for their customers and future customers.

If the internal IT department gets accurate estimates of growth and equipment exceeds its expected useful life, internal resources will provide sufficient computing power over that timeframe. That also assumes that the software being utilized does not dramatically increase the resource requirements it uses or business needs change. Additionally, very few companies ever plan for reductions in response to an economic downturn. Accordingly, on-premise, a company will always buy more capacity than it needs, either initially when anticipating capacity for growth or later if the purchased capacity is not needed.

Security

When I first started I-Business Network, and after 9-11, potential customers thought cloud service providers would become targets for terrorists. They were not wrong, but now everyone is a target for cyber-terrorists!

One of the key drivers to the cloud these days is cybersecurity. While many organizations trust an on-premise security team, and some completely isolate critical systems from the internet, criminals have breached the most secure environment run by world class experts. For small to mid-sized businesses, the costs of cybersecurity experts and tools, or a successful ransomware attack, far exceed any perceived costs of a cloud environment.

With the ever-increasing demand for remote working, the impact of digital transformation, and the resulting connections with external parties, the need for and complexity of security expertise is only increasing. Utilizing the skills of a cloud provider or hiring experts in cybersecurity on-premise, the cost of security has become a major factor.

Cost

Every cloud service provider will tell you the cloud is less expensive because you have the up-front outlay of cash and need to pay for all the maintenance costs. Factor in the actual cost of security, potential cost of downtime and ransomware, they may be a true statement. In contrast some companies use legacy software for extended periods of time with equipment lifecycles which would drive computer salespeople crazy!

The evaluation of cost is complex and unique for each company. However, some generalizations can be made by company size and complexity of the business. For example, simple and small organizations can truly benefit from outsourcing to low-cost, high-volume SaaS providers. This is especially true for commodity computing functions like e-mail. If a small company is managing its own mail server, I hope they have some great IT folks and a compelling business reason!

While larger organizations may have the scale required to cost effectively run their own private cloud (either on-premise or in a cloud computing environment), many have chosen to outsource technical operations to the cloud to focus on key functions or core competencies. This is a market where multi-cloud is growing in popularity. For example, a manufacturer may want to supporting mission critical operations on-premise in proximity to machines. The manufacturing systems then connect with one or more clouds for other financial and human resources systems.

Conclusions

There is no magic bullet, secret formula or crystal ball to provide the ultimate answer. Cloud, like digital transformation, is a journey that we are all on. Whether we are checking our mail, using a cloud desktop or reading an article on LinkedIn, we are all in the cloud and we are all on-premise at the same time!

During the past 23 years advising companies of all sizes, from start-ups to Fortune 500 companies, I have found that the answer lies in holistic planning. Cloud and on-premise are deployment options. If you chose Cloud, you must architect your process and train your people to take advantage of the technology selected. Better yet, select the technology that optimizes the process which results in the best outcome for your organization.

As a Cloud Evangelist, since before cloud was coined as a term, I have personally helped hundreds of companies improve their operations by turning the internet into a competitive advantage.  To learn more about how to optimize a cloud computing platform for your digital transformation please reach out to me on LinkedIn or book some time on my Calendar!  

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