As digital transformation is leaving no stone unturned, businesses are faced with the seemingly simple question of which platform to adopt for their next suite of systems. Whether on-premises or cloud solutions, each option carries its distinct set of pros and cons, influencing factors like cost, scalability, security, and maintenance.
Cloud-based productivity software has expanded rapidly as 94% of enterprise businesses adopt cloud-based systems according to RightScale. However, not everyone is as eager to make the switch, and there are some very valid reasons to keep your servers on the ground. This detailed guide offers a deep understanding of both cloud and on-premises approaches, carefully evaluating their advantages and disadvantages to empower businesses in making well-informed decisions.
The way businesses communicate with their customers either fuels growth or slows it down. Utilizing the suitable communication solution for your business definitely leads to higher conversions, retention, and business growth. There are many communication platforms that are highly scalable and provide seamless customer experiences such as CEQUENS Omni-Channel Chat, Zendesk, and Salesforce. And in the world of internal communications, there are also certain empowering communication solutions such as Microsoft Teams, Slack, Trello, Google Workplace, and many other platforms that businesses use worldwide to boost their employees' development. There are two approaches that businesses choose according to their industry and needs: cloud solutions and on-premises solutions.
Cloud vs. on-prem: The major differences
Infrastructure location is the key factor that distinguishes cloud solutions from on-premises solutions. Cloud solutions (aka cloud computing) are hosted on a service provider’s servers and its accessibility depends on internet connectivity. On-premises solutions, on the other hand, are hosted on the company's own servers, giving it complete control over all maintenance, updates, and management of the infrastructure and resources needed to operate the software or hardware.
Cloud solutions
Cloud computing provides a wide array of computing services such as storage, processing power, and software, and all these services are provided over the internet on a pay-as-you-go basis. This enables more mobility and flexibility of use for cloud-based software options. Many businesses are switching or have already switched to cloud solutions for the cost-efficiency, scalability, and agility they offer. It is worth mentioning that the global public cloud computing market is steadily expanding and is projected to reach an estimated value of $679 billion in 2024 according to Statista.
On-premises solutions
On-premises solutions are software solutions hosted in-house, requiring local ownership of data, hardware, and software, running on machines within your facility without third-party access. On-premises solutions represent the traditional approach to deploying and managing IT infrastructure and software. This approach provides businesses with an exceptional degree of control over their hardware, software, and data assets, allowing them to fine-tune the infrastructure to meet their specific needs and security protocols. By keeping essential systems on site, companies foster a sense of proximity and accessibility, leading to more customized management practices and smooth integration of capabilities.
It is worth highlighting that IT professionals worldwide anticipate a near-even split between on-premises and cloud solutions within their organizations, resembling a 50/50 balance. This trend is expected to continue through 2024, with only a slight decline projected in the share of physical machines and virtual servers managed on-premises.
Is there a third option?
A hybrid cloud combines private and public cloud services, offering flexibility and scalability. Some data stays on-premises for security, while other workloads utilize the public cloud's scalability and cost-effectiveness. This approach allows for easy data migration and workload portability, providing agility and control. It helps businesses optimize IT infrastructure, improve efficiency, and meet regulatory requirements.
Examples from business sectors
Each business has its own needs which might go perfectly with cloud or on-premises solution. It is your business's call to determine which solution is more suitable for you. However, there are industries who made their stance clear on which solution that seems to be rewarding for them.
1. Banking and financial services
One of the most critical industries that cannot compromise security, yet they chose a middle ground to make the most of the cost-efficiency and scalability of cloud solutions through mobile applications and websites, while keeping critical financial data on-premises for ultimate security and control. Some of the outstanding business models in banking cloud adoption are Capital One, HSBC, and Bank of America that built its own cloud leading it to save $2 billion.
2. Retail
Cloud solutions dominated the retail vertical without question especially since the evolution of e-commerce that needs seamless inventory management and data analytics. According to Grand View Research, the global retail cloud market was valued at approximately USD 50.09 billion in 2023 and is expected to expand at a compound annual growth rate (CAGR) of 18.7% from 2024 to 2030.
3. Healthcare
Cloud solutions are becoming more prominent in healthcare with 50% adoption rate more than other verticals. Cloud computing is empowering medical applications like telemedicine, electronic health records (EHR), and medical imaging, providing remote access to patient information and enhancing collaboration among healthcare providers.
4. Marketing and advertising
Marketing and advertising agencies utilize cloud computing for functions including data analytics, campaign management, and customer engagement platforms. Cloud services enable them with instant insights and collaboration with remote teams, leading to enhanced campaign performance and increased return on investment (ROI).
Breaking down the pros and the cons
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Cloud solutions pros
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On-premises solutions pros
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Cost-efficiency: In comparison to on-premises solutions, cloud solutions have a significantly lower entry cost, and most cloud platforms offer pay-as-you-go-pricing with no initial capital outlay which provides businesses with great payment flexibility.
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Scalability: Cloud resources offer immediate scalability, allowing your business to effortlessly adjust your computing power and storage requirements in response to changing workloads. This agility not only supports swift adaptation to fluctuating demands but also fosters accelerated business expansion.
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Cloud disaster recovery: Cloud providers employ strong disaster recovery measures and data redundancy across multiple data centers located in different geographic regions. This guarantees continuous availability and reduces the likelihood of data loss or downtime caused by hardware failures, natural disasters, or unexpected incidents.
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- Offline accessibility: On-premises solutions function independently of an internet connection, allowing uninterrupted access to data and applications even during outages. This can be vital for businesses with mission-critical operations.
- Security stays in-house: Highly regulated industries can have major barriers for cloud systems, making on-premises the only option.
- Data control: Businesses have complete control over their data with no third-party access.
- Controlled rollout: With on-premises solutions, you have the autonomy to determine when, where, and how changes are implemented. This flexibility enables your business to give precedence to particular departments and structure training schedules according to your organization's priorities and operational requirements.
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Cloud solutions cons
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On-premises solutions cons
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Internet reliance: Cloud solutions hinge on internet connectivity for accessibility, which can become a hurdle in regions with inconsistent or restricted internet access.
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Potential vendor lock-In: Migrating from a cloud provider can be a bit complicated and costly, especially if your business had become heavily reliant on its specific services. This is why it is smart to choose a cloud provider that offers future flexibility.
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Compliance risks: Cloud solutions introduce compliance risks related to data privacy, security, and regulations. Storing sensitive data on third-party servers means losing control over protection measures which might lead to potential breaches or unauthorized access.
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Limited scalability: Due to reliance on physical hardware, on-premises solutions have limited scalability which can make them only handle a certain amount of workload. Unlike cloud solutions that can easily expand or shrink resources as needed, on-premises setups require purchasing new equipment when demand grows, making it harder to quickly adjust to changes in business needs.
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High expenses: The cost of an on-premises solution can be very high to start, with much lower operating costs.
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Maintenance challenges: Overloading the IT team with managing the infrastructure will most probably cause delay in other projects that directly support your core business activities. This may hinder innovation and limit the strategic impact of the IT department.
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Ultimately, the decision between cloud or on-premises solutions depends on various factors like business goals, budget constraints, security needs, and scalability requirements. While cloud solutions offer flexibility, cost-efficiency, and scalability, on-premises solutions provide control, security, and customization. It is crucial for businesses to carefully assess their specific needs and weigh the pros and cons of each option before making a decision. If your business needs the most stringent security protocols and control over your data due to regulatory compliance issues, then an on-premises solution is likely your go-to. In many cases, a hybrid or multi-cloud strategy may offer the best of both worlds, combining the advantages of cloud and on-premises solutions to meet diverse business requirements.
To explore hybrid, seamless solutions for your business, schedule a demo today.
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