On-premises versus on-Cloud: Key differences, benefits and risks

Avatar photo

Cat Mules

The number one question our partners ask is - Which is the better option for business, on-premises or on-Cloud?

Our answer is that there’s no ‘one size fits all’ approach – it depends wholly on what is important to your business. Today’s world of enterprise IT operates in different environments, each able to be adjusted to meet specific business needs. Having all the facts on hand will ensure Cloud decision making is right for your business.

Cloud vs on premise: Key differences 

With increasing threats to data security and improved interconnectivity, it’s important to explore each hosting option. All Cloud decisions about deployments depend on the intended outcomes and infrastructure requirements of each business case. Cloud Service Providers are fully equipped to help you make the right choice for your business.

Factors to consider

  • The ways in which your CSP helps you manage the Cloud
  • The budget you have available
  • Cloud management security
  • Costs of hardware and staff

Remember: not all Cloud services are created equal.

On-premises computing

The Capital Expenditure – CAPEX – model involves high initial capital commitment for setups. CFOs and businesses might follow the mindset that investing a lot will get as much as possible out of the technology you already possess – known as ‘sweating the assets’.

However, physical infrastructure comes with many costs, such as temperature control, power, labour and maintenance, networking, racks, and certifications. Traditional on-premise hosting providers are expensive and often not agile in their operations, often leading to high cost and inefficiency.

Also, if you’re hosting applications locally, decisions need to be made about the kind of local setup required for the next three to five years. If it’s hard anticipate the future, or if you get it wrong, you’ll easily end up in a situation of having either too few or too many resources. Underestimating the number of servers needed may result in slow turnaround, and failure to deliver agreed service to customers may result financial loss.

Not only does high up-front investment increase operational risk as later on in the lifecycle of on–premise things change. No matter how savvy your business intelligence is market predictions can be difficult.  IT systems and protocols will only be as good as your capability to align with long term trends in the global market.

Cloud computing – all the advantages

Even though the first Cloud computing services are less than a decade old, organisations big and small are embracing Cloud technology for almost every business challenge. They’re probably using the Cloud, even if they don’t realise it.  Cloud computing is operating the background when you send emails, stream movies, listen to music, play games, or manipulate images, data and documents.

Cloud computing has an Operational Expenditure – OPEX – model that entails powerful advantages to business due to lower initial commitment and ongoing scaled costs that are aligned to actual computing usage.

The Cloud gives you the ability to quickly scale up and down at the drop-of-a-hat – including auto-scale. Cloud computing eliminates the high costs involved with a single company purchasing servers for its own needs, such as costs of physical space, and other local hosting expenses. The sheer volume of Cloud data centres allow your Cloud Service Provider to continuously reduce its cost of operations for your deployment.

Continuous integration and continuous deployment (aka CI/CD) improves the speed, quality and reliability of your computing. Highly agile tool development allows for rapid deployments. New environments can be templatised and deployed in minutes rather than days or weeks.

Automatic scaling keeps costs lower on Cloud platforms, with flexible cost options and cost management insights. Collaboration with your Cloud Service Provider will supercharge these insights into tangible spending and consumption outputs. Financial governance tools such as such as budget alerts, organisational permissions and usage quotas make costs more predictable. IT chargebacks mean usage by specific departments can be traced, and this information can be used for financial reporting.

The Cloud provides control over the specifics of your computer resources, such as storage and computational power. Tagging resources and a roadmap from your Cloud Service Provider can make quick work of asset management/classification for Cloud-based assets.

Security is a cornerstone of how Cloud platforms are designed and architected. It is inherently easier to detect and respond to security incidents with in-build centralised encryption, logging and improved handling of information and events, compared to on premise infrastructure that can have loosely defined boundaries. The Microsoft Security Development Lifecycle and an “assume breach” strategy are some examples of how the environment is kept visible to staff and customers.

Compliance is a shared responsibility on the Cloud in order to ensure that laws, standards and regulations are met across each data region. Cloud infrastructure offers out-of-the-box compliance standards with measurement, tracking and blueprints that offer easily manageable compliance options. In New Zealand, both business and Microsoft Cloud Service Providers must comply with New Zealand’s recently revamped Privacy act (2020).

Underpinning these, Microsoft has its own privacy protocols, such as customer control over where their data lives, and never using customer data for advertising and independent auditing. Microsoft’s specific international standards include the Payment Card Industry Data Security Standards, to prevents credit card fraud, and information security management protocols.

Hybrid Cloud – a third option

Beyond on-premises and full Cloud options, businesses have the option of a partial transition to the cloud, and movement between the two.

This is the hybrid Cloud: an alternative Cloud computing solution that combines services from both on-premises with Cloud, sharing data and apps between each service. On-premises and Cloud environments are connected as if they were a single environment.

One of the main benefits of hybrid Cloud is control. If you’re reluctant to entrust all aspects of your IT infrastructure to a third-party Cloud Service Provider, companies can customise the private end of their hybrid Cloud model to their private or unique needs. They have full control to adjust these private elements as they see fit.

Critically, storing data in the private portion of the hybrid Cloud network, at least for some time, can allow companies to mitigate the potentially disruptive costs of migrating for staff.

Moving to the Cloud

Cloud computing continues its steady increase in adoption. Before the Cloud, computing services were costly, difficult to manage and lacking the flexibility to support business growth. Now, on-premise computing, while retaining some possible benefits such as increased security, is undoubtedly becoming obsolete. Businesses are realising that the benefits of the Cloud are not only extensive– they’re also highly flexible.

Business is light years easier on the Cloud. Why wait? If you’re ready to improve your company’s ROI, innovation and agility, move to the Cloud now.


About the Co-Author: Sunny Lakhiyan head of Umbrellar’s Enterprise Service Management, draws on a deep knowledge of IT security and network infrastructure across the CSP’s bespoke cloud service and management offerings.



Avatar photo

Cat Mules

Umbrellar's Digital Journalist, coming from a background in tech reporting and research. Cat's inspired by the epic potential of tech and helping kiwi innovators share their success stories.

Umbrellar Powered by Pax8

See Profile

Get the Cloud, Done Right. Umbrellar Powered by Pax8 is New Zealand's prime Professional and Managed Cloud Services specialist. Recently acquired by Pax8, we're transitioning into something "harder, better, faster, stronger" (thank you, Daft Punk!). Watch this space!

Managed services

See Profiles

Managed cloud services refers to outsourcing daily IT management for cloud-based services and technical support to automate and enhance your business operations. Often, internal IT departments don’t possess the skills to effectively monitor and maintain a cloud environment. In these situations, a company hires a third-party cloud managed services provider to manage cloud security, computing, storage, network operations, application stacks, vendors and more.

You might also like

[ajax_load_more id="9462509724" container_type="div" post_type="post" posts_per_page="6" post__in="" pause="false" placeholder="true" scroll="false" button_loading_label="Loading" button_done_label="No results" no_results_text="No results"]

Our Vendors

Subscribe to
On-premises versus on-Cloud: Key differences, benefits and risks

Get the latest news content in your inbox each week