We have all witnessed how the COVID-19 pandemic had a significant role in the rapid transformation and adoption of the cloud. The pandemic pushed enterprises into a remote-functioning digital experiment. Organizations facing pressure to adopt a remote-first approach have turned to various cloud-based solutions. Additionally, increased flexibility, scalability, and cost-effectiveness are the other significant reasons driving cloud adoption amongst enterprises. We have seen the rise of cloud systems driven by industry giants such as Microsoft Azure, Amazon Web Services, Google Cloud Platform, and others. It is no wonder that cloud computing has ushered in a transformative era. Numerous large and SME companies have migrated to the cloud and found it cost-effective, secure, and convenient compared to having an on-premises IT infrastructure.
However, the sales of on-premises solutions are rising too. 92% of survey participants, including software developers from 5 continents, confirmed that 80% of these companies develop different versions of their apps for cloud and on-premises deployment. Especially when it comes to choosing between cloud computing and on-premises solutions, it is more difficult to decide when it comes to custom-built software. Although the cloud is functional for all industries, on-premises software is particularly relevant for BFSI, healthcare, cybersecurity, and government agencies. The reasons are security concerns and the need for extensive storage and processing capacities that could otherwise incur huge costs on the cloud.
Differences between cloud and on-premises infrastructure
As we see that cloud and on-premises IT infrastructure are popular, let us dig deeper and find out the fundamental differences.
Location
The developers build on-premises software for their company servers and PCs. In contrast, when it comes to cloud infrastructure, developers build software on the cloud and operate it in the cloud provided by a cloud provider such as Microsoft Azure or AWS and in their dedicated hardware. Usually, you can adapt on-premises software for use in the cloud, but it does not work vice versa.
Access
To access the cloud, you need an internet connection. There can be limited functionality offline, but for real-time collaboration, data upload, and download, you need a reliable internet connection. However, to use on-premises software, you need physical access to hardware where an office network installs it. You can access it via the internet as well, but many companies, due to security reasons, may not allow it.
Costs
Let us compare the two components of the software’s total cost of ownership.
- Initial purchase price: When deployed on-premises, the initial purchase price involves license costs, procurement of the hardware needed to deploy the software, and the cost of training personnel to use the new app. Overall, on-premises computing requires a high capital expenditure (Capex).
- Operating costs: For on-premises applications, ongoing costs include hardware maintenance, such as repair costs, energy bills, and salaries. In contrast, ready-made cloud applications involve time-based subscription licenses or metered licenses, where enterprises pay for specific services. Custom-made cloud apps require businesses to acquire cloud storage and computing capabilities, as the service providers handle the hardware updates and maintenance, making it a much more cost-effective option. While cloud services offer cost-efficiency, setting it up optimally can be challenging. Many companies overspend on cloud services by almost 36%. You can mitigate this by partnering with companies specializing in cloud adoption, such as Saxon AI, where we help enterprises with managed Azure services at optimized pricing.
Security
Most enterprises cite security as one of the prime reasons to choose on-premises infrastructure over the cloud. Especially when the app runs on servers that are not connected via the internet, it cannot be hacked via the internet as well. All they have to do is guard the physical facility so that no one can physically access the servers. However, cloud solutions are also highly secure. Organizations such as NASA use the cloud for their operations. Enterprises that require higher security can opt for private clouds instead of a public cloud. Private clouds offer a more dedicated and customizable environment than public clouds but can be less scalable and cost-efficient.
Control and Maintenance
With on-premises, your team has complete control over your systems, including decisions on upgrading, data backup locations, and operating systems. Similarly, in cloud solutions, you also have the control settings. It is actually more available for private cloud users.
Maintenance-wise, the cloud is maintained by the cloud owners, whereas companies manage the on-premises software and infrastructure maintenance internally.
Hardware
On-premises computing requires hardware and servers and the items needed to maintain. Again, heavy use of cloud solutions also requires robust hardware, such as stable internet connections, high bandwidth modems, fiber optic cables, etc.
Latency
Latency is the time between a person requesting and receiving information from a server; the lower the latency, the better. On-premises solutions have lower latency because of the proximity of the computing resources, making it preferable for companies needing fast data processing. However, the cloud also offers lower latency, as we see in the use cases of Netflix and Thomson Reuters, to reduce latency for their end users.
Environmental impact
Many enterprises are environmentally conscious; in this context, cloud computing is much more energy efficient than on-premises solutions. According to a study, the Azure cloud platform is 98% more carbon efficient than on-premises solutions. Moreover, Azure commits to being powered by 100% renewable energy by 2025, with sustainability at the core of Microsoft’s business. Again, if your facilities are powered by renewable energy, then on-premises software is a good choice for sustainability.
Benefits of Cloud Solutions
Let us find out the notable benefits of cloud solutions compared to on-premises solutions.
- Flexibility and scalability: Cloud solutions enable enhanced flexibility and scalability. You can adjust your capabilities with scaling tools for optimized efficiency. It is ideal for companies with high seasonality or varying processing needs.
- Cost-efficiency: Cloud solutions are much more cost-efficient than on-premises solutions when set up correctly. Eliminating the need to buy and maintain expensive hardware, you can proceed with a pay-as-you-go model. It is advantageous for SMEs, as it doesn’t require high Capex and can be cost-effective when dealing with seasonality.
- Accessibility: Cloud solutions have high accessibility. You need an internet connection to access it from any location. It allows remote work with complete ease.
- Energy-efficiency: Cloud data centers are more energy efficient as companies like Microsoft actively work towards sustainability.
Benefits of On-premises computing
Let us now look at the advantages of having an on-premises computing infrastructure.
- Security: Companies can enforce strict security protocols to protect against rising cyber threats like ransomware.
- Data protection: Enterprises also favor on-premises software for safeguarding sensitive data, such as trade secrets and highly secure personal data (such as the ones involving healthcare and financial data).
- Increased availability: On-premises systems provide higher availability and faster disaster recovery than cloud computing. High availability ensures that the software functions correctly at 99.999%.
- Compliance requirements: Many businesses face regulatory restrictions on data storage and processing. Compliance requirements vary depending on the location, including local storage mandates, processing restrictions, data transfer bans, and conditional data transfer. This ensures adherence to local regulations or the data being subject to the laws of the country where it originated (also known as data sovereignty).
Thus, choosing between on-premises and cloud often depends on specific business needs and regulatory contexts.
Hybrid Cloud solution
You can choose the best of both models in a hybrid cloud solution. Comprising the capabilities of public and private clouds with on-premises resources, a hybrid cloud solution offers the flexibility to avoid an exclusive choice between both. This allows an enterprise to securely store sensitive data on-site while leveraging the cloud’s scalability to process non-critical data during peak traffic. Hybrid cloud infrastructure has many advantages: scalability, adaptability, agility, elasticity, and flexibility! Since the hybrid model has inherent cloud features, enterprises can adjust their computing resources as required. That leads to significant cost savings compared to maintaining exclusive on-premises resources and an in-house IT team.
While hybrid cloud solutions are more affordable than private clouds, they are more expensive than public clouds. This cost consideration comes with a trade-off- as the companies using the hybrid model often let go of some control over their resources. (Since the cloud providers operate their data centers rather than an in-house IT team.) One emerging hybrid cloud trend is the focus on workload portability- the ability to move workloads across cloud and on-premises environments. Microservice infrastructure enables high portability of workloads.’
The verdict
Both on-premises and cloud computing can fulfill your business’s IT infrastructure needs. The ultimate decision between the cloud and on-premises models hinges on your specific use case for data usage and storage, the necessary security level to meet compliance standards, and your preferred cost structure. A hybrid cloud platform also provides various benefits- ensuring optimal value from the existing infrastructure. By running specific workloads in the cloud, your organization can benefit from the flexibility and innovation of the public cloud while safeguarding highly sensitive data in your data center. Thus, it meets client needs and complies with regulatory requirements simultaneously.
If you want to scale up your IT infrastructure to the cloud or consider hybrid cloud adoption, our Azure experts at Saxon AI can help you. We are a Microsoft Services Partner with over two decades of expertise and can help you with a tailored plan for your unique business needs. You can book a consultation today.