On Premise vs. Cloud: Key Differences, Benefits and Risks

There are a number of fundamental differences between an on-premises and a cloud environment

In today’s world of enterprise IT, there are many factors that a company must consider in order to decide whether a cloud infrastructure is the right fit. Conversely, there are many companies that are unable make the leap into the cloud, instead relying on their tried-and-true legacy and on-premise applications and software to do business.

On Premise vs. Cloud

Simply put, the difference between on-premise vs cloud software is the location. On-premise software is installed and runs on a company's own hardware infrastructure, and is hosted locally, whereas cloud software is stored and managed on the provider's servers, and accessed through a web browser or other interface. 

It’s no surprise that cloud computing has grown in popularity as much as it has, as its allure and promise offer newfound flexibility for enterprises, everything from saving time and money to improving agility and scalability. On the other hand, on-premise software – installed on a company’s own servers and behind its firewall – was the only offering for organizations for a long time and may continue to adequately serve your business needs (think, “if it ain’t broke then don’t fix it”). Additionally, on-premise applications are reliable, secure, and allow enterprises to maintain a level of control that the cloud often cannot. But there's agreement among IT decision-makers that in addition to their on-premise and legacy systems, they'll need to leverage new cloud and SaaS applications to achieve their business goals.

On-Premise Software

Whether a company places its applications in the cloud or whether it decides to keep them on premises, data security will always be paramount. But for those businesses in highly regulated industries, the decision might already be made for them as to whether to house their applications on premise. And knowing your data is located within your in-house servers and IT infrastructure might also provide more peace of mind anyway.

On-premise software requires that an enterprise purchases a license or a copy of the software to use it. Because the software itself is licensed and the entire instance of software resides within an organization’s premises, there is generally greater protection than with a cloud computing infrastructure. So, if a company needs all this extra security, why would they dip its proverbial toes into the cloud?

The downside of on-premise environments is that costs associated with managing and maintaining all the solution entails can run exponentially higher than a cloud computing environment. An on-premise setup requires in-house server hardware, software licenses, integration capabilities, and IT employees on hand to support and manage potential issues that may arise. This doesn’t even factor in the amount of maintenance that a company is responsible for when something breaks or doesn’t work.

Cloud Computing

Cloud computing differs from on-premises software in one critical way. A company hosts everything in-house in an on-premise environment, while in a cloud environment, a third-party provider hosts all that for you. This allows companies to pay on an as-needed basis and effectively scale up or down depending on overall usage, user requirements, and the growth of a company.

A cloud-based server utilizes virtual technology to host a company’s applications offsite. There are no capital expenses, data can be backed up regularly, and companies only have to pay for the resources they use. For those organizations that plan aggressive expansion on a global basis, the cloud has even greater appeal because it allows you to connect with customers, partners, and other businesses anywhere with minimal effort.

Additionally, cloud computing features nearly instant provisioning because everything is already configured. Thus, any new software that is integrated into your environment is ready to use immediately once a company has subscribed. With instant provisioning, any time spent on installation and configuration is eliminated and users are able to access the application right away.

As an example, EDI software has been traditionally been hosted on-premises, but recent cloud computing developments have allowed EDI providers to offer their services via an EDI SaaS model.

This development has saved installation costs for clients, but also enabled software companies to create a recurring revenue model charged on an annual basis.

Key Differences of On-Premise vs. Cloud

As outlined above, there are a number of fundamental differences between an on-premises and a cloud environment. Which path is the correct one for your enterprise depends entirely on your needs and what it is you’re looking for in a solution.


On Premises: In an on-premises environment, resources are deployed in-house and within an enterprise’s IT infrastructure. An enterprise is responsible for maintaining the solution and all its related processes.

Cloud: While there are different forms of cloud computing (such as public cloud, private cloud, and a hybrid cloud), in a public cloud computing environment, resources are hosted on the premises of the service provider but enterprises are able to access those resources and use as much as they want at any given time.


On Premises: For enterprises that deploy software on premise, they are responsible for the ongoing costs of the server hardware, power consumption, and space.

Cloud: Enterprises that elect to use a cloud computing model only need to pay for the resources that they use, with none of the maintenance and upkeep costs, and the price adjusts up or down depending on how much is consumed.


On Premises: In an on-premises environment, enterprises retain all their data and are fully in control of what happens to it, for better or worse. Companies in highly regulated industries with extra privacy concerns are more likely to hesitate to leap into the cloud before others because of this reason.

Cloud: In a cloud computing environment, the question of ownership of data is one that many companies – and vendors for that matter, have struggled with. Data and encryption keys reside within your third-party provider, so if the unexpected happens and there is downtime, you maybe be unable to access that data.


On Premises: Companies that have extra sensitive information, such as government and banking industries must have a certain level of security and privacy that an on-premises environment provides. Despite the promise of the cloud, security is the primary concern for many industries, so an on-premises environment, despite some of its drawbacks and price tag, make more sense.

Cloud: Security concerns remain the number one barrier to cloud computing deployment. There have been many publicized cloud breaches, and IT departments around the world are concerned. From personal information of employees such as login credentials to a loss of intellectual property, the security threats are real.


On Premises: Many companies these days operate under some form of regulatory control, regardless of the industry. Perhaps the most common one is the Health Insurance Portability and Accountability Act (HIPAA) for private health information, but there are many others, including the Family Educational Rights and Privacy Act (FERPA), which contains detailed student records, and other government and industry regulations. For companies that are subject to such regulations, it is imperative that they remain compliant and know where their data is at all times.

Cloud: Enterprises that do choose a cloud computing model must do their due diligence and ensure that their third-party provider is up to code and in fact compliant with all of the different regulatory mandates within their industry. Sensitive data must be secured, and customers, partners, and employees must have their privacy ensured.

Hybrid Cloud Solutions

While the debate of the pros and cons of an on-premises environment pitted against a cloud computing environment is a real one, and one that many enterprises are having within their offices right now, there is another model that offers the best of both worlds.

A hybrid cloud solution is a solution that features an element of different types of IT deployment models, ranging from on premises to private cloud and public cloud. A hybrid cloud infrastructure depends on the availability of a public cloud platform from a trusted third-party provider, a private cloud constructed either on premises or through a hosted private cloud provider, and effective WAN connectivity between both of those environments.

Cleo Integration Cloud

Regardless of what kind of environment you are looking for, whether that’s to add a software-as-a-service (SaaS) solution to address a specific business need, move processes and data into a cloud integration platform, or whether you are a SaaS organization that thrives on delivering faster responses to customer requests, you rely on integration to make your data flows work.

Every successful company needs a scalable infrastructure that can support any-to-any hybrid integration, data transformation, fast and secure file transfer, and end-to-end visibility of all the data that flows their dynamic ecosystems. Cleo Integration Cloud enables enterprises to accelerate ground-to-cloud and cloud-to-cloud integration processes to easily integrate applications, and storage and business platforms, to connect all your data, no matter what it is, and wherever you want it, be it on premises or in the cloud.

Cleo Integration Cloud also features self-service and managed services for business and technical users alike, and allows them to build, control, and monitor any and all B2B, application, cloud integration, and data integration processes.

Contact Cleo today to learn more about integrating the critical on-premise and cloud applications running your business.

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