On-Premises Vs Cloud- How Are They Different and
What Factors to Consider Before Deciding?

No one size fits all.

Cloud Computing has taken the technological world by storm right from its advent. Undoubtedly it is lucrative for the many technology players in the market due to the flexibility and scalability it offers. The ongoing debate on what suits the requirements of modern-day businesses, on-site or cloud computing, still has not seen a befitting climax. The popularity of cloud application development can be gauged from the fact that the global cloud computing market was estimated at around $546.1 billion in 2022. However, one big question still stings the minds of many technology businesses.

Should they switch to custom cloud software solutions or invest in on-premises software solutions?

Let’s find out what are the risks, benefits, and factors you must know before making a choice.

What is Good for Your Business- On-Premises or Cloud Solutions?

A lot of factors come into play when you decide between On-premises and Cloud Computing for your business such as budget, size of business, business goals, data sensitivity, IT resources, and much more. Just because many businesses are opting for custom cloud software solutions, that doesn’t mean you must join the bandwagon without assessing your needs and bandwidth.

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Assess if Cloud Migration is Suitable for Your Business Size

If you are a new business with limited financial resources and still figuring out your scalability needs, cloud application development can be a practical choice for you. Small to medium-sized enterprises can benefit from cloud computing as it cuts the need for heavy hardware and software investments. The ‘pay as you go’ model takes off a substantial financial load off their shoulders.
On the other hand, established businesses can achieve agility and innovation by integrating cloud computing with their well-established technological infrastructure. They can give a great boost to their productivity by using cloud computing to suit their hybrid work needs.

Check Utility for Your Industry and Business Type

If you belong to a data-sensitive industry like finance, banking, or healthcare, there might be security concerns related to cloud computing. On-premises web solutions are the most trusted among businesses running in these domains. Cloud application development service providers do offer robust security measures to drop such apprehensions related to the cloud, turning major security concerns into myths. In 2021, retail banks across the world spend $20.9 billion on IaaS, PaaS, and SaaS products and the market looks bullish with an expectation to achieve a CAGR of more than 22% in the next five years.

Also Read: Security Concerns to Keep in Mind While Building FinTech App

Understand the Regulatory Requirements

The decision to choose between On-Premises and Cloud Computing must consider the regulatory compliance requirements. For example, HIPPA in the USA requires all covered entities to protect the confidentiality, integrity, and availability of electronic protected health information (ePHI). Similarly, IT SOX internal controls are put in place to check who has access to what data, and how data is stored to ensure data integrity. Most cloud computing service providers ensure the highest standard of compliance with such regulations, offering auditable records.

Comparing Benefits of On-Premises and Cloud Computing

Before we compare the benefits of on-premises and custom cloud software solutions, let’s make it clear that there’s no one winner yet. Both have distinct advantages and can cater to the unique needs of businesses.

Advantages of Cloud Computing

The server is the lifeline of an organization. It allows a business to store data and interact internally and externally. Previously, the on-premises were the only alternative available to the companies. Now Cloud application development offers significant benefits to businesses along with the key feature of cost-effective data storage.

• Reduced Manpower Requirement- As custom enterprise software development services are handled by a third party; your IT staff need not be engaged in new software patches and installation. Freed up working hours can be used in more productive and profitable processes.
• Quicker Time to Market- It is easy to spin up new instances or retire them instantly. This enables quick deployments. It is easy to test innovative ideas and design new applications, dropping any hardware limitations.
• Unmatched Scalability- To meet the ever-growing scalability demand of a thriving business, cloud computing allows scaling up resources and storage per need. And it is as easy to scale down when the resources are idle, and business is in hibernation mode.
• Reduced Costs- The cloud computing model involves subscription and usage fees with certain variable and hidden costs. As an enterprise, you pay only for the service to the extent you use it. This significantly reduces overbuilding the in-house infrastructure.
• Accessible Anywhere- Your business is not location-bound once you shift your technology base to a custom cloud software solution. Your employees, customers, and other stakeholders can access the information from anywhere, anytime.
• Ensured Data Security- Contrary to widespread belief, cloud computing can become the spine of your company’s data security and integrity requirements. In-depth security features, automatic features, regular IT internal controls testing, and centralized management ensure that your data is always well-protected.
• No Data Loss- Local/on-premises servers can glitch and lose data, but data stored on the cloud has backup and disaster recovery systems. No information is lost when you opt for cloud computing.

Advantages of On-Premises

Before cloud computing made a mark in the technology space, on-premises solutions were the only way of running for businesses. If you are on the threshold of making a choice between on-premises and cloud computing, here is a list of advantages it offers.

• Better Control Over Resources- With its own server, a company can have better control and ownership over its resources. It is easier to identify potential threats and vulnerabilities in the system.
• More Personalized- When a company has in-house infrastructure, they can make customization per their needs. As compared to custom cloud software solutions, the on-premises are more personalized and can be further customized at a lower cost.
• Confidentiality- There’s no such criterion that proves that the on-premises solutions are more secure than the cloud. However, when the data is stored locally, it never leaves the organization, and any outage can be managed efficiently.

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Here’s matrix that will help you compare their benefits at glance-

Potential Risks: A Heads-Up

In this debate of On-Premises vs Cloud Computing, what is often overlooked is the potential risks associated with both. Here’s a heads-up if you are a step away from deciding.

Risks Associated with On-Premises Solutions

1. The security of an on-premises system is solely in the hands of the IT team. It might give better control over the system, but it also makes it vulnerable to security threats. Any inefficiency can cause severe data loss or breach.
2. It is not a cakewalk to scale an on-premises system. There are hefty software and hardware costs associated with scalability.
3. If the local server goes down, it takes your data along. Any hardware, software, or power failure can cause significant downtime.

Risks Associated with Cloud Solutions

1. With a third-party managing cloud service, there might always be concerns about who has access to your data and to what extent.
2. Uptime on cloud computing service is governed by the Service Level Agreement (SLA) between the provider and the customer. However, any downtime can drastically affect the businesses relying upon the affected cloud computing server.
3. Many cloud services run on proprietary software and might have a specific set of technologies that can prevent the business migrate from the custom enterprise software development service provider in the future.

Also Read: Choose The Right Cloud Computing Service Model For Your Business: SaaS, IaaS, PaaS

In a Nutshell

There are ways and tools to break away from these limitations. A cloud service provider can offer specialized services by integrating them deeply into the system. That makes migration possible. Concisely, the custom cloud computing solution holds an upper hand over traditional on-premises solutions. Its compliance with the regulations and regular upgradation of security measures builds the required level of trust and reliability.

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