On-Premises vs. Cloud Data Center: Which Is Right for Your Business?

Updated on Mar 21, 2022 by

Every business or company has a set of data and applications that need to be shared or accessed by different departments throughout the organization. This data must be set up and stored somewhere that allows easy retrieval.

Traditionally, companies relied solely on server hardware located within the business premises to store and access data via the local network. However, digital transformation has seen several companies begin their cloud migration journey. Today, most businesses run on-premise and cloud data centers through a hybrid cloud strategy that offers the benefits of both worlds.

Both the on-premises and cloud data centers come with their pros and cons. We’ve explored this and more in the subsequent sections below.

What Is a Data Center, and Why Is It Important?

A data center is often defined as a physical or cloud facility that houses business-critical apps and information. Data centers comprise several elements that can be categorized into three groups: storage, compute, and networking.

data center components

The compute element represents the processing power and memory needed to run apps, often provided by high-end servers.

Storage is all about the media used to house enterprise data. They comprise tapes, hard disks, and solid-state drives with several backups.

On the other hand, networking consists of interconnections between data center components and routers, controllers, switches, etc.

With many businesses now having some of their data hosted in the cloud, reliability, security, and efficiency are becoming the top considerations. The modern data center is expected to communicate across multiple sites in the cloud and on-premises. This infrastructure supports workloads and applications across physical data centers and into a multi-cloud environment.

On-Premise and Cloud Data Center Basics

An on-premise data center refers to a data center that’s physically located in a business building. The company’s IT staff are responsible for maintaining the servers and carrying out routine maintenance services such as installing & updating security software. A private cloud hosted by a third-party cloud service provider can also be considered on-premise. Here, the company maintains the on-premise software, while the service provider oversees the private cloud.

On the other hand, a cloud data center is controlled and operated by a third-party cloud service provider like AWS or IBM Cloud. There are two types of cloud data centers: public and private. With public cloud data centers, you share cloud computing resources with other enterprises, hence it’s a cheaper option. A private cloud data center is expensive since your company doesn’t share cloud computing resources with other enterprises.

On-premise vs. Cloud Data Centers

Before choosing between cloud and on-premises data centers, it’s essential to understand the similarities, differences, and pros and cons. Every business is unique, and what works best for one company may not be ideal for yours. Here’s a quick overview of the factors to consider before making up your mind.

factors to consider before choosing cloud or on-premises


While cloud and on-premise data centers have some significant differences in how they operate, these solutions aim at reducing maintenance burdens and costs by implementing agile and modern IT infrastructure. Some of the major similarities include:

Flexible workload management – similar to cloud deployments, on-premise data centers can also use cloud computing to streamline workloads. For instance, they can test and run extra workloads on the cloud as a temporary solution depending on the requirements.

Access to modern technologies – both cloud and on-premise infrastructure rely on a combination of modern technologies to ensure security and efficiency. These technologies include a management platform, an operating system, and application programming interfaces (APIs), which work together to ensure the smooth running of the data centers.

High-level automation – IT infrastructure automation has been adopted on the cloud and on-premise environments. This helps free up manual and repetitive work while reducing cost and streamlining workload deployments.


Organizations that choose the cloud data infrastructure see significant differences from those that host and manage their data within the business premises. Some of the key differences lie with the following parameters:

Cost – on-premise data centers require considerable upfront investment while cloud deployments are relatively cheap, thanks to the user-oriented subscription services such as pay-as-you-go models.

Data security – On-premise data centers offer complete control over your data; hence, you can easily implement advanced security measures. However, you may lose direct control over your data in cloud deployments depending on the cloud service type you’ve chosen. If you go for a shared responsibility model, ensure you understand your responsibilities and the requirements to keeping your data safe.

Deployment of resources – With on-premise, most of your resources are deployed within the business premises, while cloud data centers have most of their resources on a third-party server.

Scalability and flexibility of operations – on-premise deployments are less scalable and less flexible than cloud data centers.

Compliance issues – Most on-premise deployments align with the data compliance policies. However, cloud data centers, by default, violate data compliance policies due to the loss of direct control over one’s data.

Pros and Cons

For a better comparison and overview of the two data center deployment options, here are some pros and cons to consider.

Advantages of Cloud Data Centers

  • It reduces your IT staff’s responsibilities and headcount.

  • It eliminates the need for substantial initial investments.

  • You can adjust the services to your budget.

  • It offers better data backup than on-premises deployments.

Disadvantages of Cloud Data Centers

  • The quality of your internet connection determines the user experience.

  • Little control over your data means data can be less secure.

  • High-end scalability means cloud deployment costs can skyrocket if the operations are left unmanaged.

Advantages of On-Premise Deployments

Besides offering better control over your company data, on-premise data storage provides the following benefits:

  • It allows for quick and convenient operation, even without internet access.

  • It lowers monthly IT costs.

Disadvantages of On-Premise Data Storage

  • It requires in-house IT support, increasing maintenance costs.

  • A lack of sophisticated data security and backup strategy increases the risk of data loss.

  • Less scalability means any future advancements or business relocation can be quite costly.

Choosing the Right Data Center Solution

Now that you know the similarities, differences, advantages, and disadvantages of cloud and on-premise data centers, choosing the right solution for your organization should not be a challenge.

The best choice often narrows down to your unique business needs, cost, and personal preference. If you are in a highly-regulated industry such as finance, you may want to consider a hybrid cloud solution. However, a small business will benefit from cloud deployment due to the reduced IT cost and better scalability.

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