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Cloud storage vs. on-premises servers: 9 things to keep in mind

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When it comes to deciding whether to store your business’ information on-premises or in the cloud (or migrating it from one to the other), the sheer thought can seem overwhelming and complex. Still, many companies—large and small—are choosing a cloud solution. In fact, a 2020 survey finds that 41% of enterprise workloads will be run on public cloud platforms by the end of the year, with another 22% using a hybrid option, which is a mix of both. The study also predicts on-premises workloads will shrink a full 10% before the year’s out—from 37% to 27%.


Small, medium and large businesses are moving to cloud storage as it’s generally the best solution based on several criteria—but there are some edge cases where it’s not ideal. Let’s take a look at the pros and cons of both cloud storage and on-premises storage, so you’ll be better informed before you decide. 

What is on-premises storage? 

On-premises storage means your company’s server is hosted within your organization’s infrastructure and, in many cases, physically onsite. The server is controlled, administered, maintained, procured, etc. by your company and its in-house IT team, or an IT partner. Data and other information are shared between computers through your local network.

What is cloud storage?

With cloud storage, an outside service provider such as Microsoft hosts your data. The cloud provider procures, installs and maintains all hardware, software, and other supporting infrastructure in its data centers. You access these services and manage your account via the internet from your PC, a web browser or a mobile app.

Pros and cons

From comparing the potential costs involved to security, maintenance, compliance, scalability, reliability and integration issues—just to name a few—the question of “to move or not to move to the cloud” may seem daunting. Here are nine crucial considerations when choosing the cloud vs. an on-premises solution: 

1. Costs and maintenance

Business decisions can often come down to cost. But when something as important as your critical data comes into play—the decision isn’t always just about dollars and cents. Here’s a look at the difference between the cloud vs. an on-premises solution, in terms of cost and maintenance:


In the short term, deploying your company’s on-premises infrastructure means you’ll have to invest a large amount of capital upfront on hardware, the installation itself, software licensing fees, data backup, extra IT services, support and more. Once it’s ready to go, you’ll need to invest in internal or external IT staff for ongoing support, maintenance and security, as well as cover energy costs, hosting costs and the extra square footage needed in your office space. And we can’t forget ongoing hardware, software and licensing updates and purchases. 

If your hardware malfunctions and needs to be replaced—or if you want to upgrade to new equipment—this will require additional investment. For new businesses just starting, the capital investment can be a huge disadvantage. However, you will not have to pay for ongoing cloud service subscription fees, and you may be able to lower your internet bills, as your infrastructure doesn’t demand as much bandwidth for accessing files stored for cloud-based services.


One of the biggest benefits of choosing a cloud provider is there are no enormous upfront costs. You pay monthly subscription fees as you go. Maintenance, up-to-date software, security and support all fall into the lap of the cloud provider—plus, your staff doesn’t have to waste precious time troubleshooting problems. And most providers include large amounts of storage in their base subscriptions, along with benefits like increased security, file sharing, and all the other perks that come with the cloud (see #s 2-9 below). 

Often times, your overall cloud costs are less than the amount of money you would spend for on-premises storage/server use, cooling, floor space, electricity costs, etc. Remember, cloud provider costs can vary widely, so be sure to compare prices and see what planning tools they offer, like pricing calculatorsmigration estimates and more. 

2. Security/threat protection

Whether your data center is on-premises or in the cloud, the issue of cloud security (both physical and virtual) should take center stage. It’s also the reason given by nearly half of IT decision-makers who choose to stay on-premises over the cloud. Fifty-eight percent believe apps that come in contact with critical data or systems need to be on-premises. But are those concerns valid? Let’s take a look at the pros and cons of both choices in terms of security:


Companies that choose to stick with their on-premises application often feel that keeping everything onsite gives them more control. And, because a third-party provider isn’t involved, fewer people have access to it. However, if you choose to stay on-premises, you’ll be responsible for creating a security system—and the responsibility is yours alone. 

This path requires a high level of security expertise, constant monitoring/maintenance of physical assets (like hardware, servers, office space) as well as your network. You’ll need security tools to build a formidable firewall, as well as encryption and secure access control. And of course, it all requires a lot of in-house time and money.


While some businesses may be reluctant to transition to the cloud, cloud security has never been better—which takes the burden off of your business. According to Gartner estimates, public cloud service workloads will suffer at least 60% fewer security incidents than those in traditional data centers. 

The top cloud providers offer comprehensive, multi-layered security that includes the following:

  • Access control systems
  • Continual threat monitoring
  • Encryption for data in transit and at rest
  • Physical data center security 
  • Network protection
  • Application security
  • Data redundancy
  • Continuous validation
  • Mass file deletion protection,
  • Suspicious login and activity monitoring 


Unlike on-premises storage, you’ll have a team of global cybersecurity experts helping to safeguard your business assets and data at all times. 

Still, breaches can happen, just like they can with on-premises. Businesses who use the cloud can mitigate this using onboarding and offboarding processes to manage employee access and address how and when their employees use external applications. 

3. Compliance

Many companies in the financial and healthcare industries (and beyond) are subject to compliance with mandates such as HIPAA, GDPR or CCPA, to name a few. So, which makes more sense in terms of choosing on-premise vs. cloud compliance? 




Whether you’re dealing with local, international or industry-specific regulations—staying compliant means you’ll need specialized knowledge and expertise. If you choose to build or continue with your on-prem infrastructure, it can be costly. You’ll have to make sure you properly configure and maintain your systems to stay in compliance, as well as have the right employees and resources at hand to get it done. 


Meeting compliance rules means hiring staff familiar with your particular regulations, continuously monitoring systems/logins, creating incident procedures and using data encryption. If something goes wrong, the responsibility falls 100% on your business, as it owns the servers and storage. If you’re audited or fined for being out of compliance, that can add to the cost. 



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Using a compliant cloud provider can take much of the costly compliance burden off your plate. Unlike an on-premise solution, a top cloud provider has teams of experts who have compliance certifications in dozens of key industries, including health, government, finance, education, manufacturing and media. Not to mention groups that engage globally with governments, regulators, standards bodies and non-governmental organizations. 

Note: in the end, your company will be responsible if compliance requirements come up short, so you should ask your cloud provider for compliance certificates or audit results.

4. Scalability

When it comes time for businesses to scale up, on–premises and cloud solutions are vastly different. Here’s what you need to know:


When your on-premises infrastructure can no longer handle its changing workload, you’ll need to scale by adding resources like new hardware and software and increased memory and computing power. Expanding your computing resource requires money, labor, expertise, procurement, hardware, software, monitoring systems and precious time. And if your spike in demand is short-lived, your spend will be highly inefficient.


With cloud storage, there’s no need to rack and stack servers. In the cloud, businesses can scale workloads based on certain metrics as needed—in literally a few clicks—using built-in features. This capability allows you to easily scale up, down, out, in—and even auto-scale. This flexibility dramatically cuts your overhead costs associated with monitoring and scaling resources manually.

5. Reliability

First and foremost, accessing your servers needs to be quick and reliable, while offering a good user experience. When it comes to reliability, here are some things to consider when choosing on-prem vs. cloud storage: 


Some businesses like the idea of on-premises because it does not require an internet connection for onsite employees to access storage, making it fully available without the need for a good connection. However, recognize that having all of your data on the server limits access to only those working in the office—excluding today’s many remote workers. In addition, on-premises will require power and backup power (such as a generator), and a storage backup system, which will add to your costs. 


A good, fast, reliable internet connection is critical when it comes to cloud storage. No connection means no access to your files—and a slow connection can be equally daunting. A break in connectivity can delay your operations and send productivity into a slump. Be sure you’re happy with your internet connection before switching to cloud storage. Many opt for a backup internet connection if all (or most) of their workload is in the cloud.

6. Data backup

Disaster recovery can be a business’ worst nightmare. One study found that about half of all companies are not prepared to recover from a disaster. Here’s a look at how an on-premises solution stacks up vs. the cloud:


With on-premises storage systems, your data is stored on an internal server, meaning your company assumes a greater amount of risk in terms of losing data. Still, many businesses choose to keep storage on-premises, but with an off-site backup service to avoid data loss. Eighty percent of organizations that use on-premises servers still use the cloud for at least a portion of their data protection strategy (see #9).


A reliable cloud storage provider offers businesses many features to avoid data loss, including built-in redundancy, failover, backup, automatic logging, monitoring, and more—allowing for shorter recovery time compared with on-premises alternatives.

7. Anywhere access (via mobile app, browser, PC)

Your company’s remote access and mobile access needs play a role in choosing the right option. Here are some considerations when it comes to accessing your information via the cloud versus on-premises:


If most of your users work in the same office and are rarely mobile—an on-premises server could be a solid choice since you won’t likely need the anywhere access the cloud offers. Also, if you often work with sizable files or videos, you may want to keep them on-premises to keep upload and download times short. (If you use a VPN, keep in mind that unforeseen situations like natural disasters or COVID-19, for example, can suddenly turn office workers into remote workers, which can also overwhelm your VPN system.)


With cloud storage, you have what amounts to a virtual desktop. Workers can access anything they do in the office via a cloud server, as long as they have an internet connection. This convenience makes the cloud a great choice for employees who will be using it frequently from home or while they’re on the move, without the need for a VPN. 

Cloud servers are also perfect for running applications that need to be always up and available. In addition, the cloud allows for easy file sharing, real-time collaboration and better version control. Lastly, some cloud storage providers offer differential sync, which dramatically reduces the upload time and bandwidth used when making changes to huge files.

8. Integration of apps and legacy systems

When choosing a storage solution, many businesses have applications with formats that don’t quickly transfer to other systems. That’s why 84% of enterprises surveyed say integration is top-of-mind when choosing how they’ll modernize their applications. Some simply want to keep specific data entirely in-house, and others are looking to the cloud. So what is the best choice? That depends on your company’s particular situation:


If you have a legacy line of business (LOB) apps that directly access your local file server—and you’re unable or unwilling to say goodbye to that software just yet—those legacy systems will have to stay on-premises for now—at least in part. (see hybrid option #9).


If you are ready to modernize your entire infrastructure, it’s time to move to cloud-based apps beyond just file storage. This way, the vendor incurs the cost of maintaining, implementing and supporting your software instead of you. Plus, it’s scalable, mobile and an overall better use of resources.  

9. A hybrid solution

The ability for businesses to embrace both the public cloud and local data can improve their IT agility and maximize efficiency. In a hybrid solution, data and applications can move between on-premise servers and public clouds for greater flexibility and more deployment options. In other words, you can keep files that your LOB software uses on-premises—and the rest of your files and documents in the cloud. Other benefits include:


  • Control: Your organization can maintain a private infrastructure for sensitive assets
  • Flexibility: You can take advantage of additional resources in the public cloud when you need them
  • Cost-effectiveness: With the ability to scale to the public cloud, you pay for extra computing power only when needed
  • Ease: Transitioning to the cloud doesn’t have to be overwhelming because you can migrate gradually—phasing in workloads over time


While a hybrid solution seems to offer the best of both worlds for some companies, it really is a temporary solution. Today, small- and medium-sized businesses (SMBs) are already running 43% of their workloads in the public cloud and forecast to rise. With that in mind, it’s hard to ignore the benefits of fully migrating to the cloud for SMBs with understaffed and overworked IT departments. 

Learn more about hybrid cloud options for your business, as well as fully public cloud solutions.

Paul Diamond is the Product Marketing Manager for Microsoft OneDrive (consumer and small business). He has worked in marketing and eCommerce for Amazon, T-Mobile, Groupon and Vistage International. He’s also the editor of the books: Fishing’s Greatest Misadventures, Surfing’s Greatest Misadventures, and Cycling’s Greatest Misadventures published by Casagrande Press.

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