Arun Subramanian
Jun 20 · 5 min read
Photo by imgix on Unsplash

For the last few years, businesses have been seriously reconsidering their IT infrastructure to stay competitive. They have started to look into the pros and cons of keeping their computing resources on-premises or moving the functions to cloud services.

Initially, most companies thought that the cloud would resolve a lot of their IT problems. But soon they realized that on-premises and cloud computing both have their own strengths and weaknesses. So, IT decision makers like CIOs and CTOs are still struggling with understanding which model best suits their needs.

Of course, the right choice depends on the various aspects of the business in question. However, a good understanding of the differences between on-premises and the cloud is a good starting point to make more informed decisions.

Evolution from On-Premises Data Center to the Cloud

Data centers have played an important role in the evolution of modern business. In the late 1950s, American Airlines and IBM partnered to create the first passenger reservation system called Sabre. It’s an early example of using large-scale data processing to serve a commercial enterprise. IBM continued its innovation by developing mainframe computers.

Before the introduction of personal computers (PCs) in the 1980s, the mainframes dominated information processing. But in the early 1990s, businesses started to use microcomputers as cheaper alternatives to mainframes. They stacked a lot of microcomputers or servers together to produce mainframe-type processing power and called them data centers. Most businesses who dealt with lots of information started to build these on-premises facilities that had stacks of servers. The introduction of VMWare Workstation in the 1999–2001 period created a new wave of innovation in on-premises technology. Now, the IT teams could virtualize servers and optimize their use of resources.

In 2002, Amazon Web Services (AWS) started the development of cloud-based services that gave businesses the opportunity to use computing and storage without building their own IT infrastructure. Since then, other tech leaders like Microsoft and Google have started their own cloud services. Today, companies have more options than ever to run their business in on-premises data centers or in the cloud.

Trends in IT Computing

According to the Uptime Institute’s data center survey, data center operators are using hybrid IT approaches to mix on-premises and off-premise resources. However, only about 50 percent of the operators fully understand the tradeoffs of their chosen approach.

For example, around 61 percent of the respondents believe that their use of on-premises and the cloud has improved their IT resiliency. Yet, there has been a 31 percent increase in IT downtimes and severe service degradations compared to the previous year. This indicates that IT decision-makers have to carefully evaluate their approaches to ensure their expectations are aligned with the results.

Key Concerns in On-Premises vs. the Cloud

When IT decision makers are considering resources for workloads and trying to decide on using their own data centers or the cloud, here are some factors to consider:


A big appeal of the cloud is that there is no up-front investment in infrastructure. Businesses can buy resources and start using the cloud instantly. They don’t have to build or rent data centers. They don’t have to design the technology stack. The cloud makes it easy and saves time. It can lead to enormous cost savings. But IT decision makers should still consider long-term costs.

On the cloud, businesses have to keep paying. So, it’s important to run a cost analysis to see if an on-premises investment would be cheaper. It’s also important to remember that cloud services can change fee structures in the future. That risk factor should be part of the consideration. If you are running services on the cloud, auto-scale resources and avoid over-provisioning. If on-premises makes sense for your workloads, create efficient resource management processes to keep costs in check.

Service Outages

Both on-premises and cloud computing can face service outages. However, the remedy for the two differs significantly. In an on-premises case, the business is responsible for creating redundancy. So, companies need to design the necessary backup systems to restore services as soon as possible.

With a good cloud computing service, the infrastructure redundancies should be already in place. But it is the responsibility of the IT operator to design for high availability and disaster recovery. For example, AWS architects should design to take advantage of multi-region deployments to keep their systems safe from regional downtimes.

Operational Control

Businesses have full control over their on-premises data centers. But it also means they have to invest staff and resources to maintain those systems. Most cloud providers have a shared responsibility model. It relieves IT and DevOps teams from certain duties, but they are still responsible for the good design and system implementations.

Security and Privacy

Security and privacy are big contributing factors in the choosing of an on-premises data center or a cloud service. For businesses that deal with sensitive government or defense information, the use of the cloud is often prohibited. Even though security and privacy on the cloud are getting better every day, it is still riskier than an on-premises facility. But it’s also important to have the right security expertise to keep your on-premises safe.

Vendor Lock-Ins

With the cloud, businesses often worry about getting locked in by a particular vendor. You can mitigate this risk by using a hybrid approach by mixing on-premises and the cloud, or you can use a multi-cloud approach and keep your services spread across multiple clouds.


Businesses have complete information about on-premises data centers. So, it’s easier to comply with various regulations like HIPAA, PCI DSS or GDPR. Cloud computing can make it harder to keep track of all the necessary information.

The Bottom Line

Your business workloads will ultimately determine whether to use on-premises or cloud computing. The hybrid use of on-premises and the cloud is popular right now. As cloud computing gets cheaper and more IT software and hardware service terms expire, you can expect more companies to become cloud-only businesses. However, most government and defense-related operations will probably remain on-premises.

Originally published at on June 20, 2019.

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Arun Subramanian

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I’m programmer, wannabe designer, and trying to be an entrepreneur.

The Startup

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