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Cloud or on-premise – which deployment model will be better for your business?

Magdalena Martens-Patyńska


12 min

Nowadays, when practically every company operates in a digital environment, one of the most important decisions is whether to deploy an on-premise environment or use cloud services. Both solutions have advantages and disadvantages. Ultimately, the model chosen should be closely related to the company’s individual capabilities and needs.

A history from on-premise to cloud

The history of on-premise solutions dates back to the 1960s and 1970s. At that time, the first high-computing power machines appeared. It initiated the demand for information systems to support data management and business processes. Companies decided to buy their servers and build local data centers. Their IT infrastructure began to develop in what was considered the best and most secure way.

However, traditional data storage methods gradually became insufficient and too costly for rapidly growing organizations. This pushed the market to look for more efficient solutions. The development of virtualization, a technology that allows multiple virtual machines to run on a single physical server, opened up new possibilities for data management.

The next significant development was the advent of Internet technologies and the growing popularity of network services. As more and more companies started to shift their operations online, the demand for resources also increased. This led to the birth of cloud computing, a service that leverages remote resources to provide flexibility, scalability, mobility, and accessibility from anywhere in the world. While the first cloud computing services made their debut in the mid-1990s, it was the advancement of technology and the increase in network capacity that made them more widely available.

Current market offerings

Nowadays, different cloud solutions are offered, and their configuration is unlimited. Among the most popular are public, private, hybrid, and multi-cloud. These solutions can also be divided by the type and scope of services offered:

  • Infrastructure as a Service (IaaS) – cloud service providers (CSPs) manage the IT infrastructure, but the responsibility for subsequent layers belongs to the company.
  • Platform as a Service (PaaS) – CSPs maintain the software and infrastructure. They reduce administrative tasks on the part of internal IT teams and allow them to focus on application development.
  • Software as a Service (SaaS) – cloud users have access to the software and applications they use online. Everything, including software updates, is managed by its providers.

The number of cloud solutions is growing rapidly. More and more companies are making their services and products available on a subscription basis, abandoning on-premise altogether. Gartner unequivocally predicts an inevitable shift to the cloud. The year 2025 is expected to be a watershed year in this regard. For the first time in history, revenues from cloud solutions are expected to exceed those from on-premise solutions. Similarly, values are projected at $917 billion from the cloud and $868 billion from on-prem.

Statista provides approximate figures in the report ‘Global Cloud Computing Market: Market Size, Trends, And Forecast (2020-2025)’. According to it, the global cloud solutions market is estimated to grow from $371 billion for 2020 to more than $832 billion in 2025. This means more than doubling its value in just five years. Based on McKinsey’s ‘Cloud 2030’ report, the use of cloud solutions could bring an additional 120 billion PLN to Poland in seven years. That’s the equivalent of 4% of the country’s GDP.

Interest in the cloud is declining

Looking at statistics on companies that use cloud solutions, the trend no longer maintains such a high momentum. According to Eurostat, the average percentage use of cloud computing among companies in EU member states is 42%. This compares with 75% in Scandinavian countries such as Sweden and Finland. The result is significantly underestimated by countries at a lower level of digital transformation, such as Romania and Bulgaria, where the average is only 13%.

Of the companies that use the cloud, the vast majority (79%) have chosen it to host their email systems. About two-thirds of respondents use the cloud to store files and office software, such as text editors and spreadsheets. Meanwhile, more than half use cloud-based security software (59%).

Polish companies’ decisions

PMR’s 2022 report for the Polish Cloud shows that only 37% of Polish enterprises have moved all their resources to the cloud. 25% of organizations have moved only 8% of resources.

Similar figures are indicated by research conducted by OVHcloud and Intel Poland. According to them, cloud technology is used by more than half of the surveyed companies (59%). Higher use of the cloud is declared primarily by organizations where digital transformation is rated high (65%) and very high (74%).

A new deal

In addition to the rising interest in cloud computing, there is a different trend emerging. The popularity of developing hybrid environments, which involve a balanced use of both cloud and on-premise solutions, allows companies to customize their IT infrastructure according to their specific needs. In 2022, there was a 40% increase in the number of companies worldwide that moved away from cloud solutions. According to statistics, these companies are planning to return to on-premise or colocation in a commercial data center.

On-premise is a secure local solution

The on-premise solution (abbreviated as ‘on-prem’), involves setting up a local IT environment for a company to store data and manage applications. The organization invests in its own servers, but this allows it to choose them, manage them freely and optimize them for security. This setup provides privacy and independence from vendors or third parties. The company is typically responsible for self-administration, maintenance, and security of the entire infrastructure, including hardware and software.

An important advantage of using a local solution is the high level of security and privacy it provides for resources. This is due to the ability to fully customize the internal environment to match the company’s evolving needs or cyber threats. In-house data centers ensure complete privacy; servers are not shared in any way and can only be accessed by company employees. This can potentially reduce the risk of security breaches and streamline all procedures.

Administrators have more control over devices and resources, allowing them to verify in real-time that everything is functioning correctly. If there is a malfunction, they can respond quickly without relying on third-party providers, which, depending on the model and type of service selected, may require contacting not only the distributor but also the manufacturer and sometimes even the direct provider of the service itself.

Permanent access guaranteed

A local solution ensures that the organization has continuous access to the system and resources. In case of a failure or security breach, this can be extremely important. Additionally, in today’s unpredictable political climate, a company’s reliance solely on Internet access, vendor-side service availability, or lack of a Business Continuity Plan can lead to significant business consequences.

Storing data on your own servers gives you complete control over how it’s stored and processed. This makes it easier to comply with legal requirements and regulations such as GDPR, ISO, or FSC. It’s especially crucial for companies that handle sensitive customer data or information about their business processes to have strict security and access control policies in place. Companies dealing with critical data, as well as organizations in sectors like defense or banking, are obligated to maintain the highest level of control due to legal regulations.

Local solutions do not require recurring subscription fees. They involve a one-time investment in infrastructure or the purchase of software licenses. As a result, the company does not face recurring costs, which can often exceed the expense of a one-time purchase in the long run. Additionally, amortization of assets can save the company a significant amount of money. Using leased or co-located servers can also be an effective way to reduce the cost of owning your own server room.

Downsides of on-prem

However, using an on-premise solution presents certain challenges, including limited scalability. Typically, an on-premise solution requires purchasing an infrastructure that is large enough to meet the company’s needs. As the organization expands, it becomes evident that the existing infrastructure is insufficient and requires significant expansion. This can be not only costly and time-consuming but also a substantial obstacle to further growth.

An on-premises solution can limit a company’s flexibility, making it difficult to implement rapid and large changes. When implementing new software that requires changes to the entire IT infrastructure, the process can take much longer, incurring higher costs and involving multiple departments, which can lead to project delays in large organizations. Furthermore, if a company wants to move in a new and uncertain innovative direction, it may be burdened with unnecessary costs and resource allocations.

It’s important to note that setting up and maintaining in-house infrastructure requires an experienced IT team. This means the organization needs to budget for the cost of hiring qualified staff or outsourcing these services. This can be quite burdensome, particularly for newly established companies.

What will you choose: cloud or on-premise?

two phones side by side, view of screens with application icons

Cloud means flexible efficiency

The cloud solution is based on the utilization of external resources – in the form of virtual servers for storing data and applications. These resources are made available as services in the cloud. They can be accessed online and scaled as needed by the company, without the necessity of making one-time capital expenditures for building and operating its own infrastructure or hiring an IT team.

Scalability should be mentioned as the biggest benefit of a cloud solution. The use of the cloud allows companies to quickly respond to their current needs and adjust computing power, memory, or network bandwidth flexibly to meet them. These changes do not require a one-time investment in hardware or the need to hire an IT team, and can be implemented quickly. An organization can not only increase the resources it uses but can also drastically reduce them when needed, without having to lay off staff or depreciate redundant equipment.

No investment required

No upfront costs is another benefit of using cloud computing. Companies can access large resources without needing an investment budget, as they are billed on a subscription basis based on usage. This is especially advantageous for start-ups, which have limited resources and are uncertain about the scale of their development.

Cloud solutions provide unlimited access to company resources. This enables all employees to work from anywhere in the world and access all data, systems, or applications, as long as they have constant access to Internet services.

Disadvantages of the cloud solution

Using a cloud solution comes with certain risks. Administrators relinquish some control over their data and applications. The storage of resources relies heavily on trusting another company, specifically an authorized distributor, to ensure that the service provider securely and compliantly stores and protects our data. Moreover, collecting and processing data in the cloud means it is stored on servers outside of our company’s control, and depending on the chosen model, on shared resources, potentially heightening security risks.

Dependence on a vendor, also known as vendor lock-in, is a potential drawback of utilizing a cloud solution. It can impact the accessibility of company resources. This could result from financial challenges, policy modifications, or system issues on the provider’s end. There are instances where the provider might suddenly cease operations or fundamentally alter the service itself. Furthermore, a decrease in the quality of SLA can be a cause for concern, as well as potential data release without maintaining its structure upon contract expiration.

Storing data in the cloud can be more costly in the long term, especially for companies requiring substantial storage space or significant computing resources. For organizations with extensive server infrastructure, the monthly expense of utilizing external resources might be excessive.

Regulatory compliance

When analyzing the use of cloud computing, it is important to keep in mind the restrictions and legal issues that may prevent some companies from taking advantage of such a solution. There are also sectors where there are real legal restrictions on the use of the cloud:

  • companies in the government or national defense sector – due to the sensitivity of the data and the need to meet certain security requirements;
  • financial sector companies – must store data locally due to industry regulations;
  • medical companies – when processing and storing medical data, it is important to meet regulatory requirements for data privacy and security;
  • companies in the energy sector – because of the sensitivity of data and the need to protect infrastructure from cyber attacks.

Is there a universal recommendation for every company?

There is no one-size-fits-all solution for every organization. What works well for one company may not work for another. That’s why it’s crucial to carefully analyze your business needs, technological requirements, and the company’s chosen development path before selecting an infrastructure. Depending on the scope of implementation and the chosen service model, haphazardly adopting a cloud solution or selecting it solely for the sake of innovation can result in abandoning the project in its early stages or only achieving short-term benefits.

Cloud computing is a great option for startups that don’t have their own IT infrastructure yet, don’t manage critical data, and where the costs of building their own data center wouldn’t be suitable for their initial needs. Organizations with outdated infrastructure that requires large capital expenditures can expect tangible benefits. On the other hand, for companies with a modern on-premise environment, much depends on the specific needs and expectations of the organization itself.

Diversification and common sense

Keep in mind that shifting to the cloud can result in additional financial costs. Furthermore, certain industries may not find it advisable to use cloud solutions. In some cases, regulations may even prohibit it. For businesses that deal with sensitive data, maintaining local backups is essential. Implementing cloud solutions will also necessitate additional investments in the company’s IT infrastructure.

In a world with increasingly strict data storage regulations, as well as data processing restrictions and rapidly evolving security threats, one significant challenge for cloud solutions is the lack of viable legal protections. Since we don’t own the infrastructure, we have no control over where the data is processed and how quickly it can be recovered after a breakdown. While it’s possible to include various clauses in the contract, impose high penalties on the service provider, and set guaranteed service standards, the ultimate risk remains a business decision for each contractor.

Despite the considerable prevalence of materials promoting only cloud solutions, it is worth remembering to maintain a reasonable balance.

Best practices at major companies also come to the rescue, showing that diversifying solutions works best. The cloud is therefore worth using. However, it’s important to implement this according to a well-thought-out plan, rather than using all company resources and expecting planned benefits.

Which Proget solution to choose – on-premise or cloud?

We want to meet your organization’s needs in the best way possible, which is why we offer both described solutions. Decide which is better for your company.

Choose cloud if you:

  • want to get your system up and running quickly,
  • do not want to invest in your own servers and their maintenance,
  • bet on software mobility,
  • want constant and immediate access to the latest features.

Choose on-premise if you:

  • prioritize the highest level of data security,
  • want to maintain full control over your system and resources,
  • insist on self-configuration of infrastructure, permissions and availability,
  • don’t want to burden your budget with recurring subscription fees.