Cloud or on-premise – which is best for your business?

Nowadays, with virtually every company operating in a digital environment, one of the critical choices facing organizations is to choose between deploying a cloud or on-premise solution. Both have advantages and disadvantages, and the final decision should be closely related to the individual capabilities and needs of the company.

Story from on-premise to cloud.

The history of on-premise solutions dates back to the 1960s and 1970s. At that time, the first computers with high computing power appeared, and with them came the demand for IT systems to support data management and business processes. Companies decided to purchase their servers and build local data centers, and their IT infrastructures began to develop in what was then considered the best and most secure ways.

Traditional data storage and processing methods quickly became insufficient and too costly for fast-growing organizations, which led to a market search for more efficient solutions. The development of virtualization, i.e., allowing multiple virtual machines to run on a single physical server, opened up new possibilities for data management.

The next stage was the emergence of Internet technologies and the popularity of network services such as e-mail, social media, and e-commerce. The increasing globalization of business also had a significant impact on the emergence of new needs in the area of IT infrastructure management. More and more companies and organizations have begun to conduct their operations online while requiring many resources for data storage and information processing. Thanks to that, the concept of cloud computing has risen. Now, it is a service that enables remote resources to provide flexibility, scalability, mobility, and accessibility anywhere in the world. The first cloud computing services appeared on the market in the mid-1990s, but it was only in the development of technology and increased network capacity that they became widespread.

Today, we can use different cloud solutions, and their configurations are unlimited. Among the most popular are public cloud, private cloud, hybrid cloud, and multi-cloud. We can also divide cloud solutions can also 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 lies with the company.

• Platform as a Service (PaaS) – CSPs maintain the software and infrastructure, reducing the number of administrative tasks on the part of internal IT teams and allowing them to focus on application development.

• Software as a Service (SaaS) – cloud users can access the software and applications they use online. Everything, including software updates, is managed by the software providers.

On-premise and cloud in numbers.

The number of cloud solutions is building an undeniable growing trend. More and more companies are making their services and products available on a cloud subscription, abandoning the on-premise solution 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, revenues from cloud solutions are expected to surpass those from on-premise solutions. Similarly is projected at $917 billion from the cloud and $868 billion from on-premise.

The approximate figures in the report “Global Cloud Computing Market: Market Size, Trends, And Forecast (2020 – 2025)” are provided by Statistica. According to it, the global market for cloud solutions will grow from about $371 billion in 2020 to more than $832 billion in 2025. According to the “Cloud 2030” report compiled by McKinsey, cloud solutions could bring Poland an additional 120 billion zlotys within seven years, the equivalent of 4% of the country’s GDP.

However, reviewing statistics on companies that use cloud solutions, the trend does not maintain such a high momentum despite its upward trend. According to data from Eurostat, the average percentage of companies in the European Union member who use cloud computing is 42%. Compared with 75% in Scandinavian countries such as Sweden or Finland. Countries significantly lower the result at a lower level of digital transformation, such as Romania or 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 companies (61%) use the cloud for file storage (68%) and office software such as word processing or spreadsheets. More than half use the cloud for security software (59%).

PMR’s 2022 report for the Polish Cloud shows that only 37% of Polish companies have moved all their resources to the cloud, and 25% have moved only 8% of their resources. Similar figures are indicated by a study conducted by OVHcloud and Intel Poland, according to which more than half of the surveyed companies (59%) use cloud technology. Higher use of the cloud is declared primarily by organizations in which digital transformation is rated high (65%) and very high (74%).

Parallel to the growing interest in the cloud, a completely different trend is beginning to take shape – the development of hybrid environments and a certain balance in the use of the cloud, tailored to a particular company’s actual needs and specifics. In 2022, the number of large companies worldwide that plan to abandon cloud solutions and return to on-premise or colocation in a commercial data center will increase by 40%.

On-premise is a secure local solution.

An on-premise solution (“on-prem”) involves a company creating a local IT environment to store data and manage applications. The organization invests in its servers, allowing it to choose them, manage them freely, optimize them for security, and gain privacy and independence from vendors or third parties. Typically, the company is also responsible for the administration, maintenance, and security of the entire infrastructure: the hardware (hardware) and the software (software).

The most important advantage of a local solution is the high level of security and privacy of resources, resulting from the ability to comprehensively customize the internal environment according to the company’s changing needs or cyber threats. In-house data centers allow total privacy and ensure that the company doesn’t share servers in any way. Moreover, company employees can access them only, potentially reducing the risk of security breaches and facilitating all procedures.

Administrators also gain more control over devices and resources, so they can verify in real-time that they are working correctly. In the event of a failure, they can react faster and do not have to rely on external providers, which, depending on the model or 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.

A local solution guarantees the organization constant access to the system and resources, which can be crucial in a failure or security breach. Moreover, in the current unstable political situation, a company’s complete dependence on Internet access, service availability on the provider side, or the lack of a Business Continuity Plan can have serious business consequences.

Maintaining data on your servers also allows you absolute control over storing and processing data. Therefore, it is a more effective tool for complying with legal requirements and regulations like RODO, ISO, or FSA strictures. A strict security and access control policy are crucial for companies that store sensitive customer data or information about their business processes. Legal regulations obligate companies handling critical data and organizations in specific sectors, such as defense or banking, to the highest level of control.

Local solutions do not generate recurring subscription fees. They require a one-time investment in infrastructure or the purchase of software licenses. However, thanks to this, the company does not incur the recurring costs necessary for its operation, which very often, in the long run, such as two years, will exceed the price of a one-time purchase. What’s more, the depreciation of assets can save the company a lot of money. Leased or co-located servers can also effectively reduce the cost of owning your server room.

On-prem cons.

On the other hand, using on-premise comes with some challenges, if only limited scalability. A local solution usually requires the purchase of an appropriately sized infrastructure to create an environment that meets the company’s needs. However, when a company grows, the infrastructure will grow simultaneously. It requires considerable expansion, which can be too costly and time-consuming for the organization and a significant roadblock to further growth.

An on-premise solution can reduce a company’s flexibility, making rapid and significant changes challenging to implement. When new software needs to be implemented, requiring changes to the entire IT infrastructure, the implementation process can take much longer, involve higher costs, and involve more departments, which in large organizations can block the project altogether. What’s more, if a company wants to try some innovative solution but is still determining the outcome, it may be left with a cost and resources that will burden it unnecessarily in a change of direction situation.

Finally, the very installation and maintenance of an in-house infrastructure require the expertise of an experienced IT team. The organization must therefore prepare for the cost of retaining suitably qualified staff or using an outside company. In either case, it can be a financial burden, especially for newly established companies.

Cloud computing is about flexible efficiency.

A cloud solution uses external resources in virtual servers storing data and applications made available as a service in what is known as the cloud. These services are available online and can be scaled at will, depending on the needs of the company, which does not have to incur the one-time capital expenditure of building its environment, operating it, or hiring an IT team.

Scalability is the most significant benefit of a cloud solution. The cloud allows companies to respond very quickly to their current needs and flexibly adjust computing power, memory, or network bandwidth to them. These changes do not entail a one-time investment in hardware or the need to hire an IT team so you can verify it in short time frames. An organization can increase its resources and drastically reduce them when needed without having to lay off staff or depreciate redundant equipment.

No entry costs are another benefit of using cloud computing. It means that the company can use a limited amount of money to use extensive resources,  billed on a subscription basis, in proportion to consumption. It is significant for start-ups that have limited resources on the one hand and are still determining the final scale of their development on the other.

Using cloud solutions gives unlimited access to all company resources. It means that all employees can work from anywhere in the world and have access to all data, systems, or applications as long as they have constant access to Internet services.

Cloud solutions allow companies to be more flexible in business. Easy adaptation to the changing needs and requirements of the company, scalability, and the ability to modify the resources used, gives the organization complete room to operate in a rapidly changing environment.

Downsides of cloud solution.

The use of a cloud solution also carries some risks. Administrators need to gain some control over their data and applications. The storage of resources is primarily based on trusting another company, or more precisely, an official distributor ensuring that the service provider stores and protects our data safely and competently. Collecting and processing data in the cloud also means that it is stored on servers outside of our company’s control, depending on the chosen model and shared resources, potentially increasing the risk of its security.

Vendor lock-in is another downside of a cloud solution, which can arise on various levels. Financial difficulties, policy changes, or system problems on the vendor’s side can significantly affect the availability of company resources. There are also situations in which the provider suddenly disappears, or the parameters of the service itself change significantly. A decline in the quality of the service level offered (SLA) is also a cause for concern for administrators, as is the release of data without preserving its structure after the expiration of the contract.

In the long run, using the cloud can be more expensive, especially if the company needs a large amount of disk space or extensive computing resources. The monthly cost of external resources can be too high for organizations with colossal server rooms.

When analyzing the use of cloud computing, it is worth considering 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 cloud solutions:

• Companies in the government or national defense sector – due to the sensitivity of data and the need to meet specific security requirements.

• Companies in the financial sector – industry regulations require that financial data be stored locally.

• Companies in the medical sector – when processing and storing medical data, it is essential to meet regulatory data privacy and security requirements.

• Companies in the energy sector – because of the sensitivity of the data and the need to protect against cyber attacks.

Cloud or on-premise, which solution is the best?

There is no universal rule indicating the best solution for each company. Cloud and on-premise are two complementary opposites solutions, which means that any advantage of one will be a disadvantage of the other. That is why you have to choose infrastructure by a stage of analysis: business needs, technological needs, and the direction of development determined by the company. Depending on the scale of implementation and the model of the selected service, the random implantation of a cloud solution or its selection for the mere idea of being innovative will end in abandoning the project in the initial phase or achieving only short-term benefits.

Cloud computing is a good solution for start-ups that still need their IT infrastructure, do not handle critical data, and the costs associated with building their data center would not be adequate for their initial needs. Organizations with an outdated infrastructure requiring significant capital expenditures can expect tangible benefits. In contrast, for companies with a modern on-premise environment, much depends on the individual needs and expectations of the organization itself.

In some cases, migration to the cloud may require additional financial outlay. There are also sectors where cloud solutions may sometimes be impossible due to regulations or lack thereof. Companies handling critical data always need to do local backups. So they must invest more in their IT infrastructure when using cloud solutions.

In a world of increasing regulations regarding data storage, all the strictures on the security of data processing, and a rapidly changing world of threats, a considerable challenge for cloud solutions will be the fact that, at this point, it has no fundamental legal safeguards. Only the infrastructure owner has control over where the data is processed and the speed of disaster recovery. Of course, it is possible to enforce various clauses in the contract and charge the contractor with skyrocketing penalties and guaranteed service parameters. At the same time, the ultimate risk remains the business decision of the principal.

Despite the considerable prevalence of materials promoting only cloud solutions, it is worth remembering to maintain a reasonable balance. Best practices from the most significant companies also come to the rescue, showing that diversification of solutions works best there. Therefore, it is worth using the cloud but with a plan, only on some company resources, and expecting specific benefits.

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

As the only Polish manufacturer of a solution for managing the security of data processed on a company’s fleet of mobile devices, we want to meet your organization’s needs best, so we offer both described solutions. Decide for yourself which will be better for your company.

Choose cloud licenses if you:

• care about getting your system up and running quickly

• do not want to invest in your servers and their maintenance

• rely 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 complete control over the system and resources

• care about self-configuration of infrastructure, permissions, and availability

• don’t want to burden your budget with constant subscription fees

Let us know if you still wonder which solution will be for you! Our team will be happy to help you decide.

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