On-Premises vs. Cloud: Which One to Choose?

In this article we are going to discuss:

There's a technology revolution brewing. Experts estimate that more than 50% of IT spending will shift from traditional tools to cloud services by 2025. Yet some companies remain hesitant to adopt cloud technology, relying on the same on-premises applications of yesteryear.

Yes, new tech can be difficult to understand, and cloud computing may have a learning curve. Also, sometimes, the status quo is comfortable. But moving to cloud computing offers a slew of benefits.

We’ll compare on-premises versus cloud computing, including a rundown of the pros and cons to help you decide whether to stay the course or embrace the future.

What is on-premises?

A company’s self-owned systems are typically on-premises, meaning they exist on-site in the business’s office or data center. The user purchases a licensed copy of their desired software and installs it on their computer or company network.

With on-premises options, the user is also responsible for hardware infrastructure. Any requirements regarding hard drive size, computer memory, central processing speed, and so on must be fulfilled and managed by someone on-site, such as the business owner or head of IT.

What is cloud computing?

what is cloud computing

You’ve probably seen articles comparing on-premises versus SaaS solutions. SaaS stands for software as a service. It’s a type of cloud computing — an umbrella term referring to technology hosted by a separate, off-site, third-party entity.

Rather than footing the bill for on-site tech setup and management costs, businesses can access applications, cloud storage space, and other services — all on demand and billed according to usage.

On-premises vs. cloud computing: Key differences

To better understand the nuances of on-premises and cloud computing, we’ll explain how these two options differ.


Companies that opt for on-premises software bear the burden of everything from server hardware to the utilities needed to power the network. They also require ample space for the initial infrastructure and any future additions. That all costs money, not to mention the budget for maintenance.

The cost of cloud services depends heavily on consumption. The user isn’t responsible for building and maintaining the entire system. Instead, they only pay for what they use. Upgrades, electricity to run the servers, routine tune-ups — that’s all billed to the third-party entity running the resource.


On-premises environments are typically more secure because you’re operating on a closed system. You technically don’t even need to hook the system up to the internet except when seeking downloads or sending digital communication to customers and vendors. This is a significant benefit for companies that deal in sensitive information, such as defense, finance, and healthcare organizations.

One of cloud computing’s most significant drawbacks is its vulnerability to leaks and hacking. That’s why reputable cloud computing services have dedicated security experts and layers of digital protection designed to foil bad actors, preventing the theft of intellectual property and personal details about employees and clients.


On-premises environments are entirely regulated, adjusted, and governed by the on-site owner — other than factors run according to government or industry guidelines, of course. You control your data, and you decide how much access and privacy you’ll afford your team and customers.

The boundaries of data ownership become more blurred with cloud computing. The third-party vendor is tasked with data storage and encryption, meaning you may not always have access to the information when you want it. Even companies that promise 24/7 access are subject to outages; you’ll have no control over when those outages are fixed.


In-house resources are deployed in a relatively closed environment. You rely on your own IT infrastructure, and you’re solely responsible for all the resource’s necessary maintenance.

Although cloud computing deployment can differ depending on the exact type (public versus private cloud, for instance), it’s generally faster and more agile. Resources are pre-built and hosted by the third-party service provider, making them accessible as needed. There's minimal setup and no hardware build-out required.


Companies operating in highly regulated industries must adhere to certain information security standards. HIPAA’s protection for private health information is probably the most recognizable example, but regulatory bodies in finance, insurance, and education also set data storage and treatment standards.

On-premises users may find it time-consuming and expensive to stay current on regulations and remain in compliance. Cloud computing companies may have entire teams dedicated to compliance, but the cloud infrastructure is inherently risky. There’s a decent argument for both sides.

Cloud vs. on-premises: Pros and cons

pros and cons of on-premises and could services

Still debating the merits of on-premises versus cloud computing? Compile a list of the functionality your business needs to succeed and what you’re willing to invest in software. Then, compare it to this list of pros and cons.

On-premises pros

  • Complete control: With on-premises computing, you have the final say on every aspect, from how the system is run to how data is stored.
  • Insulated from external factors: There’s no worrying about whether your third-party host might have internet problems or forget to pay their electric bill.
  • Total cost of ownership: You’re paying for a license, not an entire system, which can help protect your bottom line.

On-premises cons

  • Implementation time: You’ll need to plan ahead and account for implementation time, including building out a complex system and training everyone to use it.
  • Maintenance responsibility: If something breaks, you’re responsible for fixing it.
  • Upfront expenses: Getting an on-premises system up and running costs much more.

Cloud pros

  • Accessibility: Tap into software, data, and add-on services as the needs arise. Cloud computing also streamlines collaboration with other companies and vendors, as everyone can sign into the online platform and communicate in real time.
  • Affordable scalability: Because you’re not responsible for the tech infrastructure, you won’t have to bear the cost of build-out and maintenance.
  • Predictability: The host is responsible for licensing, support, and infrastructure costs, meaning you don’t have to worry about fluctuating expenses. Instead, you pay a monthly or annual fee to participate.
  • Deployment speed: It’s faster to get up and running when you’re tapping into an existing system rather than building it from scratch.

Cloud cons

  • Internet connection dependence: You’re limited by not only your own internet access but also the connectivity of your third-party host.
  • Limited customization: Although some cloud software providers offer options for customization, many are configured to please the masses — not the preferences of a single user.
  • Long-term costs: Cloud computing may be cheap to start, but it’s like renting a house. You may pay more in the long run than if you invested in your own infrastructure.

Which one is right for my business?

Choosing on-premises versus cloud computing comes down to what your company needs.

Ask yourself:

  • Which option better fits my budget?
  • Is security a primary concern?
  • How often will I require updates?

Take advantage of cloud-based solutions with Orderful

No matter what type of computing you choose, you’ll need a system for efficiently communicating with your industry partners. That’s where electronic data interchange (EDI) can help.

Orderful’s EDI solution has the power to revolutionize your business operations. To better understand how Orderful paves the way for stress-free EDI implementation using cloud-based technology, schedule an appointment to speak to an expert today.

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