What actually is On-Premises?

G DATA Guidebook

Take away or sit down? That's what many customers are asked at food stands. In IT, the analogy is: On-premises or cloud computing. Instead of delicious meals, of course, it's about software. Should the software ordered be used in their own network environment (i.e. to go), or at the service provider in cloud computing (directly at the provider)? The differences as well as the advantages and disadvantages of the almost iconic cloud and the on-premises model are explained here.

What does On-Premises mean?

By definition, the term on-premises means "in one's own environment". Companies install the software on their own hardware. However, software that is operated on-premises does not have to be installed directly in the company's own IT environment. Rented third-party servers that the customer administers himself are also considered on-premises. The term on-premises is also called on-prem or in-house. In contrast, the cloud computing model is also called software as a service (SaaS for short) or off-premises and is by definition a service that is used directly in the licensor's network environment. Collaboration software, for example, can be hosted on-premises on a company's own servers or in the manufacturer's data centres, i.e. in the cloud. The current trend is clearly towards the cloud: Microsoft, for example, has announced that it will no longer operate its on-premises MS Project solution.

On-premises vs. cloud software

On-premises software and cloud solutions differ fundamentally in the way they work. Below you will find an overview of the most important differences:

On-Premises Cloud
Infrastructure The software is installed on the user's own hardware. The software is hosted in the licensor's data centre.
Maintenance and support The user himself looks after the software, updates and maintains the hardware (e.g. repairs). The provider looks after the software, regularly installs updates and ensures that the hardware functions smoothly.
Scalability Poorly scalable as companies and their requirements grow. Additional functions and staff access can easily be added.
Data protection Sensitive data remain in the user's own system. The user must choose a trustworthy provider.
Costs Costs for own servers, maintenance and IT staff. There are no costs for own servers and no or low costs for IT staff.
Workload Effort for installation and maintenance lies with the IT department, which requires the corresponding know-how. Little effort and know-how required, so companies can concentrate on their core business.

Advantages and disadvantages of on-premises solutions

On-premises solutions have various advantages and disadvantages compared to the cloud. Which model is best for your own business ultimately depends on its individual requirements and technical possibilities. In the following, we summarise the most important points for you.



A much-discussed point is security. While the data is transferred to a data centre of the cloud provider in the case of SaaS, it remains in the company's own systems in the case of on-premises. In this case, the company has full control over its own data, but must take care of security itself. If the responsibility lies with the company's own IT team, this requires a lot of expertise. If an on-premises solution is made accessible from the internet by opening ports, for example, this is a problem for data security.

Depending on the expertise available within the company, cloud providers may have more IT security know-how. Many companies therefore opt for a cloud solution. In doing so, it is important to choose a trustworthy manufacturer that gives the highest priority to data protection. An important criterion is that the provider and its servers are located in the European Union. Because only then does it have to comply with the regulations of the General Data Protection Regulation (GDPR).

If the servers are operated in other countries, the stored data is primarily subject to the law there. If the infrastructure is located in the USA, for example, the stored data is subject to the Patriot Act, i.e. if there is reasonable suspicion, it must be disclosed to the US government.


Cloud solutions are usually offered on a subscription basis, while on-prem solutions often have a one-time purchase fee. But here, too, there are providers with monthly or annual billing or additional fees for updates. Since the pricing models and fees vary greatly, the licence costs between cloud and on-prem are generally difficult to compare. It is therefore advisable to compare the licence costs in the specific case.

However, it should always be taken into account that on-premises solutions incur costs for the acquisition of their own servers. This means there are additional expenses for the necessary IT staff - whether it is the company's own employees or external IT experts who are consulted as needed.

Another point: in the case of growing companies, requirements can change quickly, so that the purchased software may no longer fit sooner than previously thought. Cloud solutions are then usually much more scalable and flexible: thanks to monthly or annual payments, it is possible to switch to another product at relatively short notice. If further functions and additional access for employees are required, these can easily be added. Companies therefore only pay for what they really need. However, they should make sure that the cloud solution is properly designed and optimally utilised so that they do not pay too much.


One of the biggest disadvantages of on-prem versus cloud computing is the significantly higher workload. Software vendors release updates on a regular basis to provide more features and, more importantly, to close security gaps that are discovered. If the software is on-premises, the company must completely take care of installing these updates in a timely manner.

This means additional work. After the installation, there may be effort involved in testing, as possible errors have to be logged and corrected. Companies also have to take care of hardware maintenance and repairs themselves. Cloud software, on the other hand, outsources these complex tasks so that companies can concentrate on their core business. Hardware and software are managed and maintained by experts from the cloud provider. This means that updates are regularly installed in the background without any additional effort for the users. The software is simply accessed via the browser.

So you need a good enough internet connection for employees to use the software. However, using cloud software does not mean that one's own employees do not have to acquire any new knowledge at all. The switch to the cloud may at least require training or possibly even further training for the IT officers.


The decision for on-premises or the cloud is always a trade-off for companies. Many companies value cloud solutions for their simplicity and scalability, while others continue to rely on on-premises. When making a decision, it can help to examine the advantages and disadvantages specifically in relation to your own needs, processes and employees.