November 11, 2016

Key Considerations for Evaluating Cloud vs. On-Premise Software

Written by
Jorden Jackson

The modern software buyer will find dozens, if not hundreds, of different solutions in almost every category of business IT. Of course, no software is one-size-fits-all, and though it can be overwhelming to choose, it is possible to find a solution that meets most of your business needs.

They key is to know what you should be considering during the research phase. Your priorities will vary depending on what industry you’re in and the nature of your data and workflows. One decision that’s vital across every line of business is choosing between on-premise or cloud-based software.

ALSO READ:  4 of the Best Options for Small Business CRM

There are plenty of solid arguments on both sides of the fence, so it can be difficult to decide. Maybe you’re attracted to the versatility of mobile access, but concerned about data privacy and security. Or maybe you prefer a desktop-based system, but can’t afford a massive capital expenditure. Here are some key areas to consider:



Hosting is, by far, the biggest difference between cloud-based and on-premise solutions. Cloud-based solutions are hosted on the vendor’s servers and accessed via the Internet, which means you can use them from any location and any device with an Internet connection. On-premise solutions are hosted on your own servers and typically licensed for a finite number of devices.  


Another big difference between cloud and on-premise solutions is pricing. Most cloud solutions follow a monthly or annual subscription-based pricing model (i.e. software-as-a-service), while on-premise solutions incur an upfront fee, with additional fees for upgrades after purchase.

On-premise software requires a much larger investment upfront. For small to medium-sized businesses looking for a low barrier of entry and a low-risk investment, cloud-based software is usually a more viable option. Many cloud-based solutions also offer plans with no contract that can be cancelled at any time. This is an attractive offer for a small business owner looking to test the waters before committing.

Updates and Bug Fixes

Another benefit of choosing a cloud-based solution is the regular updates and bug fixes that your provider will take care of automatically. Since on-premise solutions are installed on your device, they usually require manual upgrades to fix bugs, patch vulnerabilities, and keep the software current. In some cases, these updates may even cost an additional amount.

Data Security

One of the biggest reasons why companies thought on-premise solutions were a safer option than the cloud was due to a lack of confidence in cloud security in its early years. This way of thinking has shifted significantly over the last several years as more and more companies transition to the cloud.

Even so, if data security is your highest priority — for example, if you handle sensitive customer information in a tightly regulated industry — an on-premise solution may be a good choice, so long as you’re willing to forego the benefits of working in the cloud. Industries such as healthcare and financial services have to follow certain government regulations that may require them to keep data stored in private data center, which means cloud is not an option.

Note: Some vendors now offer private and hybrid cloud deployments for business that want to enjoy the versatility of the cloud but keep all or some of their data separate.


Cloud-based software tends to be more rigid when it comes to customizations — a lot of companies offer a-la-carte options, but for additional fees. When it comes to customization, on-premise software takes the trophy, but custom deployments and configurations come at a high cost.

Megavendors like Oracle, IBM, and Microsoft offer customized solutions tailored to your needs, but at a much steeper price than simple cloud solutions. Not to mention, the complexity of a custom deployment often means you’ll need to hire a consultant or pay for an implementation specialist to get up and running.

Time to Implement

In most cases, you can test out a cloud-based solution simply signing up for a free trial. After purchase, businesses can quickly import data from other platforms or accounts to speed up implementation. On-premise solutions, especially in the case of custom implementations, take far longer to implement. They have to be built, installed, and set-up, and a lot of data from other systems will need to be manually imported via spreadsheet upload.

Final Considerations

Cloud-based deployments have made business software more accessible than ever, and the majority of businesses, small to large in size, are choosing it over on-premise because of cost, agility, and ease of use. On-premise solutions are still a viable option for companies with serious security concerns, but even many of these companies choose cloud.

Recent stats show that 58 percent of IT leaders believe “the public cloud is the most secure, flexible, and cost-effective solution to business challenges,” with 51 percent noting that “data security is better in the cloud than their own data centers.” While the preference, for most, is cloud, you need to think about all the aspects of your business, the core factors we outlined here, and choose what’s right for you.

Jorden Jackson is a Digital Media Strategist at mHelpDesk, a top-rated field service management solution. She is a regular contributor on the mHelpDesk blog, a resource with actionable insights and business tips for field service business owners. She specializes in marketing and social media strategy for SMBs, as well as video production and graphic design.