On-Premise vs. Cloud: 6 Key Differences

Published by Lareshka McCoy on September 8, 2020

On-Premise vs. Cloud

On-premise vs. cloud computing – it’s the classic debate. Whether you are updating your existing enterprise resource planning (ERP) system or adopting a new one, a crucial factor governing your system’s overall performance will be determined by whether you choose to host it on-premise vs. cloud. 

Organizations now can decide between the two platforms for almost every element of their IT infrastructure. Cloud deployment may be gaining traction, however, on-premise operationalization still plays a vital role. Do you know which side you’re on? 

While both solutions are equally promising, each has its own merits and drawbacks. Below, we will explore and determine which could be the most appropriate solution for your business needs.

On-Premise The traditional form of an enterprise IT infrastructure, where the software and hardware elements are sourced in-house. 

The company oversees the responsibility for the following:

  • Acquiring and maintaining its servers on-site within a climate-controlled environment. 
  • Highly skilled IT team overseeing hardware and software updates. 
  • Purchasing additional equipment to support advancements and growth. 

The on-premise model has been the convention in the ERP space until a few years ago.

Cloud Cloud computing refers to the on-demand availability of IT resources, which are accessed over the internet. Such resources include data storage, computing power, backups, maintenance, software updates, HVAC, and power. These are provided and managed by the cloud provider for a monthly subscription fee.  

The primary distinction between the on-premise vs. cloud is centered upon the hosting of the services. Wherein on-prem computing, the company’s data, and servers are behind its own firewall. However, in cloud computing, the data is protected and stored on third-party specialized servers.

Both of these IT solutions have unique traits that can best support your organization’s needs. Listed below are some of the key differentiators, with pros and cons between on-premise vs. cloud solutions. 

1. Costs

Capital Expenses:

On-PremiseCon: Establishing an IT infrastructure in-house requires significant capital outlay to procure the hardware, purchase software licenses, and its supporting staff. Software costs are ordinarily a one-time perpetual license fee, determined by the size and number of users. Also, the aging hardware will incur repair and/or replacements as it reaches the end of its lifecycle; resulting in significant, recurring expenses when hosting on-premise vs. cloud.   

Cloud – Pro: The business incurs no capital expenditure since the cloud provider is responsible for establishing and maintaining the hardware for the cloud platform. The organization obtains exponential savings by outsourcing its resources and maintenance. 

Operating Expenses:

On-Premise – Con: On-going expenses include space to house the servers, as well as power, cooling, and personnel costs. Software costs include recurring fees for training, support, and updates. These expenses are much higher when choosing an on-premise vs. cloud infrastructure.

Cloud – Pro: Cloud users tend to pay for the resources that they utilize, usually in the form of a monthly or annual subscription fee, along with potential recurring fees for support, training, and updates. The payment model is typically referred to as pay-as-you-go. Under this method, you are saving by avoiding paying for more than you need. 

Overall, both on-premise vs. cloud systems will result in a portion of company expenses, however, the longevity and recurring savings that come along with cloud computing allude for it to take precedence over the traditional infrastructure.

2. Customization

On-PremisePro: This model affords the organization with a high degree of customization. Since the ERP system is housed on-site, the applications can be tailored on-demand as the business needs as required.
On-Premise – Con: Should the company require additional storage space or other computing capabilities, it is more challenging to rapidly scale the on-site servers due to having to install new hardware and commit additional manpower. Customization can also result in increased implementation time, as well as complicated updates from vendor software due to the customized code. 

Cloud – Pro: Expanding the server capacity to accommodate your new business needs can be accomplished by simply selecting a more capacious plan. The vendor can seamlessly deploy PeopleSoft updates due to limited customization. This subscription-based model allows for scalability as the demands of the business change.
Cloud – Con: Applications hosted on the cloud can sometimes be an out-of-the-box solution, depending on the cloud provider. This purpose relates in turn to system stability, as updates released by the vendor may be hindered by complicated customizations.  

Overall, a cloud-based system favors server elasticity and accommodating on-demand computing capabilities. On occasion, customizations can play a tricky role in the cloud environment, therefore, it is always best to verify any limitations upfront with your chosen provider when deciding between on-premise vs. cloud.

3. Control

On-Premise – Pro: Since the data resides in the on-prem server, the company solely retains all control and privacy.
On-Premise – Con: The business relies on a limited number of servers since redundancy is prohibitively expensive. In the event of a system malfunction or ransomware compromise, all the internally stored data could be permanently lost. This would be detrimental to the company’s operations and reputation since data tends to be the foundation of the business.

Cloud – Pro:  Cloud deployment ensures redundancy by operating back-up servers and multichannel network connectivity. It will sustain the system availability should the underlying hardware fail. This also eliminates the risk of a single point of failure (SPOF) within your infrastructure.
Cloud – Con: Your company operations are dependent on internet connectivity. A connection outage could result in loss of company operations and productivity. It is therefore imperative that companies ensure that their connection is stable and strong.

Choosing a reliable cloud provider, such as Oracle helps to combat any network connectivity concerns between on-premise vs. cloud infrastructures. Companies should always formulate a back-up plan regardless if on-premise vs. cloud, to circumvent not being productive due to loss of connectivity. Ensure certain apps allow you to operate offline and preemptively storing mission-critical documents and presentations on a local hard drive.

 

4. Compliance

Regardless of the industry, most companies nowadays are governed by some variant of regulatory supervision. Some of the most prevalent being the Health Insurance Portability and Accountability Act (HIPAA) relating to private health information; the Family Educational Rights and Privacy Act (FERPA) covering detailed student records; Sarbanes-Oxley Act (SOX) to protect shareholders, employees, and the public by reforming accounting and auditing practices; and the Red Flags Rule to protect customers from identity theft and suspicious activity, just to name a few. In the case of PeopleSoft, which tends to house Personally Identifiable Information (PII), it most likely will have to comply with requirements outlined by a governing body, it is therefore imperative to select the most appropriate hosting solution for your business needs.

On-Premise – Pro: Since the data is stored and processed in-house, it allows the organization to oversee and comply with regulatory requirements governing data protection and management on their own terms.
On-Premise – Con: Companies operating within heavily regulated industries like Finance or HealthCare, which tend to gravitate towards PeopleSoft as their ERP system, are subject to stringent requirements. Resultantly, the responsibility to ensure compliance rests solely on the business since they own and manage the data. Compliance can also entail a large number of employees, costly external auditors, and potentially heavy fines for non-compliance. 

Cloud – Pro: The cloud provider bears some of the responsibility for the burden of compliance, to the extent that numerous data centers even provide attestations of regulatory compliance.
Cloud – Con: The onus is on the business to perform their own due diligence to determine whether the cloud provider is compliant with the relevant regulatory requirements of their industry by ensuring that their customer, employee, and business partners’ data is safeguarded. The ultimate burden of compliance rests with the business to ensure that codes and standards are being abided by. The Oracle Cloud offers a Managed Cloud Service to ensure that your company’s regulatory requirements pertaining to data storage and management are in compliance.

Oracle’s vendor partnership with Sentinel Software provides users with unique tools to assist with compliance regulations. Its features and capabilities offer extensive audit reports, user permissions, access requests, and data protection. The software is available for either on-premise or cloud solutions. Sentinel can even assist if you are looking to make the switch between the two platforms, as they provide Oracle Cloud hosting.

5. Deployment

On-Premise – Pro: The ERP solution is deployed on the company’s infrastructure, for which they are responsible for managing and maintaining it.
On-Premise – Con: The process of identifying the appropriate hardware and software required for your ERP solution, and then determining how it can be integrated into the current IT infrastructure can take days, if not weeks.  Depending on the breadth of the project, deployment alone can take multiple days-not taking into account system downtime or whether the necessary expertise is readily available in-house.

Cloud – Pro: Considering that all the hardware and system infrastructure are housed on the cloud platform, and all that is necessary to access it is an internet portal, deploying your ERP system to the cloud will be most efficient and cost-effective. Oracle offers the PeopleSoft Cloud Manager to streamline the migration of PeopleSoft applications from on-premises to the cloud. PeopleSoft customers can retain their core configurations and customizations by “lifting and shifting” their environments to OCI.
Cloud – Con: The deployment of critical ERP data occurs on a third party server. The Oracle Cloud Infrastructure is engineered to ensure that your ERP data hosted on their servers is protected by multiple tiers of security and numerous levels of defense at every hardware and software layer. Also with the addition of cloud benefiting tools, such as Cloud Manager, you can easily lift and shift your PeopleSoft environments to the cloud avoiding extensive downtime.

Making the decision between on-premise vs. cloud can seem overwhelming, but luckily with the right cloud provider, the migration and deployment process into the cloud environment can be seamless. 

6. Security

On-Premise – Pro: In the traditional model, the data is secured in-house and only available to authorized individuals within the organization. Also, the security features can be exactly customized to comply with the organization’s processes and regulatory requirements.
On-Premise – Con: The efficacy of an organization’s security is only as good as it’s internal security policies and procedures. It is therefore imperative that businesses that are subject to stringent security requirements, maintain rigorous security protocols including frequent and secure backups, and a robust disaster recovery plan. 

Cloud – Pro: Cloud platforms today employ a much higher standard of security and sophistication than their former reputation acquired. PeopleSoft customers can benefit from the cloud platform’s cutting edge infrastructure and network security as well as frequent backups and upgrades. Cloud platforms are subject to strict regulatory guidelines due to the sensitive nature of the data that they store, customer’s can therefore benefit from their extensive investment in security policies and oversight.
Cloud – Con: As with anything, you run the risk of the unknown. It’s imperative to choose a cloud provider that is built with heightened security to protect your data at all times. Oracle Cloud, offers a number of enhanced security measures to provide a secure and reliable infrastructure.

Previous apprehensions about inadequate security on the cloud are dissipating as companies realize that the benefits of cloud adoption far outweigh those of maintaining their ecosystem on-premise. As the debate between on-premise vs. cloud continues, it’s apparent for the trending winner.

As security remains a leading topic within organizations, it forces companies to take an internal look into their own metrics. Sentinel Software helps enterprises dive deep into user access and reports to gain visibility and an understanding of PeopleSoft security. You are provided with a wide array of tools that assist with easily identifying and removing unauthorized access to limit organizational risks.

Statistically, most breaches occur within an organization due to a lack of security controls. Maintaining adequate PeopleSoft housekeeping and maintaining updated systems helps to reduce this risk and avoid the costly effects of a breach.

Hybrid Model

If it’s unclear which model favors best for your organization between on-premise vs. cloud; you’ll want to explore the option of the Hybrid Cloud Model.  This method harnesses the benefits of each solution to satisfy your corporate requirements. It entails deploying your ERP solution to a hybrid mix of on-premise, public, and private cloud.

Some organizations have a preference for housing select data on-premise; but also want the many benefits that come along with cloud computing. Considering the ease of scalability and access on the cloud, it would be a sensible solution for creating additional capacity to manage certain workloads and processes. This would alleviate the burden on the on-prem IT infrastructure.

And The Winner Is..

Although both on-premise vs. cloud solutions have their benefits, the cloud is quickly becoming the leading platform within the industry, proving to be worth its hype. It’s imperative to understand the organizational needs of your enterprise and equip your staff with the technology resources to withstand its desires. In an environment molded by customers’ needs and evolving business landscapes, organizations must maintain a software infrastructure that is agile and expeditiously responsive in order to retain their market share.

With customers now facing incalculable technological challenges stemming from aging hardware and in-house data center infrastructure, outsourced services, to outdated security models, housing your PeopleSoft environment on the cloud has become the next logical step. It is not surprising that the number of organizations deploying their IT solutions to the cloud platform has become more pervasive over the last decade. 

The cloud entices customers with the promise of flexibility, improved agility and scalability, cost and time savings, and the latest technology. IT executives agree that their legacy systems may not be adequate to allow them to stay ahead of the game, therefore leveraging cloud functionality would afford them a pivotal advantage in managing their PeopleSoft environments. 

Oracle’s Cloud Infrastructure (OCI) offers a robust, unified framework that utilizes ‘best-in-class’ cloud strategies to harmoniously migrate your PeopleSoft infrastructure and applications to the cloud platform. If you are looking to make the switch, Sentinel Software can assist by providing the hosting and support for easy migration to the cloud.

Have more questions? Contact us to receive more information about on-premise vs. cloud solutions and see what’s right for you!