What's the better system: on-premise systems or cloud systems? Many businesses and companies around the world ponder these thoughts before making a decision to choose either one. Before any executive makes a decision on the right system for their company, they would need to understand the fundamental differences between these systems.
ON-PREMISE SYSTEMS
An On-premise system or software is installed and runs on the premises of a the business or individual running the software or system, rather than at a remote facility such as a cloud system.
This type of system is more traditional and has always been the norm for huge multi-national companies which servers and computers throughout the world.
On-premise systems can also be as simple as a piece of software installed on a computer just like an application you run on your computer. 
CLOUD SYSTEMS
Cloud systems is the on-demand availability of computer system resources including: servers, storage, databases, networking, security and software. A cloud system is essentially an on-premise server where you pay only for the services you use. When making a comparison for the types of systems, the criteria for separating and comparing the systems should be clearly laid out. The criteria for this comparison will be:
- Cost
- Security
- Scalability / Flexibility
For the interest of simplicity, we will limit the criteria to these categories and also analyse the systems for a small to medium business.
1. COST
Cloud Systems: Business that elect to go with a cloud system only need to pay for the parts of the system or the services which they use. For example, an enterprise only needs to pay for storage and services that it uses on the cloud.
On-premise Systems:The costs of an On-premise system, purely in the computing sense, will involve 3 factors: a setup cost, a maintenance cost and then overhead costs (Internet, floor space and power costs). Comparision:If one takes only storage as factor for an analysis, then the rule of thumb will always be that Cloud systems are cheaper as one is only paying for the services they are using and avoiding any upfront sunk costs involved with such a system.
A research paper conducted by Fisher (2018) found that when one looks at a time frame for more than 3-4 years, then on-premise systems start becoming cheaper and the cumulative investment in on-premise becomes lower.
The problem if this logic is that it involves a lot of 'ifs' and 'maybes'. It only looks at costs one dimensionally in terms of storage costs, but the reality is that On-premise systems need resources to maintain this system.
To run an efficient IT system, you need resources in terms of technical IT resources and these resources can be expensive.
Even if your business is at a size, where you have dedicated IT resources, keep in mind that these resources will still need to dedicate their expensive time towards server maintenance and similar mundane low ROI activities.
2. SECURITY
On-premise Systems:Traditionally on-premise systems have been more secure than cloud systems. This is mainly due to the isolated nature of an On-premise system. Remember the times when your employees found it hard to log-on to your legacy ERP system?
Now imagine, the same level of isolation for someone who would like to hack your system. Traditionally, this isolation of your system acts to your advantage when dealing with cyber-security threats.Cloud Systems:Cloud systems have always been under a higher threat from cyber-attacks since it's connection to the internet is open. The common thinking is that cloud systems are more connected to the internet and therefore as a consequence have to deal with a greater variety of cyber attacks.
On the contrary, most cloud providers provide a seasoned security protocols and teams to look after entire security of the servers themselves. On top of free security, most cloud providers also give options on advanced paid security services from the cloud that give another layer of security.What do you need to think about?As a CIO, while making a decision on the choice of On-Premise vs Cloud it would be imperative to ask all stakeholders the following questions:
- Are there any governmental regulations surrounding the type of data I can store on the cloud?
- What kind of system is the business looking to put on the cloud?
- What is my budget for security and maintenance?
CIO's need to ascertain if there are any data security and data privacy regulations regarding customer PII (Personal Identification Information). For example, you would need to make sure your servers are GDPR compliant.
CIO's will also need to judge the budget for a security team if they wish to go On-Premise. Yes, it is true that On-Premise is more secure, but this comes with the condition that an internal security team is present, or at the very least their server's security is handled by security consultants and support personnel.
Large companies usually have the luxury of an internal IT security team, but this leaves much to be desired for Small and medium enterprises as they typically don't have the budget.
With a cloud system, the features you get on security features is higher than compared to an On-premise system with no security team. Due to this, cloud systems are more favourable when it comes to getting the most bang for your buck in terms of security.
3. SCALABILITY & FLEXIBILITY
On - premise SystemsAn On-premise system will be limited in terms of scalability and flexibility. When data storage and computational specifications of the server is not enough the meet the needs of the software running on these servers, then these servers will be needed to be expanded.
This typically will constitute the following processes:
- Gauge the additional resources you need.
- Increase Storage or Increase computation through the addition of additional servers, or the direct addition of computational and storage devices on your server.
- Ensure that the installation team is vetted and there are no security lapses.
Cloud SystemsScalability on a cloud server is something much easier to measure and increase or decrease server capacity. Since you are essentially renting services for storage and computation, you can increase this storage and computation through simple transactions that set aside additional resources dedicated for your company.
In some cases, it is as easy as the click of a button!
In terms, of scalability and flexibility this ability ensures that Cloud is way ahead of traditional on-premise systems.
CONCLUSION
There is no simple black or white answer to the Cloud vs On-premise debate. A smart CIO needs to look at: What they need to do? & What they have to do it with?
The answer to these questions will guide your decision. If you are deciding on a system which contains extremely secretive information, have an established security team and a healthy budget to run your server, then On-premise will be the preferred choice.
If the organisation is a growing organisation where more emphasis will be laid on core value generating workers rather than an experienced in house IT team, then looking at cloud software and systems will provide much more value.
At WMSSoft we implement ERP systems for our clients. We provide years and years of experience when it comes to IT decisions like the decision of Cloud vs On-premise systems.
An ERP system provides all the business functions present in a company and packages this into a single system. Contact Us for a FREE consultation and demo of our ERP product: Odoo.