Cloud vs on-premise: Key differences and pros & cons

If you're researching cloud vs. on-premise infrastructure, you've probably noticed how confusing the whole topic has become. Do you go cloud, or stick with on-premise? 

Honestly, making this choice shouldn't be this complicated. But here we are, with vendors pushing their preferred solutions, consultants offering conflicting advice, and a mountain of technical considerations that would make anyone's head spin.

The truth is, there's no universal right answer. Some businesses thrive in the cloud, others need the control and customization that comes with on-premise systems, and many find success with a hybrid approach. The key is understanding which factors matter most for your specific situation.

This guide will walk you through both options, explain their key differences, and help you determine which approach makes the most sense for your organization's goals and constraints.

What is cloud computing?

Cloud computing means using software, storage, and computing power that's hosted by cloud service providers and accessed through the internet. Instead of running applications on your own servers, you're essentially renting space and resources from companies like Amazon Web Services, Microsoft Azure, or Google Cloud Platform.

The appeal is straightforward: you can get up and running quickly without buying expensive hardware, and you only pay for what you use. Your team can access these systems from anywhere with an internet connection, which has become increasingly important as remote work has become more common.

Common types of cloud services

Cloud services typically fall into three main categories:

IaaS (Infrastructure as a service)

Infrastructure as a service gives you the basic building blocks of cloud infrastructures. You get virtual machines, storage, and networking resources, but you're still responsible for managing the operating systems, applications, and data. 

PaaS (Platform as a service)

With platform as a service, the cloud provider gives you a ready-to-use platform where you can build and run your applications without worrying about the underlying servers or operating systems. You focus on your code, they handle the infrastructure.

SaaS (Software as a service)

Software as a service is the most hands-off approach, where you simply use fully built applications hosted in the cloud. Examples include Gmail, Salesforce, or Slack. You just log in and use the software without worrying about any of the technical details behind it.

Pros of cloud computing

Reduced upfront infrastructure costs

You don't need to buy servers, networking equipment, or worry about setting up data centers. Major cloud service providers handle all the physical infrastructure, which can save tens of thousands of dollars in initial capital expenditure.

Easier scalability and updates

Need more computing power for a busy season? You can usually scale up in minutes rather than weeks. Software updates and security patches are typically handled automatically by your cloud provider, reducing the burden on your IT team.

Remote access and collaboration

Your team can access cloud-based systems from anywhere with an internet connection. This flexibility has proven invaluable for supporting remote work and ensuring business continuity during disruptions.

Minimal IT maintenance required

The cloud provider handles server maintenance, hardware failures, infrastructure upgrades, and automated data backup. This frees up your IT team to focus on projects that directly support your business goals.

Quick deployment

Most cloud services can be deployed and running within hours or days, compared to the weeks or months it might take to procure and configure on-prem hardware.

Cons of cloud computing

Ongoing subscription costs

While you save on upfront costs, cloud services require ongoing monthly or annual payments. Over time, these can add up to more than you would have spent on owning your own infrastructure, especially for stable, long-term workloads.

Reliance on internet connectivity

If your internet goes down, you lose access to your cloud systems. While internet outages are less common than they used to be, they can still bring your business to a halt when they occur.

Potential compliance and data residency concerns

Some industries have strict requirements about where data can be stored and who can access it. Cloud providers have made significant improvements in this area, but you may still need to do additional work to meet certain cloud compliance requirements.

Less control over infrastructure

You're dependent on your cloud provider's decisions about hardware, software versions, and service availability in public cloud environments. If they decide to discontinue a service or make changes you don't like, your options may be limited.

What is on-premise software?

On-premise solutions are software applications and systems that run on servers and infrastructure located at your business location. Your IT team is responsible for purchasing, setting up, maintaining, and securing all the hardware and software involved.

This approach gives you complete control over your technology environment. You decide what hardware to buy, which software versions to run, and how to configure everything to meet your specific needs. Many organizations with strict security requirements, regulatory constraints, or unique technical needs still prefer this approach.

Pros of on-premise software

Full control over data and systems

You own and control every aspect of your infrastructure. This means you can implement exactly the security measures, configurations, and policies that your business requires without having to work within the constraints of a shared cloud environment.

Potentially better performance for specific applications

For certain types of workloads, especially those that require very low latency or process large amounts of data locally, on-premise systems can deliver better performance than cloud alternatives.

Greater customization options

Since you control the entire technology stack, you can customize systems to meet your exact business requirements. This is particularly valuable for organizations with unique processes or technical requirements that don't fit well with standard cloud offerings.

Cons of on-premise software

High upfront costs

You need to purchase servers, networking equipment, software licenses, and often build or modify physical space to house everything. These costs can easily reach into the hundreds of thousands of dollars before you even start using the systems.

Longer setup and deployment time

Planning, purchasing, installing, and configuring on-premise systems typically takes months rather than the days or weeks required for cloud solutions. This can slow down business initiatives that depend on new technology capabilities.

Requires internal IT support and ongoing maintenance

Your team needs to handle everything from replacing failed hard drives to applying security patches. This requires specialized skills and can be expensive if you need to hire additional staff or consultants.

Less accessible for remote workers

While it's possible to provide remote access to on-premise systems, it typically requires additional infrastructure like VPNs and can be more complex to manage securely than cloud-based alternatives.

5 key differences between cloud vs on-premise software

Let's cut to the chase and look at what really matters when making this decision.

1. Cost structure

This is where most arguments start. Cloud solutions spread costs over time with monthly or annual subscriptions. You pay less upfront but more over the long term. On-premise requires a big initial investment in hardware, software licenses, and implementation services, but typically costs less to operate year after year. The catch? "Long term" might be longer than you think. For many workloads, you need to run on-premise systems for 3-5 years before the total cost beats cloud alternatives.

2. Control and customization

With on-premise systems, you have complete control over hardware selection, software configuration, and security policies. Cloud solutions offer less control since you're using shared infrastructure, but they also require less management from your team. The trade-off is between flexibility and convenience.

3. Security and compliance

Cloud providers invest heavily in security and often have better security capabilities than individual organizations can implement on their own. However, you're trusting a third party with your data in public cloud environments, which some organizations aren't comfortable with. Private cloud options provide more control but at higher costs. If you don't have cloud security expertise on your team, this can be a liability rather than an advantage.

4. Scalability and flexibility

Cloud solutions were built for scaling and handling variable workloads. Need more capacity? Add it in minutes. On-premise systems require more planning to handle growth, since you need to purchase and install additional hardware ahead of time. You might end up with too much capacity (wasted money) or too little (performance problems).

5. Accessibility and remote access

Cloud systems are designed from the ground up to be accessed from anywhere with an internet connection. On-premise systems can support remote access, but it typically requires additional infrastructure and can be more complex to manage securely.

What are hybrid cloud solutions?

Here's where things get interesting. You don't have to choose just one approach. Many companies use hybrid solutions that combine cloud and on-premise systems, keeping different workloads where they make the most sense.

For example, you might keep your core business database on-prem for performance and security reasons while using public cloud services for email and file storage, or private cloud infrastructure for sensitive development projects. This lets you optimize each system for its specific requirements rather than forcing everything into the same mold.

The benefits are obvious: you maintain control over critical systems while gaining cloud flexibility for everything else. You can also migrate to the cloud gradually rather than making a risky all-or-nothing switch.

But hybrid approaches come with their own challenges. Managing multiple environments is more complex than managing just one. Integration points between cloud and on-premise systems can create security vulnerabilities. And your team needs expertise in both environments, which can be expensive.

Cloud computing vs on-premise: Which is right for your business?

The right choice depends on your specific business needs, technical requirements, and organizational constraints. Here are some factors to consider.

When to choose a cloud computing solution 

A cloud computing solution works best when you: 

• Need to get up and running quickly with minimal upfront investment
• Have a distributed workforce that needs access from multiple locations
• Want to focus your IT team on business initiatives rather than infrastructure maintenance
• Have workloads with variable or unpredictable resource requirements
• Are comfortable with subscription-based pricing models

When to choose an on-premise solution

Opt for an on-premise solution if you: 

• Have strict data residency or compliance requirements that are difficult to meet in the cloud
• Need extensive customization or integration with legacy systems
• Have predictable, stable workloads that won't benefit from cloud scalability
• Have the budget for upfront infrastructure investment and ongoing maintenance
• Require very low latency or high-performance computing for specific applications

When to choose a hybrid solution 

A hybrid solution works best when: 

• Want to maintain control over critical systems while gaining cloud benefits for others
• Need to integrate cloud services with existing on-premise investments
• Are planning a gradual migration to the cloud
• Have diverse workloads with different security, performance, or compliance requirements

Secure and scale IT with Rippling

Whether you choose cloud, on-premise, or hybrid infrastructure, managing IT complexity doesn't have to slow down your business. Rippling's unified platform helps IT leaders manage devices, applications, and employee access across any environment without the usual headaches—and integrates seamlessly with HR and finance software for full workforce management.

The reality is that most IT teams end up juggling multiple tools that don't talk to each other properly. You have one system for user provisioning, another for device management, a third for access control, and somehow you're supposed to keep it all synchronized manually. Rippling changes this by combining identity and access management, device management, and inventory management into a single platform powered by unified employee data.

With Rippling's IT management solution, you can automate user provisioning from day one through offboarding, enforce granular security policies based on real-time user and device data, and maintain complete visibility across your entire technology stack. The platform integrates with over 600 applications and services, meaning you can manage your IT environment effectively regardless of where your systems are hosted.

What makes Rippling different is that it's built on a single source of truth for all employee data. Instead of trying to sync information between disconnected systems, everything works from the same unified dataset. When someone changes roles, gets promoted, or leaves the company, all their access permissions, device assignments, and application provisioning updates automatically across every connected system.

Cloud vs on-premise FAQs

What is the difference between a cloud and an on-site server?

The difference between a cloud and an on-site server is simply location and management. A cloud server is owned and maintained by a third-party provider, and you access it over the internet. An on-site server sits in your office, and your team is responsible for keeping it running. Cloud servers offer flexibility and lower upfront costs; on-site servers give you more control and potentially better performance for specific needs.

Is cloud more reliable than on-premise?

It depends on your setup. Major cloud providers typically offer better uptime guarantees and have redundant systems across multiple data centers, which can make them more reliable than a single on-premise installation. But cloud reliability depends on your internet connection, while on-premise systems keep working even when your internet goes down.

Why is cloud better than on-premise?

Cloud isn't automatically "better"—it just solves different problems. Cloud shines when you need flexibility, want to avoid large upfront costs, need to support remote workers, or would rather focus your IT team on business projects instead of infrastructure maintenance. But for some organizations, the control and customization of on-prem systems is more valuable than cloud convenience.

What are the main security differences between cloud and on-premise?

Cloud providers typically invest more in security infrastructure than individual organizations can afford, including advanced threat detection, regular security audits, and dedicated security teams. However, you're sharing responsibility for security with your cloud provider and trusting them with your data. On-prem solutions give you complete control over security but require you to implement and maintain all security measures yourself.

How do I decide between cloud and on-premise for my business?

Start with your specific requirements: budget constraints (upfront vs. ongoing costs), compliance needs, performance requirements, team capabilities, and growth plans. Don't get caught up in what other companies are doing or what vendors are recommending. Focus on what will actually work for your situation, and remember that you can always start with one approach and evolve over time.

This blog is based on information available to Rippling as of June 19, 2025.

Disclaimer: Rippling and its affiliates do not provide tax, accounting, or legal advice. This material has been prepared for informational purposes only, and is not intended to provide or be relied on for tax, accounting, or legal advice. You should consult your own tax, accounting, and legal advisors before engaging in any related activities or transactions.