From the cloud to the company floor: Is on-premise the trend in 2024?

Around the year 2000, the big move came: companies moved numerous components of their software and IT environment to the cloud. A good 20 years later, many want to go back. Currently, more and more companies are bringing their IT infrastructure back into their own four walls:

David Heinemeier Hansson, creator of the Ruby on Rails programming language, provides a detailed account of how his company moved Basecamp from the cloud to on-prem. In the six months between the October 19, 2022 and the June 23, 2023 Basecamp gave up the cloud infrastructure and saved millions as a result. You can listen to the associated podcast that defines the beginning of the on premise transition here:

Are you the driver or the passenger?

On-premise solutions and SaaS can be compared to owning a car versus using a driving service.

On-premise solutions are like owning a luxury car. You have full control and can customize your vehicle as you wish, but there are acquisition costs and ongoing maintenance costs. You have full responsibility for regular maintenance - oil changes, tire rotations, insurance and more. And if something goes wrong, it's up to you to fix it. The running costs are high, but the car is all yours and you can drive it when and how you want.

SaaS, on the other hand, is like using a ride service. There is no large initial investment or worry about maintenance. You pay a fee determined by the ride service based on usage, and you can order a ride at any time. If the car breaks down, it's the ride service's job to take care of it, not yours. If you rarely drive is a cost effective solution. You sacrifice some control, but gain flexibility and minimize expenses.

Or maybe a little of both?" In today's dynamic IT landscape, many companies are taking a sort of in-between position by keeping only certain elements in the cloud. This approach is called hybrid multicloud infrastructure, and it's a hybrid of boarding your own car (on-premise) and using a driving service (cloud).

But why are companies opting for this apparent backward movement in a time of rapid technological advances? Does it even make sense today to use your own vehicle (on-premise)?

In this article, we'll cover all the pros and cons of an on-premise solution and show where the key differences are with cloud computing (the driving service). Just as you sometimes use your own car for your daily commute but use a driving service for special occasions or trips to unfamiliar areas, the choice between on-premise and cloud can depend on your specific needs and circumstances.

on premise definition

On Premise Definition

On Premise, also referred to as On Premise solution or In-House solution, is a software or IT infrastructure that is deployed and operated locally on a company's servers and systems. With on-premise solutions, companies have complete physical control over their servers, databases, and applications, giving them a high degree of control and flexibility over their IT infrastructure. They can adapt the solutions to their specific needs, such as by integrating additional software.

The local mainframe of an on premise solution has evolved considerably over the last 40 years. While performance and flexibility were very limited back then, new technologies have made in-house solutions significantly more performant over the years.

For example, virtualization now allows companies to run multiple operating systems and applications on a single physical server.

This saves costs, space and energy and enables better resource utilization.

In addition, network technology has evolved greatly. Companies can now build powerful local networks and securely access remote sites via VPNs (Virtual Private Networks). This facilitates collaboration and data exchange between different company locations.

on premise alternative

On Premise Alternative: Cloud Computing

Cloud computing is a technology that allows companies to access virtual resources such as applications, computing power and storage online - without the need for on-site physical hardware.

There are different types of cloud services. These include Infrastructure-as-a-Service (IaaS), Platform-as-a-Service (PaaS) and Software as a Service (SaaS). IaaS offers companies the option of storing their physical infrastructure in the cloud. PaaS enables applications and development environments to be hosted in the cloud. SaaS is an on-demand software platform delivered over the Internet. The software is hosted and maintained by a provider. This allows users to subscribe and access these applications instead of installing and managing them locally. Since its launch, SaaS has experienced a veritable boom that has continued to this day. For example, the revenue generated by SaaS worldwide has increased by twentyfold since 2010.

On Premise vs Cloud Computing: Direct Comparison

In view of today's on premise possibilities, the question arises as to whether comprehensive outsourcing of software and IT infrastructure still makes sense at all today. Is cloud computing - especially in the area of SaaS - now rather just an option, but no longer the only possible way? To be able to decide, which is the right IT infrastructure, we show you a detailed insight into the differences between on-premise and cloud:

Implementation and Access

On Premise Software is installed directly on the company's hardware. You need trained personnel for this. Once this is mastered, your business can look forward to decisive advantages: Access to data is strongly secured. At the same time, you have direct control over the on premise application and can configure it according to your requirements. 

In contrast Cloud Computing Solutions run like SaaS on your own or rented servers. Therefore, you do not have to take care of installation and setup. However, this also means: You cannot configure the application according to the individual requirements of your company. But: A cloud offers the advantage that you can react quickly to changes in the business environment. This makes an online solution more dynamic and scalable. At least, that was the case for many years. Whether that is still true today is questionable.

Meanwhile, companies can flexibly combine on premise and cloud.

The company's own IT infrastructure acts as a "battery" for the basic performance of the company, while external sources in the form of cloud services can be added to cover peak loads.

Costs and Financial Planning

For an on-premise solution, companies need to carefully plan the costs involved. This is because it can be expensive, depending on the application. Expenses are incurred for hardware and software, implementation, IT staff training and maintenance, for example. There are no ongoing costs for cloud solutions. They usually only charge a monthly or annual fee for use. However, in the long term and with rapid scaling, the costs for cloud services can also skyrocket.

Maintenance and Support

Companies must ensure that they have sufficient IT resources for the maintenance and support of on-premise solutions. For example, IT must regularly update hardware and certain software via updates and security patches. If problems occur in departments, IT resources must be available to resolve them quickly. This may require employees to be trained first. Cloud solutions eliminate these tasks. Any updates and patches come from the application provider and therefore always keep it up-to-date and secure.

Scalability

For many years, cloud-based software enabled faster and easier adaptation to changes, but today this can often also be done by an on premise cloud hybrid, which couples the company's own IT with cloud applications. Both types of system - on premise and cloud - are therefore similarly scalable. Only companies that rely exclusively on an isolated on premise infrastructure are less flexible. They need more resources and budget to scale successfully. IT teams must then deploy and maintain the necessary hardware, software and infrastructure themselves to meet the requirements.

Security and Compliance

On Premise solutions are strongly secured by their physical presence and offer complete control over data protection. This also helps meet compliance requirements.

To maintain this high level of data protection, companies can regularly check the On Premise Solution for security vulnerabilities.

In a cloud solution, on the other hand, the data is stored in an external data center. Companies have no way of influencing the security of the data. Under certain circumstances, this can have a negative impact on data protection and compliance.

Backup and Recovery

Backup and recovery are essential to ensure continuous business operations. With on premise hosting, companies decide for themselves how and how often they want to back up their data. They do not have this option with a cloud solution. In doing so, they rely on the provider to reliably create backups. However, services in the cloud usually have an additional backup in another physical location. This prevents possible, unintentional data loss and increases the security of the stored information.

Functionality and Analysis

An on premise infrastructure offers companies more individual customization options. In practice, this means that as a business owner, you can fully customize functionalities and analyses to meet the requirements and needs of your company. In doing so, you can also align reporting tools individually.

However, it can be complicated to collect and analyze data from different sources. This is usually easier with a cloud solution. This also applies to the basic setup of the functions. This saves a lot of time, especially when starting up the application. But: The functions available in the cloud can only be customized to a limited extent. 

on premise use cases

3 Use Cases for On Premise

The following 3 examples show when an on premise solution makes particular sense:

1. High data protection requirements

In some industries, such as healthcare or government, protecting sensitive data is a top priority. Data must therefore remain within the company's own infrastructure. This allows tighter control over access, encryption and security measures.

2. Low latency requirements

In some applications where real-time processing or fast response times are required, an on-premise solution can be beneficial. Processing data locally eliminates the need to send data over the Internet to a cloud infrastructure and minimizes the delay caused by network latency.

3. Strict compliance requirements

Certain industries and regions have specific compliance requirements that limit the use of cloud solutions. For example, banks and financial institutions often have to comply with strict regulations that limit access to sensitive data. In such cases, an on-premise solution can give companies more control over compliance with these regulations.

3 Use Cases for Cloud Computing

In these 3 practical examples, a cloud solution makes particular sense:

1. Scalability and Fexibility

Cloud services make it possible to scale resources quickly and easily as needed. For example, if a company is running an application that experiences high demand at peak times, the cloud can automatically provide the required computing power. This enables efficient use of resources and prevents overloads. By comparison, an on-premise solution requires the purchase and maintenance of additional hardware to handle such demands. However, this does not apply to on premise hybrid cloud solutions. These are similarly flexible as pure cloud applications.

2. Geographical Distribution and Accessibility

Cloud solutions enable companies to deploy data and applications across multiple locations and provide easy access to global users. This is especially beneficial when a company has multiple branch offices or remote teams. Data is centralized and can be accessed from anywhere. In contrast, with an on-premise solution, companies would have to set up and maintain multiple local infrastructures to achieve the same level of accessibility.

3. Data Backup and Disaster Recovery

Cloud solutions provide an effective way of data backup and disaster recovery. By storing data in the cloud, it is additionally backed up at an off-site location, ensuring protection against data loss due to hardware failure, human error or natural disaster. In the event of a failure or data corruption, organizations can quickly recover their systems by accessing the data backed up in the cloud. In comparison, an on-premise solution requires the use of additional hardware and manual configuration for data backup and disaster recovery.

On Premise vs Cloud Computing: Practical Recommendation

On Premise Hosting is a good choice for companies that need complete control over their data and IT infrastructure. This is because: all data is located within their own four walls. There is no need for external service providers or rented servers. In this way, the data enjoys a high level of security. An on premise solution therefore generally makes sense for organizations that have special security requirements, meet high compliance requirements or need to store certain data locally.

In addition, an on-premise infrastructure also makes sense when companies need to strongly align applications, computing power and storage to their own individual requirements - more so than cloud solutions allow. The prerequisite for on-premise, however, is: your company has sufficient IT resources and budget to install and commission applications.

Smaller companies can rarely handle the workload for maintenance and support as well as the financial outlay for installation and commissioning of on premise. They should therefore opt for a cloud application. 

On Premise Cloud Hybrid as a possible solution

Companies do not have to choose exclusively one variant - on premise or cloud. They can also use a hybrid of the two variants. The variant known as premise cloud hybrid describes a mixed computing, storage and service environment consisting of an on-premise infrastructure, private cloud services and a public cloud such as Microsoft Azure or Amazon Web Services. It enables harmonious interaction between the different platforms.

Hybrid Multicloud Infrastructure

A hybrid multicloud infrastructure is a modern approach to IT strategy in which companies use resources from on-premise infrastructures (i.e., infrastructures hosted on the company's own physical servers) and multiple cloud services simultaneously. "Hybrid" refers to the combination of on-premise and cloud resources, while "multicloud" means using services from multiple cloud providers.

In a hybrid multicloud environment, for example, certain applications and data could be hosted on private servers in the company's own data center (on-premise), while other applications and data could be hosted on public cloud platforms such as Amazon Web Services (AWS), Google Cloud Platform (GCP) or Microsoft Azure. The result is a flexible, agile IT environment that leverages the benefits of on-premise and cloud while minimizing risk.

For example, an enterprise might host its mission-critical applications and sensitive data on its own rather than external servers to ensure full control and security, while offloading less critical applications and data-intensive workloads to the cloud to optimize scalability and cost efficiency. At the same time, using multiple cloud providers enables greater flexibility and avoidance of vendor lock-in.

However, implementing a hybrid multicloud strategy requires careful planning and management to ensure that all elements of the IT environment work together seamlessly and that data can be transferred securely and efficiently between the different platforms.

AI Cloud as a possible solution

To optimize processes and use data effectively, companies can rely on an AI Cloud solution. Konfuzio offers a tailored and powerful solution for sustainable data sovereignty in a hybrid multi-cloud infrastructure. The platform enables companies to leverage cloud technology while maintaining control over their data. Efficient data utilization is a key element of Konfuzio's approach. The vendor provides robust data management tools to quickly analyze large volumes of data. Gaining relevant insights from data helps companies make informed business decisions and improve customer service.

About Konfuzio

"Deploy Anywhere, Run Everywhere." This is the principle behind our commitment to flexible AI solutions for enterprise needs. With Konfuzio, we provide a robust environment to build, run and monitor AI. This ensures that our customers can work in the environments that best suit their unique requirements.

Deploy on Your Terms

At Konfuzio, we strongly believe in "Your Infrastructure, Your Rules." That's why our documentation, available at Konfuzio On-Premise Guide, detailed steps to run your AI solution in your own environment.

The SaaS environment provides easy access prior to on-prem installation

However, we also understand that not all organizations are equipped with the necessary infrastructure, wish to test Konfuzio prior to on-prem installation, or do not wish to manage Konfuzio on their own infrastructure, for example.

For these customers, we offer hosting as Software-as-a-Service (SaaS). "Freedom to Deploy, Power to Scale" is what we promise - we ensure that our solutions are flexible enough to adapt to your changing needs. This also makes it possible to move from the SaaS cloud to on-premises infrastructure at a later date.

"Unleash Flexibility with Anywhere Deployment" - whether you choose to deploy on-premise or opt for our SaaS hosting, Konfuzio is here to support your AI ambitions and break boundaries. Remember, with Konfuzio you choose to "Deploy in Any Environment, Thrive in Every Environment." Our goal is to make your AI journey as smooth and successful as possible so you can focus on what you do best: Running your business.

FAQ

What is an On Premise Solution?

An On Premise solution is a software solution that is installed and operated locally on a company's servers. It provides full control and access to the data and applications. However, it requires its own hardware, maintenance and updates. On Premise Hosting is used in contrast to cloud-based solutions to maintain data sovereignty and security.

What is a cloud solution?

A cloud solution is an Internet-based technology in which resources and applications are provided virtually. Cloud services can be found in these three forms: Infrastructure-as-a-Service (IaaS) provides access to virtual infrastructure. Platform-as-a-Service (PaaS) provides a platform for developing and running applications. Software-as-a-Service (SaaS) provides ready-made software applications over the Internet.

On Premise vs. Cloud Computing: Which should companies choose?

The choice between an on premise and a cloud solution depends on various factors. Enterprises should consider security, scalability and flexibility requirements. A hybrid solution that combines on-premise resources with the cloud can be an effective option to take advantage of both approaches and create customized solutions. Alternatively, an AI Cloud can bring together the benefits of an online solution with the data security of on-premise.

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