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On-Premises - When is it the right choice?

In this article, we would like to explain what on-premises means and what advantages it has for your company. We will also explain when on-premises is the right choice.

What exactly does "on-premises" mean?

The term on-premises comes from the IT industry and describes a software usage model. It means something like "in your own environment" or "in-house". Other terms include on-prem or in-house.

On-premises describes the hosting of software on your own hardware. This can actually be on your own premises or in a rented space in a data center. The on-premises model can be seen as the opposite of cloud solutions. 

Background to the on-premises software

The term on-premises did not exist before 2010. The local use of software or licensing for local use was the norm and therefore did not have a separate designation. 

The spread of cloud computing and Software-as-a-Service (SaaS) made it necessary to find a term to differentiate between them. This is how on-premises and the antonym "off-premises" were born.

What makes on-premises stand out?

If you use on-premises software, you buy or rent it and operate it on your own responsibility and on your own hardware. This can actually be done locally or on a rented space in a third-party data center. 

The idea behind the use of on-premises variants is independence and, as a result, self-responsibility. As the hardware and software are operated by the company itself, companies retain data sovereignty. The option to flexibly adapt the software to their own requirements is one of the advantages of on-premises. 

Why do companies go for on-premises solutions?

Due to the ongoing digitalization of the business world, many companies are faced with the question of which IT infrastructure best suits their needs. One option that is still relevant despite the multitude of cloud offerings is on-premises solutions. 

We would now like to take a look at why many companies continue to use local infrastructure and what advantages it offers. 

What advantages does the local infrastructure offer?

On-premises solutions offer a number of advantages, which is why companies opt for this option. We have summarised some of the most important advantages for you.

Safety and control

Two frequently discussed points are security and control. With on-premises solutions, companies retain full control over their IT infrastructure, hardware and data. This makes it possible to implement security guidelines according to your own standards. 

Data sovereignty 

In addition, the data remains in your own system and, unlike with SaaS, is not forwarded to the provider. This allows you to ensure compliance with the GDPR and country-specific data protection laws, for example.


The local infrastructure can be tailored to the specific requirements of your company. The flexibility of the configuration is a major advantage. 


On-premises solutions often offer higher performance and lower latency, which is crucial in some industries.

Long-term investment

One-off capital investments in hardware can be more cost-effective in the long term than ongoing cloud subscription fees.

What challenges can arise?

Although on-premises solutions offer many advantages, they are not without their challenges. You should take these aspects into account when making your decision.

High initial investments

Purchasing hardware and setting up an on-premises infrastructure often requires considerable financial resources.

High initial investment

You need to consider the costs of operating, maintaining and updating the local infrastructure.

Professional knowledge

The administration and maintenance of on-premises systems requires qualified personnel and technical expertise.


Adding new resources can be more complex than in the cloud, which can affect scalability.


On-premises systems require extensive fail-safe measures in order to avoid business interruptions.


When is on-premises the right choice?

The decision as to whether on-premises is the ideal solution for your company depends on many factors. We would now like to take a closer look at when it makes sense to opt for a local infrastructure.

When is on-premises better than cloud-based solutions?

There are situations in which on-premises may be the better choice:

Safety requirements

If your company processes highly sensitive data and has to comply with strict security and data protection regulations, on-premises often offers the opportunity to better fulfil these requirements. Another option would be a private cloud.

Data authority

In some countries and industries, it is imperative to retain full control over the data and ensure that it is not stored outside certain geographical boundaries.

Specific compliance requirements

Industries such as healthcare, financial services and government institutions are subject to special regulatory requirements that on-premises solutions are often better able to fulfill.

Applications sensitive to latency

Applications that require extremely low latency times, such as real-time transaction systems or medical devices, benefit from a local infrastructure.

Who benefits most from software on-premise?

The decision for on-premises also depends heavily on the nature of your company and your individual goals. We have summarized for you who will definitely benefit from on-premise software.

Large companies

Large organizations with significant resources and complex requirements can better manage the cost and effort of operating their own infrastructure.

Industry specific requirements

Companies in highly regulated industries or with unique requirements, such as research institutes, can benefit from on-premises.

Long-term planning

If your business strategy is geared towards long-term stability and investment in your own assets, on-premises is worth considering.

Special applications

If your business is based on customised applications that require special hardware resources, a local infrastructure can be advantageous.

On-premises vs. cloud solutions

Software on-premises and cloud solutions differ fundamentally in the way they work. Here you will find an overview of the most important differences. 





The software is installed on your own hardware. 

The software is hosted in the licensor's data centre.

One-time costs

Costs are incurred for your own server and commissioning.

There are usually no setup costs. 

Current expenses

Operating costs, maintenance and personnel cause costs. There may be annual license fees. 

Subscription fees and support costs are incurred. Cloud costs have risen steadily in recent years.

Maintenance and support 

You look after the software yourself and take care of updates and maintenance (e.g. repairs).

The provider looks after the software and regularly installs updates. They ensure that the hardware functions smoothly.

Privacy policy

Sensitive data remains in your own system.

You have to choose a trustworthy provider.


Security and data protection: on-premises vs. the cloud

Data protection and security already have a high priority and this is becoming increasingly important. These points are of great importance when deciding between on-premises and cloud infrastructures. 

How safe is on-premises really?

On-premises solutions give you more control over your security measures. These three factors can make on-premises a secure choice:

  1. Physical control: You have physical control over your servers and data centers, making unauthorized access more difficult.
  2. Customizable security measures: Security policies and measures can be customized to meet the specific needs of your business.
  3. No shared infrastructure: In contrast to the public cloud, you do not share your infrastructure with others, which minimizes the risk of data leaks from other users.

Data privacy and compliance requirements

Companies with strict data protection requirements or in highly regulated industries can benefit from on-premises:

  1. Data sovereignty: In some countries and industries, it is a legal requirement that data is stored within certain geographical boundaries. On-premises enable compliance with these regulations.
  2. Compliance control: Your company can better meet compliance requirements because you have full control over implementation and monitoring.

Private cloud: the best of both worlds?

For companies that want to combine the advantages of the cloud and the control of on-premises, the private cloud can be an interesting option:

  1. Scalability and flexibility: Private cloud solutions offer the scalability and flexibility of the cloud while operating in a dedicated environment.
  2. Control and data protection: The private cloud allows you to store your data in a dedicated and secure environment that is still managed by you.
  3. Customizable security policies: You can configure security measures according to your requirements and compliance guidelines.

The choice between on-premises, public or private cloud depends on your individual security and data protection requirements. A thorough risk assessment and a clear strategy are crucial to making the right decision for your company.

On-Premises - Frequently asked questions & answers

What does "on-premises" mean exactly?

On-premises refers to the delivery of IT infrastructure and applications in a separate physical environment, usually in the company data center.

What are the advantages of using on-premises solutions?

Companies have full control over their data and security policies, can implement customized solutions and comply with data protection regulations.

What challenges can you face with on-premises implementations?

High initial investment, maintenance costs and the need for qualified personnel can pose challenges.

When is on-premises the right choice for a company?

On-premises is ideal for companies with high security requirements, special compliance regulations, latency-sensitive applications or a long-term investment strategy.

How do on-premises and cloud-based solutions compare in regard to security?

On-premises offers more control over security, while the cloud depends on the cloud provider's capabilities and security policies.

What role does data sovereignty play with on-premises?

On-premises enables companies to ensure the physical storage of their data in a specific geographical region in order to guarantee data sovereignty.

What is a private cloud and how does it differ from on-premises?

A private cloud is a cloud infrastructure that is operated in its own dedicated environment, while on-premises is based on locally hosted servers and is less cloud-like.

How can a company choose between on-premises and cloud solutions?

The choice depends on the company's individual requirements, security concerns, budget and long-term strategy.

Which industries and companies usually prefer on-premises solutions?

Highly regulated industries such as healthcare, financial services and government institutions often use on-premises solutions.

How is the role of on-premises developing in a changing IT landscape?

In some scenarios, the on-premise solution remains relevant, especially in combination with hybrid approaches, while the cloud is becoming increasingly important.


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