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When deciding where to house essential business workloads, organizations have multiple options in three categories to choose from: in the cloud, in a traditional on-premises data center or a hybrid option.

Choosing an on-premises data center or the cloud depends on many factors, such as workload type, budget and regulatory requirements. For example, considerations including performance, changing business needs, budgets and security requirements often dictate where workloads should live, which causes IT leaders to look for the most flexible option.

Even with well-known benefits of the cloud, a 2022 IDC survey found 71% of respondents expected to partly or fully migrate public cloud workloads into a dedicated IT environment by the end of 2023. The key drivers of repatriating workloads back on premises include lowering costs, security and compliance concerns, supplier failure, latency and data gravity, and reversing poorly planned moves to the cloud.

Differences between cloud and on-premises data centers

Resource control and infrastructure management are the two main differentiators when deciding whether to put workloads in the cloud or in a traditional on-premises data center. In the cloud, the data center provider handles the upkeep and maintenance of the hardware and certain software tools, while on premises, it’s all on the business. Cloud data centers partially manage the digital resources, but the customer owns the data. On premises, the business completely manages and owns the digital resources from end to end.

Each type of data center provides benefits to customers depending on their needs. Check out the considerations that can help teams decide where to move their workloads:

  • Upfront costs. On-premises facilities use dedicated servers, software and other assets paid for by the organization. They require significant upfront investment in technology and additional ongoing maintenance, power, cooling and physical space costs. Cloud facilities require low upfront costs because vendors own and manage everything. Customers only pay for what they use.
  • Deployment of resources. On-premises resources are deployed by the organization, as they are solely responsible for maintaining, protecting and integrating the systems in their network. Cloud deployments vary according to the option chosen (private, public or hybrid), but always involve third-party hardware and locations, and depend on vendors for maintenance, security and integration.
  • Security. Sensitive data is preferably kept on premises, although confidential or critical data such as banking data may legally be required to be stored there. Cloud security options offer high levels of security through various encryption methods and approaches, constant vigilance and regular upgrades to the latest technologies.
  • Compliance. Organizations that follow government or industry regulations must use on-premises data centers to store, process and manage data and its infrastructure. Cloud data centers follow some compliance policies, but due to their decentralized and third-party ownership nature, they often do not meet these stringent requirements.
  • Scalability. Scaling on premises means buying and deploying new servers and related infrastructure, which is expensive and may not fit the physical space. Cloud environments offer superior scalability as vendors use the latest server technologies, network resource management platforms and optimized internet traffic management tools to scale up or down automatically. They also have the space to expand if they need to add new hardware.
  • Availability. On-premises and cloud data centers are only as good as the software and facility built around them. Factors like connectivity, power consumption and infrastructure optimization can significantly impact both facility types, creating downtime or data bottlenecks. Cloud data centers tend to recover quicker as they’re optimized for maximum productivity, performance and usage. They have redundant systems and constant monitoring that alerts them to any changes.

The following table outlines considerations for deciding whether to place workloads on premises or in the cloud:

Consideration On premises Cloud
Upfront costs Requires significant upfront investment. Uses subscription, pay-as-you-go model.
Resource deployment Resources managed and deployed in-house. Deployment and management done on third-party infrastructure.
Security Offers complete control of data and systems. Offers high security but often doesn’t meet specific regulatory requirements.
Compliance Offers better visibility and storage options to meet compliance policies. Doesn’t offer complete authority and transparency into data storage and usage, which often violates compliance policies.
Scalability Offers less flexibility due to hardware and space limitations. Automates scalability as needed, often without intervention.
Availability Vulnerable to single points of failure and can have more downtime. Better prevention and downtime recovery with continuous monitoring and built-in redundant systems.

Pros and cons of cloud and on-premises data centers

Enterprises need to weigh whether to move or keep workloads on premises or in a cloud data center, with each option having its own advantages. Check out the pros and cons of both on-premises and cloud data centers.

Cloud data centers

  • Pro. Lower upfront costs as customers only pay for what they use.
  • Pro. Lower ongoing costs as the cloud provider handles maintenance, security and support.
  • Pro. Easier and more efficient scalability as customers can scale workloads based on specific metrics as needed, often in just a few clicks.
  • Con. High duplication or storage costs if users carry multiple data sets across multiple cloud locations.
  • Con. Uncontrolled monthly costs if usage, bandwidth or other computing needs spike dramatically at any time.
  • Con. Lack of customization of services since cloud facilities are often purpose-built and don’t give customers access to change the configuration to better suit their needs.

On-premises traditional data centers

  • Pro. Compliance and customization are easy to handle on premises since owners control the entire system. IT teams know what their organizations need, how they must adhere to compliance rules, and what architecture best suits the requirements.
  • Pro. Gaining more visibility into the infrastructure. Many organizations need more visibility to move to the cloud. Going on premises means everyone can see precisely what technologies are available, their performance levels, and so on.
  • Con. Managing high upfront and ongoing costs on premises are often why organizations move to the cloud. But even future costs like replacing and upgrading hardware and software due to age, malfunction or obsolescence make it challenging and expensive throughout the entire life of the on-premises data center.
  • Con. Staying updated on the latest cybersecurity is challenging and expensive for most organizations. The time and money enterprises need to invest in additional security resources, training, constant monitoring and additional security technology can add up. Cloud vendors can spread this cost across customers, while on-premises owners must shoulder it all themselves.

The role of hybrid cloud as an alternative

To reap the benefits of both types of data centers, many organizations combine the two in a hybrid deployment. Embracing both can improve IT agility, maximize efficiency and control spending. With a hybrid plan, organizations can maintain control of sensitive assets, enjoy the flexibility of additional cloud resources, hire only a small IT team for the on-premises facility and transition workloads between the two environments at their own pace.

On-premises and cloud data centers can provide your organization with the necessary infrastructure. Your final choice will depend on your specific uses, security requirements, compliance rules and budget.

Digital Creations is an IT company providing solutions for businesses to accomplish their goals currently and in the future.

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