February 24, 2016

Cloud vs. On-Premise Solutions

Adrian Enders, Senior Sales Engineer

DoxTek, Inc.



Cloud vs. On-Premise is definitely a hot topic right now. If you are currently in a position of needing to make a decision between the two, then you understand the challenges involved with reaching a conclusion. I hope to provide you with some insights to help you along in the process. I am going to be focusing on SaaS (Software as a Service), but some of this information is applicable to other “as a service” models.

There is more to the decision than just the bottom-line cost of the software or service being implemented. The cloud approach is generally fueled by 3 primary factors:

  1. Lack of internal resources to support the solution
  2. Lack of technical know-how to maximize benefits
  3. Start-up costs for software

If you do not have the necessary IT staff to install, configure and support a solution then a hosted solution might be appealing. Additionally, some software can carry a substantial price tag. For start-ups and smaller companies the up-front costs of owning the software can be daunting or impossible. For these reasons it is easy to see why a cloud based solution would be an attractive alternative.  But there are other factors to consider.

Data Confidentiality

Keep in mind that using a hosted solution, someone else has control of your data. In companies that are dealing with data that is highly confidential or with government regulations, be absolutely certain that the hosted solution provide can support your security and regulatory needs.


Not only is someone else in control of your data, but probably multiple copies of your data. If your solution requires a tight service level agreement, then data redundancy is imperative for a high level of availability. Be certain a hosted solution can meet your redundancy and high-availability needs.


Very few of your company’s business processes operate in isolation. Most all departments interact with other departments in some capacity, and the systems supporting those departments need to do the same thing. It can be more challenging integrating a hosted solution with internal solutions.

Hidden Costs

There are also some “hidden cost” considerations as well. If using an on-premise solution, then consider the cost of power to support that solution. Not only do you need to supply power to the hardware, but that hardware needs to be kept cool and comfortable. I rarely hear business managers discussing the impacts of electricity consumption when considering an on-premise solution.

Bandwidth can be a challenge when considering a hosted solution. Many companies external traffic has limited capacity for transferring data, but internal network traffic is much faster. A hosted solution might provide great functionality, but the transfer rates of the data can slow down the business process. Consider bandwidth of the hosted application carefully to keep business processes from slowing down because of the software.

Also, some hosting companies charge extra for download capacity. Yes, data storage is getting cheaper all the time so uploading and storing data may be very affordable. However, if your solution requires the retrieval of data then additional costs could be a factor.

Finally, consider the effects of downtime on your processes. What does it cost your business if the solution is out of operation for 8 hours? Many hosted solutions provide a high level of uptime for their solution, and are fully capable of keeping your systems running 99% of the time.


Remember to focus on the cost of ownership over time. Instead of just looking at this year and next year, remember to consider in your calculations that hardware infrastructure needs to replaced on average every 5 years.

To view the PDF version: Cloud vs. On-Premise Solutions

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