On-premises refers to IT infrastructure hardware and software applications that are hosted on-site. This contrasts with IT assets that are hosted by a public cloud platform or remote data center. Businesses have more control of on-premises IT assets by maintaining the performance, security, and upkeep, as well as the physical location.

Many legacy and traditional data center resources are on-premises. There has been a shift to migrate IT assets to the cloud in recent years or creating hybrid environments that use a mix of cloud and on-premises solutions.

What is On-premises?

On-premises is the software and technology that is located within the physical confines of an enterprise often in the company’s data center as opposed to running remotely on hosted servers or in the cloud.

By installing and running software on hardware located within the premises of the company, internet technology (IT) staff has physical access to the data and can directly control the configuration, management, and security of the computing infrastructure and data.

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Importance of On-premises

Since 2010, the importance of on-premises has continuously declined as the license model is increasingly giving way to the more modern cloud computing model: Software-as-a-Service (SaaS). With this model, the licensee pays a usage fee that covers operation and maintenance in addition to the software. Unlike the on-premises model, the usage license is not purchased on a one-time basis but needs to be renewed through regular payments. All hardware and software resources are made available by the provider.

Advantages

  • Control: Licensees gain full control over all data and can decide who gets access. The customers are also responsible for the utilization of internal resources, and for running the software.
  • Data protection: With the in-house model, licensees retain all data in their own data centers; third parties do not receive any access to this data. This makes compliance with statutory data protection regulations easier since cloud servers are often located in countries with different data protection rules.
  • One-time costs: On-premises licensees pay a one-off fee that includes the purchase of the software and unlimited use. However, the investment costs are accordingly higher than with subscription-based models.
  • Independence: Licensees are independent of external service providers and from the licensor. Access to data is always ensured – even without an internet connection.
  • Integration: The licensed software can be integrated deeper into the customer’s infrastructure and interlinked with other programs.

Disadvantages

  • Large capital expenditure: On-premise systems usually require large upfront purchases which means capital expenditure (CapEx) is often required. On top, you need to include maintenance costs to ensure support and functionality upgrades.
  • Responsibility for maintenance: With an on-premise system, you are responsible for maintaining server hardware and software, data backups, storage, and disaster recovery. This can be an issue for smaller companies that have limited budgets and technical resources.
  • Longer implementation times: On-premise implementations take longer due to the time needed to complete installations on servers and each computer/laptop.

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Do you need to set up an On-premises infrastructure?

All of your company’s most sensitive data should be kept as much as possible in-house. This information includes employee and customer data, corporate secrets, and financial records. While storing them in the cloud could be beneficial in terms of access, that advantage could quickly turn into a disadvantage if your vendor isn’t as secure as it promises.