On-Prem vs Cloud Hosting in 2025

On-prem vs cloud hosting is one of the most fundamental decisions for any IT team - both at the level of individual development projects and your wider IT ops. Getting this right will have an outsize impact on your profitability, performance, security, compliance, and much more.

The trouble is - this is a widely misunderstood issue.

At least, there are a lot of outdated or just downright wrong assumptions that pervade the conversation here.

Today, we’re going to dive deep into how you can make an informed call.

Specifically, we’re going to cover everything that you need to know about selecting the right hosting and deployment model for your custom apps, data assets, and internal services.

We’ll explore the implications across costs, risks, operations, functionality, and technical and operational considerations. We’ll even check out some exemplar scenarios to help elucidate on how to make the right decision for your needs.

Before we get to any of that though, we need to start with the basics.

Hosting & deployment: background

Hosting and deployment relate to how you store your solutions and serve them to users. Essentially, hosting is where your resources live and deployment is how you push them from your local machine to the host.

Assets here could be applications, data sets, code repositories, or your entire service ecosystem.

Historically, most digital assets were hosted on infrastructure owned by or managed on behalf of the organization that used them. In the case of software packages, until relatively recently this almost always involved hosting on individual users’ machines.

Today, things are a bit different.

Now, a huge proportion of the software packages that your colleagues use are hosted not on their own machines but on external infrastructure.

When we talk about on-prem vs cloud hosting, we’re referring to the two main ways of implementing this.

Let’s take a look at each.

On-prem

On-prem is short for on-premises hosting. This means that assets and resources are stored on network infrastructure that’s owned, managed, and maintained by the organization that uses them.

Despite the name, the infrastructure in question doesn’t need to be in the same literal location as the end users - although it often is. Rather, it could equally refer to a company’s data centers, corporate network, or just infrastructure in a separate location.

Users can then access this infrastructure through private networking tools, like VPNs.

The important thing is ownership.

Since you own the devices that host your tools, you have complete control over what you do with them - including how they scale, what technology you use, and how access is provided to employees.

On the flip side, we’re also responsible for managing and maintaining our infrastructure - and there’s nobody else on the hook when something goes wrong.

Cloud

In the past decade or so, cloud computing has become the dominant model for hosting all sorts of solutions. In fact, it’s still a pretty big buzzphrase in IT circles - but what does the cloud actually refer to?

At the most basic level, cloud computing refers to infrastructure that’s owned and managed by a third party, which then provides hosting to your company as a service.

This can then be accessed via the public internet or through private networking tools - depending on the specific services you require.

The idea is to reduce or eliminate the need for your own infrastructure. Instead, we just pay to use what we need from an external vendor. This can might be computing power, software, storage space, or databases.

(CloudZero )

This is a huge simplification, of course. Indeed, cloud computing can take many different forms at a technical level, including containerization, virtual machines, serverless infrastructure, and more.

But - each of these are topics in their own right.

3 types of cloud hosting

Rather than getting bogged down in the technology, it’s worth thinking about how we can distinguish between different cloud hosting service models. Each of these has distinct use cases, so it’s important to know what we’re dealing with.

For the most part, we can divide cloud computing services into three models:

1. Infrastructure-as-a-Service (IaaS) - Vendors charge for the use of specific tools, like servers, virtual machines, operating systems, storage, and other network infrastructure.
2. Platform-as-a-Service (PaaS) - On-demand services, like software testing, debugging, migration, and delivery.
3. Software-as-a-Service (SaaS) - Application vendors that offer a subscription-based model to use their platform through the open internet.

So, the big variable here is the kind of service that vendors offer through the cloud. Note in particular that IaaS and PaaS are largely aimed at developers and other colleagues that need to deploy or create solutions, while SaaS is more of an off-the-shelf model.

On-Prem vs Cloud: Use cases and personas

Next, we can start to think about the kinds of users and even entire organizations that rely on cloud vs on-prem hosting.

This is one area where things have started to become a lot more interesting in the past few years. See, over the last decade or so, there’s been a bit of a cloud computing arms race. That is an explosion in demand to move operations to the cloud.

The orthodoxy is that this is the superior option unless you have a specific, niche use case that requires on-prem hosting.

We’ll see the real-life pros and cons of each a little bit later.

For now, what’s important is that many businesses are starting to reassess this received wisdom. In fact, high-profile voices are beginning to change perspectives on this very issue.

We can actually think about this from a few different angles.

One is technical abilities. Cloud solutions are often more accessible to teams that lack the expertise to configure or maintain on-prem infrastructure themselves.

Similarly, the upfront costs are typically lower. This means that cloud computing is almost always the most effective option for smaller companies and teams, or projects with low user volumes.

For instance, there’s obviously not much point in purchasing your own infrastructure for an application that’s only going to serve ten users.

The other thing to consider is how reliable the demand for your services is. Cloud hosting allows us to pay for only the services we need - and increase capacity if we suddenly find that this increases.

For example, in very large organizations, where traffic can spike during a release.

The space in between these two extremes can often be a bit of a grey area. A growing number of medium-sized companies are moving away from the cloud and back towards on-prem, finding that it’s much more cost-effective to manage infrastructure themselves.

At least in specific situations anyway.

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Benefits and challenges

To better understand all of this, we need to dive deeper into the pros and cons of each option.

Let’s look at the benefits and challenges of both options in turn.

On-prem: pros and cons

Let’s check out the business case for on-prem hosting. First, the positives, and then the negatives.

It’s worth noting again that many of these - on both sides - are fairly situational. In other words, we won’t inevitably enjoy them, these are the likely costs and benefits if certain contextual factors are in place.

Let’s take a look.

Pros

We’ve already alluded to some of the key benefits of on-prem hosting over cloud alternatives. So, let’s think through why you might opt to deploy solutions to your own infrastructure.

To do this, we need to be aware of two separate scenarios:

1. When you already have appropriate network infrastructure in place.
2. When you don’t - so you’ll need to procure this.

It’s easy to see how on-prem would have the edge in the first case - particularly with regard to costs. If you already have the capacity you need for your project, then you won’t need to absorb any additional hosting costs.

In terms of costs of on-prem vs cloud, the water is a bit murkier in cases where you don’t already have your own infrastructure, however. You’ll certainly have much higher up-front costs, but in the medium-to-long term, this can still work out much cheaper.

The crux of this is that - unlike cloud options - one day you’ll own your infrastructure outright. As such, there’s a time horizon over which on-prem can often become more cost-effective - even if you have to make a large upfront investment.

But what about the non-financial benefits?

We said earlier that the biggest is control.

So, when we own the infrastructure that hosts our solutions, we’re able to determine exactly how it’s maintained, accessed, and managed over its lifecycle.

The biggest area where this comes into play is security. Many enterprises and companies in sensitive industries require self-hosted solutions so that they can ensure the highest levels of security.

Similarly, there are several operational reasons to opt for self-hosting - especially around internal policies for working with external vendors and preventing service interruption.

(CloudZero )

Cons

However, on-prem hosting has several potential downsides too. Otherwise, the cloud wouldn’t have become such a hot topic. To make a balanced, informed decision, we obviously need to understand these too.

Let’s circle back to cost.

There are plenty of scenarios where on-prem can work out as the much more expensive option. When it comes to procuring infrastructure, you simply won’t benefit from the same economies of scale as cloud vendors do.

Besides this, there are potentially huge indirect costs associated with self-hosting - especially at a large scale. Obviously, if you have your own data center, you’ll also need to account for the wage burden of the people who’ll maintain this.

Then there are all of the associated costs for things like compliance, monitoring, patch management, and even more basic things like supplying energy.

It’s also worth noting that the flip side of enhanced control is increased liability. Indeed, the reality is that we will be responsible for a huge array of associated costs, workflows, and risks.

As we said earlier, there’s no vendor to turn to when things go wrong. Therefore, effective self-hosting requires a large degree of input for risk management, maintenance, and uptime monitoring.

Another potential downside of on-prem vs cloud hosting is a relative lack of flexibility and more difficulty scaling. Say we were dealing with hosting for our core product - which is a public-facing application - and we suddenly needed to increase capacity.

On-prem can present a big challenge in a situation like this. We can’t just suddenly up capacity if we don’t already have the infrastructure in place. So, we’ll encounter delays and extra costs to ramp this up.

This is probably the biggest factor that brought about cloud hosting’s ubiquity.

Cloud: pros and cons

Of course, we should take an equally balanced view of cloud hosting. Cloud vendors bill their platforms as near-utopian solutions to all kinds of business problems. Cynics say you’re basically just paying over the odds to rent servers.

As is often the case with these things, the truth lies somewhere in between.

Let’s explore why.

Pros

As you can imagine, many of the key benefits of cloud hosting are effectively the inverse of on-prem. The really appealing thing for a lot of businesses is the cost - and how this is incurred more specifically.

Rather than purchasing your own infrastructure outright, you pay a recurring fee to an external vendor, based on your actual usage.

This is often a much more manageable expense - particularly for smaller businesses or projects with unpredictable growth trajectories.

By the same token, cloud hosting offers a comparatively high degree of scalability and flexibility. So, if we find we need to increase capacity, we can do so more or less instantly. If we’re paying for more than we need, we can reduce this in the same way.

This latter point is crucial since it means we’re essentially eliminating the risk of sunk costs.

Another element of this is the relative simplicity of costs when infrastructure, software, or platforms are offered as a service. Typically, we just have one annual or monthly bill for everything.

This includes all of the costs associated with monitoring, maintenance, security, lifecycle management, energy supply, and more. This can make costs comparatively predictable - since we’re less likely to be footed with the bill in the case of an incident.

In some cases, cloud hosting might also offer security benefits over on-prem as vendors benefit from economies of scale. This makes it comparatively easy for the likes of AWS to implement the latest security technologies on their infrastructure.

That way, you can take advantage of security measures that might otherwise be beyond your reach as a small-to-medium company.

Cloud solutions also make it comparatively easy for users to access resources remotely, since they only need access to the public internet to do so - although there are obvious security implications to this, so it’s not necessarily desirable in all cases.

Finally, many cloud deployment technologies offer a high degree of portability. For instance, with containerization, it’s relatively easy to move all of the source code associated with a particular application to a new host, with minimal service interruption.

Cons

Sounds good, right?

There are downsides too though of course. We’ve hinted at some of these as well. For a start, the costs never go away. We have to keep paying a recurring license for as long as we need the vendor’s services.

So, even if the monthly fee is more manageable than investing in your own infrastructure, the overall cost might still overtake its on-prem equivalent.

(CloudZero )

We’re also less in control of our hosting. In other words, we’re more constrained by the configuration offered by vendors, making it more difficult to add certain features or security tools if these aren’t supported.

And, although we have the convenience that comes along with vendors being liable when things go wrong, the flip side of this is that we’re dependent on them if things do go wrong.

This can mean that we’re creating new vectors of attack in the sense that core parts of our operations might be hosted on infrastructure that’s outside of our control. For many enterprises, this is an unacceptable trade-off.

Internal policies on working with third-party vendors might also hamper the viability of cloud solutions. This is particularly important as cloud hosting is an area where it can be particularly easy to encounter vendor lock-in.

That is when our dependence on a particular service makes it difficult to move away from the vendor in question without encountering excessive costs or interruptions.

Alternative deployment options

We know that on-prem and cloud are the two most prominent models for hosting and deploying digital resources.

But are these the only show in town?

Sort of. At least - in the sense that our solutions must be hosted somewhere and this can only really be our infrastructure or infrastructure we license from someone.

But, there are internal variations that we need to be aware of, as well as approaches that take in elements of both options.

These can shift the balance in terms of the cost and benefits of on-prem vs cloud, so it’s vital to have a clear picture of the landscape here.

Let’s take a look at the three most prominent instances.

Public cloud

Public cloud is the most common model of cloud-based hosting. The way this works is that you pay the vendor to host your data or services on shared infrastructure.

The data itself is kept separate, but different customers’ data could use the same network resources at different times.

This is the epitome of an as-a-service model. We aren’t paying to rent specific pieces of infrastructure - but simply to have our assets hosted.

This is typically the cheapest form of cloud hosting, but it also offers us the lowest level of control and even security.

Private cloud

Private cloud hosting works a little bit differently. In this model, we do rent particular infrastructure resources from a vendor.

Therefore, our data and services are hosted on dedicated servers or other hardware. These are isolated, and none of the vendor’s other customers can access them.

For this reason, private cloud is also sometimes called single-tenant hosting.

We still enjoy much of the same benefits of public cloud hosting in terms of flexibility, scalability, and ease of access, but with a higher degree of control and security.

On the flip side, we need to pay a premium over public cloud solutions.

Hybrid cloud

You can think of hybrid solutions as a bit of a bridge between on-prem and cloud hosting. Essentially, this is any time that we use public cloud, private cloud, and on-premises hosting in concert.

For example, we might need additional security measures for some specific elements of our services, which we host on-prem. But - we still want to take advantage of lower upfront costs and increased flexibility of cloud hosting for the rest.

This is an attractive option that affords us a huge degree of agility.

The missing piece of the puzzle is what’s known as orchestration. This is the sum of your efforts to ensure that your different cloud environments operate together seamlessly - including the required tools, workloads, and resources.

Of course, this also means that we need to have a relatively high among of internal expertise in order to configure and maintain our hybrid cloud architecture - which may be outside the reach of smaller companies.

(Data Center World )

On-prem vs cloud: Decision points

We’ve covered a lot of ground so far. Since a lot of the benefits and challenges of each option are relatively context-dependent, it’s worthwhile trying to distill this down into actionable decision points.

That is, the specific aspects of your project that you ought to give precedence to when deciding between on-prem vs cloud hosting.

The first is your available resources. We can subdivide these into your:

• Financial resources.
• Technical resources.
• Technical expertise.

For the latter two points, the more resources we have, the more on-prem is likely to be an attractive option.

For financial resources, the picture is a little bit murkier, so we’ll have to think about the needs of individual projects to figure out how we can most cost-effectively meet these.

So what elements of a particular project do we need to consider?

The two biggest are the size of the resources we need to store and the volume of users we need to deliver them to. There isn’t a straightforward answer here when it comes to comparing on-prem vs cloud hosting.

Instead, we need to do due diligence to determine the most cost-effective option for our particular needs.

(CloudZero )

Finally, we need to consider additional functionality - whether this is for security, backups, monitoring, or some other feature. Where we’ve identified these, we’ll any cloud-based solutions will need to support them - or else self-hosting is our only option.

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