How to Decide Between Cloud Hosting and On-Premise Data Center

A challenging choice

Your business depends on servers to serve up content, applications, and services to employees, clients, customers, and even your supply chain. When deploying those servers, you have several options, but the 2 most popular are either via cloud hosting or an on-premise data center.

This choice can be a challenging one to make because both have their advantages and disadvantages. You might not realize this, but making the right choice from the very beginning can mean the difference between the success and failure of a project. 


You might not realize this, but even cloud development can be centered around either a cloud host or an on-premise data center. In fact, all types of deployments can be deployed to either platform, such as ERP solutions, React projects, Pharmacy Management Software, retail software, and CRM tools

So when you’re looking at beginning a new deployment or project, one of the first questions you should be asking is, “Should this be deployed via cloud hosting or on-premise data center?” The answer to that question will help define the rest of the project.

But which is the right option for your company?

Let’s break this down into the more important categories for business-level deployments, so you can easily make your decision.


This is probably one of the first considerations you should make when choosing between a third-party cloud host and an on-premise data center. Scalability is how your service handles growing demand. At the onset, your company might be smallish, but you know it’s going to grow. Your company has to grow if you plan on remaining in business. 

If there’s one aspect of the debate that heavily favors third-party cloud hosting, it’s scalability. As your business grows, your servers will have to meet the demands of more and more customers/clients. 

In an on-premise data center, you meet that demand by buying larger, more powerful servers (which can be expensive) or clustering numerous servers together (which can be time-consuming and challenging). With a third-party cloud host, scaling to meet demand can be as simple as assigning more resources to a service. You can even create a service that automatically scales up or down, based on need.

If you know your business is going to be hit with high demand in the near future, a third-party cloud host is your best option. If you opt to go the on-premise route, knowing you’re going to see massive demands, make sure that service is deployed on a server (or cluster of servers) capable of handling the growing needs. Otherwise, your IT department might find itself scrambling to keep the servers and services up and running.


This one is a bit tricky. First off, if you opt to go with a cloud host, your company (client, and customer) data will be housed on a third-party server. Is that data of a sensitive nature? If so, is it sensitive enough that you don’t want it (or can’t allow it) hosted on a third party? Should that be the case, you have your answer—your services should remain in-house. 

If this is a bit of gray area, then you have to consider:

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    Is your IT department up to securing that data in-house?
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    How much do you trust your third-party cloud vendor security?
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    Do you trust your developers to create applications that are secure enough to be hosted on a third-party cloud provider?
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    Does your cloud host allow you to configure the security of your deployments, or are you limited to their default offerings?
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    Does your third-party cloud host offer any security guarantees?

Answer the above questions and the decision should become obvious to you.


Another tricky issue. We’ve already mentioned the cost-effectiveness of using a third-party cloud provider. However, there’s a skeleton to be found in that particular closet. Consider this: 

Your cloud-native development team has created a containerized service to be deployed on your cloud host and has assured you it’s perfectly optimized to scale as demand dictates. The service is deployed and everything runs well. Out of nowhere, you start seeing your cloud-hosting bill skyrocket. Why is that so? It may turn out your software engineers optimized that deployment with an eye only on performance. Because of that, the service might use an exorbitant number of CPUs or networking objects. 

That means you’re spending far more money than necessary. 

To deploy at scale is incredibly challenging, when the cost is a consideration. You need developers who are capable of optimizing numerous moving pieces within those manifests. That’s a major challenge.

If that same service was deployed to a capable on-premise server, it can consume as much CPU and network bandwidth as it wants. As long as your server and LAN can handle the demand, you won’t get hit with a massive bill.


How much control do you want to have over your servers, services, network, security, and deployments? If you (or your company) require a high level of control, then a third-party cloud host is not for you. If control is important, an in-house data center might be the only option suited for your needs.

With a cloud host, you might find too many limitations over what you can do. You might be limited to using their deployment tools, operating systems, or authentication protocols. With an in-house data center, it’s all up to you; you have complete control over everything.

Remember this: With a cloud host, you don’t own the hardware, so you will forever be limited to what you can do. With an on-premise data center, you own everything, so you are free to do whatever you want or need.

Data Recovery

Finally, we come to yet another critical issue that will weigh on this decision. The biggest issue with cloud hosts and data recovery is that you’re dependent on them and the cost of data recovery can get expensive. 

Of course, with an on-premise data center, data recovery will depend on whether or not your IT staff has set up a reliable backup solution. If your admins have developed a disaster recovery plan (one that can go from bare metal back to a running server), then you can trust that data recovery can be fast, complete, and cheap.

If, however, your IT staff isn’t capable of developing such a plan, then a third-party cloud host might be your best option. Sure, data recovery could get costly, but at least it will be reliable. 


Take all of these issues and weigh them against each other. Which is the most important, scalability, security, cost, control, or data recovery? When you know the answer to that, you should be able to make your decision quite easily. 

Of course, it’s not going to be a matter of one issue outweighing the others enough to make that choice easy. To that end, you can score the options from least to most important. Once you’ve done that, you can then conclude pretty easily. No matter how you arrive at this decision, just make sure you do before you get too far into the planning of your project.

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