Many small business owners struggle with one core IT question: Should we move to the cloud or stick with on-premise systems?

There’s no one-size-fits-all solution, but there is a best choice for your business based on a variety of factors, such as cost, security, compliance, workflows, and growth plans. To help you decide what to do, this short guide breaks down the differences so you can make a confident, informed decision on the right technology foundation for your business.

What’s the Difference Between Cloud and On-Premise?

To understand which is best, you need to understand what each option actually means and offers your business.

Cloud (Hosted Offsite)

Your data, apps, and storage run on secure remote servers like Microsoft 365, Azure, or other hosted platforms. You and your employees access everything through the internet.

Your business probably already uses some cloud options already! Here’s a list of some potential places you’re already using the cloud:

• Microsoft 365
• Google Workspace
• Cloud File Servers (SharePoint, OneDrive, DropBox)
• CRMs or Management Software

On-Premise (Hosted Locally at Your Office)

Your data and apps run on physical servers located in your building. Depending on the size of your business, these might be large scale systems or a smaller setups.

Here’s a list of local server setups that you might be utilizing:

• Local file servers
• NAS device
• Locally installed business applications
• On-site backup equipment

The Differences and Comparisons

Now that you have a better idea of what cloud and on-premise solutions are and what your business might be utilizing, let’s dig into what the big advantages and disadvantages with the solutions.

1. Cost Comparison

Cloud Costs:

• Lower upfront investment to get started
• Subscription-based pricing for predictable monthly costs
• No server hardware that you need to maintain
• Updates and maintenance are included in cloud services
• Cloud = predictable, scalable, lower upfront costs

On-Premises Costs:

• Higher upfront investment to purchase and install a server
• Replacements should be done every 4-5 years
• Cooling, electricity, and maintenance costs
• Additional backup hardware to ensure data protection
• Unexpected repair expenses if (or when) something goes wrong.
• On-Prem = higher upfront costs, lower ongoing subscriptions, but more maintenance

2. Which is More Secure?

Cloud Security Benefits:

• Enterprise-grade security tools most small businesses cannot afford alone
• Built-in threat detection
• Automatic updates and patches
• Redundant backups to ensure data isn’t accidentally deleted or lost
• Geo-redundant data centers for extra protection
• Stronger protection against ransomware
• Cloud = Generally more secure for small businesses

On-Premises Security Challenges:

• Updates depend on your internal processes
• Hardware failures means downtime or data loss
• No built-in redundancy unless you purchase and install it
• Higher risk from physical threats like fire, water, electrical surges, and others
• Backups depend entirely on internal discipline
• On-Prem = Secure only if rigorously maintained, which most small teams struggle to do

3. Flexibility and Accessibility

Cloud:

• Access from anywhere
• Easy remote work setup for hybrid, remote, or travel scenarios
• Automatic scalability to add new users
• Fast deployment of new apps
• Great for teams using laptops or hybrid work environments

On-Premises:

• Access typically limited to physically being at the office
• For remote access, remote desktop software or VPN
• Scaling requires buying more hardware… and replacing incompatible parts
• Remote work setups are complex, leading to rigid work on-site requirements

4. Compliance and Industry Requirements

Depending on your industry and location, your business might be subject to government or insurance compliance considerations. If your business is subject to these requirements, then here’s how each solution works for you:

Pros of Cloud Compliance:

• Many platforms already meet major compliance frameworks (HIPAA, SOC2, etc.)
• Built-in encryption protections
• Audit logs and access user management

On-Premises Compliance Pros:

• Full control over data storage location
• Great for legacy applications that can’t run in the cloud

But which is better?

Because of its stronger protections and better audit capabilities, most compliance-driven industries. However, not every business is going over just yet because of legacy applications. If your business doesn’t need to support legacy apps, then the cloud might be right for you!

5. What’s the Winner for Your Business?

The cloud is the winner if you want:

• Stronger cybersecurity
• Lower upfront costs
• Easier remote access
• Better disaster recovery
• Predictable budgets
• Automatic updates
• Easier compliance
• Less hardware to maintain

Most small businesses fall into this category where the cloud is the best option.

Sometimes, an on-premises serve still makes sense for businesses not 100% ready to move to the cloud… yet.

The on-site server makes sense when:

• Your business runs legacy software that cannot operate in the cloud
• Your internet connection is unreliable
• You require specialized local integrations (e.g. manufacturing equipment)
• Your workflow is heavily dependent on large local files

Even in these cases, there’s a better option…

A hybrid model gives the best of both worlds.

Utilizing the cloud and an on-premises server can be the best option for your business. Such times this might be true is:

• Cloud email + local server for specialty apps
• Cloud file storage + a local database
• Cloud backup + on-premises primary storage

This hybrid approach offers great flexibility while accommodating legacy-system needs.

The Right Choice Depends on Your Business Goals

Cloud and on-premise solutions both have strengths that help small businesses, but for most small businesses, the cloud offers the best mix of everything.

At Marvel IT Services, we help businesses evaluate their needs, assess security, manage IT costs, and revamp data strategies and solutions that support long-term growth.

Want help deciding what option best fits your business? Let’s schedule a free technology assessment.