Cloud computing gives you on demand access to a shared pool of resources while on premises software uses servers you own. Cloud moves hardware and physical security to the provider and shifts parts of the software stack too. Data and identities belong to you in both models. Choose by control needs, cost model and compliance rules. Hybrid setups combine both.
Your company needs new software and two paths exist. You can host it on your own servers or rent it from a cloud provider.
This guide compares both paths with official definitions so you can decide with facts and not with fear.
What is the Difference Between Cloud and on Premises Software?
NIST defines cloud computing as a model for on demand network access to a shared pool of configurable computing resources that you can provision and release with minimal management effort. See NIST SP 800-145.
On premises software uses hardware that your company owns and manages in its own datacenter. Your team installs it, updates it and protects it.
What are the Cloud Service and Deployment Models?
- SaaS. You use the provider applications without managing the infrastructure.
- PaaS. You deploy your own applications on provider tools.
- IaaS. You provision processing, storage and networking and control the operating system.
- Public, private, community and hybrid. NIST lists these four deployment models. Hybrid binds two or more distinct clouds together.
Who Manages What in Every Model?
Microsoft publishes a responsibility matrix. In an on premises datacenter you own every layer of the stack. Data and identities remain yours in every cloud model. See shared responsibility in the cloud.
| Area | On Premises | IaaS | PaaS | SaaS |
|---|---|---|---|---|
| Data and identities | You | You | You | You |
| Applications | You | You | Shared | Shared |
| Operating system | You | You | Provider | Provider |
| Physical hosts and datacenter | You | Provider | Provider | Provider |
Microsoft calls this illustrative guidance. Your contract with a provider sets the legal terms.
How do the Cost Models Differ?
Microsoft describes cloud cost flexibility as a pay as you go model that suits short projects without owning anything when you shut them down. It also lists financial transparency through detailed billing and usage reports. See the cloud migration business case.
On premises software needs hardware purchases and staff before the first user logs in. Cloud trades part of that spend for a recurring bill.
How do You Choose Between Cloud and on Premises?
- List the data that must remain inside your own buildings by law or by contract.
- List the workloads that need a custom hardware setup.
- Compare the cost of ownership with the pay as you go bill for three years.
- Check which team patches the operating system in every model.
- Test one low risk workload before you move the rest.
These criteria are practical advice and not an official checklist. See our guide to the benefits of cloud computing for the other side of the decision.
Frequently Asked Questions
What is the Main Difference Between Cloud and on Premises?
On premises software uses your own hardware. Cloud software uses provider infrastructure that you reach over a network.
Who Owns My Data in the Cloud?
You do. Microsoft states that data and identities remain yours in every cloud model.
Is Cloud Cheaper Than on Premises?
Not always. Cloud uses pay as you go billing and on premises needs upfront hardware. Compare the full cost over time.
What is a Hybrid Cloud?
NIST defines it as two or more distinct clouds bound together by technology that permits data and application portability.
Can I Use Both Models?
Yes. Many companies host sensitive workloads on premises and move others to the cloud.
Key Takeaways
- Cloud computing means on demand access to a shared pool of resources.
- On premises software runs on hardware that you own and manage.
- Data and identities remain yours in every model.
- Responsibility for operating systems and hardware shifts to the provider as you move up the cloud models.
- Hybrid setups combine both models.
Sources and References
This guide follows NIST and Microsoft documentation.
- NIST SP 800-145 The NIST Definition of Cloud Computing (NIST) nvlpubs.nist.gov
- Shared Responsibility in the Cloud (Microsoft Learn) learn.microsoft.com
- Cloud Migration Business Case (Microsoft Learn) learn.microsoft.com