Which solution is the right one?

Cloud vs. On-premise
in Production

In a traditional on-premise approach, software is installed and run on a company’s local servers. On the other hand, there are cloud solutions where software is made available via the Internet by third-party providers. The cloud approach offers key advantages in many sectors and manufacturing is no exception. In this article we compare cloud and on-premise solutions with a focus on production environments.

Cloud vs. on-premise – The main differences at a glance

Comparison between on-premise software and cloud software

What does „on-premise“ mean?

„On-premise“ is the classic approach to using software, meaning a company manages all the needed resources itself. Software is installed and operated on the company’s own (local) servers.

This requires hardware, server rooms, security measures and redundancies. In return, the company retains full control over its software and data. This also means that with an on-premise approach, maintenance and updates must be regularly performed by the company’s IT staff.

Advantages of on-premise software:

On-premise approaches offer a high degree of control, as a company has the entire installation, usage and management process in its own hands.

  • Greater control over own data
  • More flexible customization
  • Offline access

Greater control over own data:
With a classic on-premise approach, a company manages its hardware and software itself, including all maintenance and security updates. All data remains with the company and is often only accessible within a local network, while the company bears full responsibility for data protection and security. Sometimes, a setup like this is required to comply with legal requirements when handling sensitive (personal) data.

More flexible customization:
With an on-premise approach, companies can configure and adapt their software and the underlying hardware systems themselves at any time to meet individual requirements. However, it should be noted that such adaptations (e.g. acquisition and integration of new hardware) are often associated with high costs and/or time expenditure.

Offline access:
In contrast to cloud services, the use of on-premise software does not require a constant internet connection. Applications are accessible even if the internet fails and the stability of the internet connection has less impact on the performance of systems.

Disadvantages of on-premise software:

The main disadvantages of the on-premise approach include the increased time and costs required to install, operate and maintain the software. Some further limitations are discussed below.

  • High acquisition costs
  • IT costs for maintenance and security
  • Operating costs
  • Limited scalability
  • Data recovery and redundancy
  • Limited accessibility
  • Outdated technology

High acquisition costs:
Setting up an on-premise solution requires comparatively high (initial) costs. Setting up the necessary infrastructure requires the availability of server rooms, the purchase of hardware, the acquisition of licenses and the installation of security and monitoring systems.

IT costs for maintenance and security:
With an on-premise approach, the company is responsible for all maintenance, updates and security measures. These tasks must be carried out by competent IT staff.

Operating costs:
In addition to costs for IT tasks and personnel, on-premise solutions incur additional ongoing costs. These include costs such as energy consumption and cooling.

Limited scalability:
Scaling on-premise solutions can be complex and costly. If a company grows and wants to expand its existing capacity, additional hardware must be purchased, integrated and configured. In comparison, many cloud services allow for easier and often immediate scaling.

Data recovery and redundancy:
Building redundancy and backup structures can be challenging and expensive with an on-premise solution, especially for smaller organizations. While large cloud providers offer geographic redundancy through distributed data centers and automated backups, companies that rely on on-premise software must implement their own safeguards.

Limited accessibility:
In many cases, on-premise software can only be accessed within a company’s network.

Outdated technology:
Many cloud services are regularly updated to include new technologies and features. With on-premise solutions, it is more common for companies to work with outdated technology, as upgrades and updates can be both costly and time-consuming.

Cloud computing as a modern alternative

Since its emergence in the early 2000s, cloud computing services have replaced traditional on-premise hosting in many places.

Cloud software is operated on the servers of a third-party provider and made available via the internet (also referred to as software-as-a-service). Companies that use cloud software do not have to install it themselves. Instead, they access it via web browser, thereby eliminating the cost of purchasing and maintaining their own server hardware.

Generally, the cloud provider is responsible for maintaining the software, including all functional and security updates.

A stable internet connection is required to use cloud services.

Advantages of cloud software:

When using cloud services, both hardware requirements and a large part of the administrative workload are outsourced to a third-party provider.

  • No installation required
  • Eliminating costs for own hardware
  • Saving costs for license management
  • Maintenance and security by the cloud provider</