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Shane Bansrupan

By: Shane Bansrupan on June 17, 2023

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In-House Vs. Cloud-based Servers: The Pros & Cons For Business

Cloud | IT Support

While many businesses have already switched from local to cloud-based servers, other organizations are still exploring their options. Some factors driving the resistance to cloud-based servers include recent investments in local servers, fear of the unknown, and security concerns

If this sounds familiar, this article is for you!

In this article, I will honestly answer your questions about the advantages and disadvantages of local and cloud-based servers for your business.  

This information in this article is based on my XX years of experience in the IT industry, and is not designed to prove that one solution is better than the other. The truth is that both options have advantages and disadvantages.

The right solution for you will depend on a number of factors.  

This article will provide clear, easy-to-understand, and honest information you can use to make the right decision for your business. 

If this sounds familiar, this article is for you!

In this article, I will provide honest answers to your questions about the advantages and disadvantages of local and cloud-based servers for your business. As a virtual chief information officer (vCIO) at a managed IT support services provider, I’m asked about local (or on-premise) and cloud servers every day. 

The information I’ll provide here is based on my experience in the IT industry and is not designed to prove that one solution is better than the other. The truth is that both options have advantages and disadvantages. The right solution for you will depend on a number of factors.  

The goal of this article is to provide clear, easy-to-understand, and honest information you can use to make the right decision for your business. 

What Is A Cloud-Based Server?

A cloud-based server is a virtual server that is hosted in the cloud. These virtual servers are administered by a service provider who handles the care and maintenance of the server. Like a physical server, a cloud-based server stores data and runs applications

What Are The Benefits Of Cloud-Based Servers?

Cloud-based (or cloud-hosted) servers offer a number of advantages. 

1. Time

Cloud-based servers can be spun up (or built) in hours and configured in just days. This means they can be deployed quickly

2. Scalability

Servers hosted in the cloud are easier, faster, and cheaper to scale (either up or down) when your business demands change. 

This flexibility provides adjustable server capacity (including storage space and processing power) to meet your business needs. This can be especially beneficial if your business is cyclical or seasonal. You get access to the server capacity you need when you need it.  

3. Security 

There is a perception that cloud-based servers are less safe than the on-premise option.

The 2022 Amazon Web Services (AWS) Cloud Security Report notes that the actual number of hacks involving on-premise servers (55%) was slightly higher than those targeting cloud-based servers (45%). 

4. Cost

Cloud-based servers are a pay-as-you go service, so your operational cost is directly proportional to your use. You have no large, unexpected upfront or maintenance costs

And, because the equipment is managed by the provider, you no longer have the costs associated with replacing server hardware every 3-5 years.  

5. Maintenance

When your server is hosted in the cloud, the provider bears responsibility for server maintenance.

While many will offer you the opportunity to manage updates, they will automatically install updates if you don’t – keeping your server operating efficiently and safely.  

6. Risk Management

Cloud providers also bear responsibility for security. This means that the provider carries insurance that will cover (at least some of) the cost of a data breach

A word of caution: Understand the amount of coverage your provider has. You may need a supplemental policy to fully protect your business. 

7. Access

With a cloud-based server, your server is available on-demand to all authorized users any time

8. Redundancy

Providers back up and store your data so in the event of a cybersecurity incident, you can revert to a recent back up of all of your data and be up and running again quickly. 

What Are The Disadvantages Of Cloud-Based Servers? 

Below are some of the biggest disadvantages I’ve seen with cloud-based servers. 

1. Cost

I know…we listed cost as an advantage, but two things can be true. Since cloud-based servers are a pay-as-you-go service, the ongoing cost will never go away

2. Security 

There is a perception that cloud-based servers are more likely to be hacked. 

As we pointed out in the third bullet in the advantages section, according to the 2022 AWS Cloud Security Report, based on a survey of 578 cybersecurity professionals, 55% of hacks targeted on-premise servers, while 45% of hacks involved cloud-based servers. 

3. Data Privacy

The more people involved with your server, the greater the statistical risk to your server and data. Make sure your organization uses a reliable provider and that you understand the precautions they take to keep your information safe. 

4. Accessibility

While cloud-based servers can accommodate unlimited numbers of users, the accessibility canlimited by your internet connection

You also have no control over up/down time because someone else manages the maintenance schedule. This could impact the availability of your business, or you may need to pay a premium for 24 hour, 7 day up time. 

What Is A Local Server? 

A local (also known as an on-premise, on-site or physical) server uses local hardware to store data and run applications. Local servers are typically hosted on-site at your business location. 

What Are The Advantages Of Local Servers?

As cloud-based servers become the option of choice, most local servers will likely be phased out over the next 5 years. In the meantime, they do offer certain advantages. 

1. Control 

If your business requires custom server configurations to manage your data, it can be easier to implement and manage these customizations in a physical server. 

2. Ownership

When you buy a server and host it on-site, you own the equipment.

3. Cost

Once you buy the server, the only additional cost is maintenance. Because it is a one-time capital expense (aside from maintenance), many people view on-premise servers as having a lower total cost of ownership

4. Physical Security

Housing a server on-site gives many business owners the feeling of increased data privacy and lower risk of data loss. This can be true if the server is routinely monitored for intrusion and maintained regularly

What Are The Disadvantages Of Local Servers?

As with most things in life there are pros and cons to local servers. We address some of the disadvantages below.

1. Cost

Local servers require a significant investment in hardware.

As with a car, ongoing operational (maintenance, backup, and upgrade) costs need to be factored in. In addition, local servers have an average lifespan of three to five years, at which time another significant investment will be required. 

In addition, you’ll need to build in redundancy for business continuity if a disaster strikes. If a server goes down, will your business be able to continue operating? A backup server means extra hardware and maintenance costs (as well as utility costs).  

Other affiliated costs include providing security for the server room. Whether that security system involves installing a badge reader or hiring a security guard, there will be an additional cost. 

2. Staffing 

Either in-house or external staff will need to be on-site for maintenance and upgrades to your local server.

If your internal staff handles these tasks, they won’t be available to handle the day-to-day service requests or the long-term strategic planning that your infrastructure requires. 

3. Space

Local or on-site servers mean need dedicated physical space in your building. Do you have the space? What are you paying per square foot for your facility space? 

4. Scalability

Physical servers are not as easily scalable as cloud-based servers. For example, seasonal businesses need a server built to accommodate peak business demands

During the off-season, the server operates at the same level, which means extra utility usage and higher operational costs. And, if business drops off, you don’t have the option to scale down the size of your server until it is time replace it.

5. Time

On-premise (or physical) servers can take two to three weeks to build due to the lead time required for hardware delivery and installation. And maintenance and upkeep will require additional time commitments. 

What’s The Right Choice For My Business? 

To be honest, the best choice for your business depends.

Some things to consider are the needs of your business, the size of your internal IT staff, regulatory and contractual requirements, your budget, the potential for your business to grow or shrink exponentially, and recent investments in your on-site server. 

If you have recently invested a lot of money in on-premise servers, I recommend waiting to move to the cloud. To maximize your investment, wait until your current local server is about 6 months from the end of life. At that point, spin up to a cloud server. 

The good news is that after reading this article, you fully understand each option. You know the difference between cloud-based and on-site servers. 

You know that cloud-based servers offer time, scalability, security, cost, and maintenance advantages. They also provide risk management, access, and redundancy benefits. 

We explored the disadvantages of cloud-based servers including cost, security, data privacy, and accessibility. 

In terms of on-site servers, we talked about control, ownership, cost, and physical security advantages. We also walked through the cost, staffing, space, scalability, and time disadvantages of local servers.

No matter when you decide to move to a cloud-based server, make sure you understand the requirements outlined in your contracts. Some organizations including banks and defense contractors are contractually required to use on-premise servers. 

Like many business leaders, you may be concerned whether your cybersecurity tools are up to the latest challenges. Since threats continue to evolve, it is prudent to make sure you have strong defenses in-place. 

Kelser provides a full suite of managed IT support services including cybersecurity protections. We know that managed IT isn’t the right solution for every business, but our offering includes the most often overlooked cybersecurity tool: employee security awareness training. Learn what Kelser’s training includes and why it’s important for every employee.

Related article: Employee Awareness Training: An Honest Cost-Benefit Analysis

Not sure about your ability to withstand a cyber attack? You aren’t alone. Click on the link below to learn five best practices and actions you must take to protect your business. Use this checklist to:

✔️Understand where your organization's cybersecurity policy needs improving
✔️Learn actions you can take to keep your organization's data secure
✔️Help ensure your organization follows the latest cybersecurity best practices

Get your free cybersecurity checklist now, so you can take action against the latest cybersecurity threats and keep your business secure.

Get Your Cybersecurity Checklist

About Shane Bansrupan

Shane is passionate about taking care of the customer. As a virtual Chief Information Officer, he makes sure our partners have the infrastructure and security they need to move their business forward. He holds enterprise business and technical certifications from AWS, Datto, Microsoft, and several other industry-leading customer experience-enhancing solutions, like Kaseya and ConnectWise.

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