On-Premise vs Cloud Storage: Key Differences in Security, Budget, and Access

The foundation of an organization's data strategy is how it will store its data: on-premise storage versus cloud.

When choosing, organizations should focus on budget, access, and security.

The two storage types have vastly different cost structures. Cloud storage is generally easier to access, while organizations opting for on-premise storage must also secure the physical environment.

Organizations should weigh these pros and cons to decide which is best for them.

1Key considerations: on-premise storage vs cloud storage

There is no one-size-fits-all solution when deciding between on-premise storage and cloud storage. What may work for one company may not be ideal for another. Organizations need to do an intensive self-assessment to determine what type of storage is best for their business.

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While there are many traits on which they can base their decision—such as performance, scalability, compatibility with existing systems, and even environmental, social, and governance (ESG)—three key dimensions should be their primary considerations:

Business leaders can easily be overwhelmed by the sheer number of factors when choosing on-premise storage vs cloud storage. Rather than get lost in these countless variables, they should focus disproportionately on security, budget, and access, which will most influence the success of the organization's data strategy.

2Budget: on-premise storage vs cloud storage

There are significant differences in the cost of on-premise storage and cloud storage.

The costs of on-premise storage

The upfront investment for on-premise storage is high. To set up and manage their data storage, businesses must use specialized hardware, such as dedicated servers and backup devices like tape drives and external hard disk arrays. They will also need a specialized software stack that may include solutions for storage management, backup and recovery, virtualization, and file synchronization and sharing.

On-premise storage will not run on its own. Businesses must commit to recurring maintenance costs, the bulk of which will go to manpower. Companies must hire in-house or third-party experts, such as network engineers, system administrators, data architects, security analysts, etc. The size of this workforce is based on the complexity of an organization's on-premises storage needs.

Businesses in highly regulated industries like healthcare or financial services may need on-premise storage. However, other companies may find that on-premise storage represents a significant cost of capital and time.

The costs of cloud storage

While most people are familiar with Amazon as an e-commerce marketplace, most of its operating income now comes from Amazon Web Services. AWS and other cloud providers have grown to heights because they operate on a tollbooth or pay-as-you-go model.

Unlike on-premise storage, which has significant fixed costs in hardware, software, and manpower, cloud storage enables businesses to pay only for what they need. Thus, cloud storage is ideal for companies that need more savings and wish to scale up their usage of resources in the cloud. In this way, a startup can use a cloud storage provider for basic document storage at the start to extensive databases with millions of entries when it grows into a platform.

Cloud providers also offer value-added services such as data protection and tools to help you forecast your cloud storage costs. Other notable cloud storage providers include Microsoft Azure, Google Cloud Platform, Alibaba Cloud, and IBM Cloud.

3Security: on-premise storage vs cloud storage

Although an organization can have strong cybersecurity measures, no matter how it handles its storage, on-premise and cloud storage each offer advantages and disadvantages.

Security challenges with on-premise storage

Due to specific industries or market policies, organizations may have no choice: They must store their data on-premise to meet data residency or localization regulations. These organizations will face similar security challenges to those storing another valuable resource, such as gold.

First, organizations will need to protect the servers. This protection may entail a hardware-managed access control system. For example, designated IT personnel may only be able to access sensitive areas through card readers, biometric scanners, keypad access, or other means of authentication. This system will need video monitoring, which may be further paired with advanced systems like automated motion detection.

When dealing with on-premise storage, security also encompasses protection from the elements. The organization must set up a climate control system to keep the servers operating within an ideal temperature and humidity range. Additional safeguards will also need to be implemented, such as gas-based suppression that doesn't damage electronics in the event of a fire and internet-of-things sensors to detect flooding or other adverse weather conditions.

Businesses will also need third-party solutions to support their on-premises storage, from access management and authentication software to intrusion detection and prevention systems (IDPS).

Security challenges with cloud storage

Cloud storage is generally safer because the tech giants that provide this service usually employ best practices for securing data, such as data redundancy. Still, cloud storage is not immune from security threats.

The first issue is that cloud storage is often offered on a multi-tenancy basis—your data is stored alongside other organizations. Multi-tenancy helps bring the costs down, but it also exposes each organization to a greater likelihood of security breaches.

Cloud storage also operates under a shared responsibility model. While cloud providers are responsible for their end of the bargain, such as securing the physical servers from hackers and natural disasters, companies are still responsible for protecting their data within that provided infrastructure. Organizations must manage their security to ensure they are protected from attack.

Finally, cloud storage providers may rely on third-party providers themselves. These relationships may introduce additional vulnerabilities for client organizations. Businesses must know what vendors their cloud storage provider uses and how this selection may affect their security profile.

4Access: on-premise storage and cloud storage

Though access may sound like a monolithic attribute, it comprises several types.

Personnel access: On-premise storage vs cloud storage

IT teams do not remain static. New employees will be hired and need access, which is more difficult with on-premise storage. Companies have to make more complex changes. For example, if a company uses keycards for physical access control to its servers, it will need to create a new one for issuing to the employee. The employee must input his fingerprints or other markers into the system if the company uses biometric access.

In sharp contrast, adding new users to a cloud platform is much easier. The user can be onboarded entirely online, including their authentication methods, such as login credentials, password, and multifactor authentication.

Device access: On premise storage vs cloud storage

Only specific devices may be compatible with the local infrastructure and network associated with on-premise storage. This compatibility may make it challenging for employees using mobile devices to access the server. Employees with non-standard devices, such as a MacBook, may have trouble in an environment that relies on authentication methods tailored to Windows.

Cloud storage is much more agnostic. Because cloud providers support many different types of businesses, they generally offer cross-platform support, even within the same service. Employees with completely different device types, brands, and operating systems can access their cloud storage with the same ease.

Location access: On premise storage vs cloud storage

For on-premise storage, employees can generally only access the servers when on-site. To the extent that remote access is available, they must do so through the organization's network, typically via a virtual private network (VPN). Setting up and maintaining a VPN can be costly.

IT personnel for cloud storage solutions have no such problems. They can access their cloud storage from anywhere, so long as there is an internet connection. The one caveat is that employers prohibit employees from accessing cloud storage outside their jurisdiction, such as while traveling overseas, if it violates local data privacy regulations.

5Choosing between on-premise storage vs cloud storage

There is no right or wrong choice when deciding between on-premise storage and cloud storage. Many successful organizations use both.

Instead of evaluating which option is superior, they need to decide which one is best for them. The primary factors that a business should focus on are budget, security, and access because these will most influence its success.

Budget-wise, on premise storage may require more up-front investment and recurring costs in the form of technical talent. While both storage and cloud storage can be secure, the former has the additional complication of physical protection, such as video monitoring. Finally, cloud storage is generally more accessible than on-premise storage for personnel, devices, and work locations.

It is important that business leaders understand these nuances so that they can lay the best foundation for their overarching data strategy.

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