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Cloud vs. on-premise (on-prem)

Compare cloud to on-prem and cloud comes out on top almost every time for almost every type of company. In fact, 95% of Atlassian customers choose cloud right off the bat—and 90% of those who move from on-prem to cloud say they’d recommend making the switch.*

So, what exactly are the differences? Why is cloud the preferred choice of so many teams? And what should you know as you’re making your own choice between the two?

Read on to find out.

What is cloud?

In the simplest terms: cloud is software and services that run on the internet instead of on your personal computer or a dedicated server in your building or a data center. They’re typically accessible from anywhere with an internet connection via a browser or mobile app.

Many cloud companies employ a SaaS (software-as-a-service) business model, in which a customer buys a subscription to the vendor’s software application and then the software is made available to the customer’s users over the internet. 

In most cases, the SaaS vendor is responsible for maintaining the performance, hosting, storage, and service of the software. And data security, privacy, and application performance are built in - without requiring upgrades or management by your team. 

When cloud users talk about what they love most about cloud, this is the theme that comes up over and over again: It takes the pressure and responsibility for basic maintenance off your teams, freeing them up to focus on more important tasks.

As Evan Lerer, Director of Engineering at Redfin explains: “Frankly, having our engineers or IT professionals manage our systems on-premise is a waste of time and money. If there’s a company that already has amazing products, why not have them do it? That way, we can spend our time working on the things that we're good at...”

What is on-prem?

Where cloud services are delivered via the internet and maintained by your vendor, on-prem services are delivered by servers within your business and maintained by your internal teams.

With on-prem software, you buy a license with a predetermined number of seats (usually for a higher up-front cost compared to a subscription model). Then your IT team manages the installation, hosting, and ongoing management of the application (sometimes with the help of the vendor or a third-party services provider for an extra fee). Your team is also responsible for software and hardware upgrades, as well as maintaining the availability of the application.

Cloud vs. on-prem: key differences

The core difference between cloud and on-prem is where your software and data are stored and who is responsible for maintenance, upgrades, and dealing with major incidents. 

But the differences don’t stop there. Security, scalability, cost, the ability to support remote teams, and the speed of innovation also differ from server to cloud, with cloud being the clear leader in most, if not all, categories.

Security

92% of Atlassian customers say cloud security is better than or equal to server*. And we must say: we agree.

Typical on-prem security involves a single login that gets your team into any tool they need. While this approach is nice and simple, it also means that a single security breach puts your whole system at risk—all your customer data, all your internal data, all your code. The castle may look secure from the outside, but once the enemy gets through the gates, it’s game over.

Leading cloud security (like Atlassian’s), on the other hand, typically takes a zero trust approach. This means granular user permissions and automatic security checks for every user and every tool. With this approach, if a hacker does happen to get a user login, they’re limited to only the data, code, and access that specific login has. Not to mention that the login won’t get them far if their device or activity looks suspicious.

Quotation mark

The stability and security is substantially better than we achieved on premise. Being able to scale with individual user licenses is very cost-effective.

Jarrett Prosser
Lead Engineer, Rollercoaster Digital

Scalability

Another big difference between cloud and on-prem is scalability

With on-prem installations, scaling is always limited by both tech team time and available resources. If your user base grows, on-prem teams will need to either add more computing power to your existing machines (known as vertical scaling) or add more machines (known as horizontal scaling).

Scale with confidence

To accomplish this, you’ll likely need to go through a lengthy approval process, order servers, set up load balancers, take existing machines offline for an upgrade, and make time in your IT teams’ busy schedules. The process is manual and needs to be planned for ahead of time.

With cloud, all the hassle of manual upgrades disappears, and you can set up your systems to automatically scale—up, down, in, or out—in an instant. This means if you have an unexpected spike in use or an unexpected downturn, your systems can react in real time. No approvals or IT team involvement required.

Cost and pricing

After migrating from server to cloud, 36% of customer say their total cost of ownership (TCO) went down*. And we’re pretty sure that number is an understatement. Because the truth is that on-prem comes with a lot of hidden costs—from all the work your tech team does to maintain systems, manage updates, monitor security, and optimize performance to the less-visible costs of system downtime, overprovisioning, and unused licenses.

Reduce cost and increase profit

As we say in our piece on how to increase profits in the cloud: “The real question here isn’t what’s cheaper – it’s whether you’re taking the long or the short view. Are you comparing only the visible, up-front costs? Or looking at the big picture, factoring in the total cost of ownership – everything from IT time to server replacements?  When you look past the tip of that iceberg, you’ll find a long list of ways that cloud saves money in the long run.”

Quotation mark

Pricing was more expensive in the short term, but in the long term it will save us money in reduced management costs.

Bryan Kennedy
IT Director, Science Museum of Minnesota*

Incident management and downtime

Speaking of downtime, another way cloud and server differ is in who’s in charge when a disaster strikes

With on-prem deployments, your IT team is on the hook for every major incident—be it during peak hours or in the middle of the night. And the average cost of those incidents? Research says it’s between $5,600 and $9,000 per minute

In the cloud, the responsibility for incidents shifts to your vendor, which means less stress (and middle-of-the-night wake-up calls) for your teams. Even better, if your vendor has an SLA-backed uptime guarantee (like Atlassian’s Premium and Enterprise plans), you can rest easy that uptime won’t fall below the threshold.

Storage

On-prem storage is subject to the finite space available on your servers and must be maintained by your tech team. In the cloud, getting more storage is usually a simple matter of upgrading a subscription, and all storage and backups are maintained by your vendor.

Remote work

While on-prem instances can support remote work, it’s typically a complex dance of virtual machines, self-hosted VPNs, and some data that’s only accessible on site. Cloud, on the other hand, was built for remote work and distributed teams. Systems can be accessed securely from anywhere, as long as the person has an internet connection and the proper permissions.

Quotation mark

Our primary reason for migrating was to support remote users better. This [was crucial] during the COVID-19 crisis, as we were able to reach our code in a secure manner without using company VPNs.

Damien Gray
Principal Laser Optics Engineer, EOS North America*

Single-tenant vs. multi-tenant

Single tenancy is when only one business hosts its software on a single server. Multi-tenancy is when the same server is shared by multiple businesses. 

With on-prem, you’re pretty much always the single tenant. With cloud, you may be a single tenant with your own dedicated server, or you may be on a multi-tenant system, sharing a server with other cloud customers.

The benefit of single tenancy (be it in cloud or on server) is control and flexibility. Your server is your own and you can control for any specific requirements your teams have. It also means that any spikes in another business’ computing power or breaches in their system have no impact on your systems’ availability, reliability, or uptime. 

Multi-tenancy, on the other hand, is more affordable, more efficient, quick to scale, and—with the right vendor and an SLA-backed uptime guarantee—can still be very low risk for downtime or availability issues.

Customization

Unsurprisingly, on-prem deployments where your IT team has full control over your servers, updates, and maintenance are typically a little bit more customizable than cloud tools deployed, maintained, and updated by your vendor.

At first glance, this sounds like a point in favor of on-prem, but we beg to differ. Because unlimited customization comes with some pretty hefty downsides. When we ask server admins about it, they talk about messy workarounds, bad hacks, sub-optimal configurations (or over-configurations), solving the wrong problems, and tech debt they never quite get around to addressing.

In cloud, these problems are solved by having standard workflows and treating customization as a backup—not a go-to. Apps and integrations mean that pretty much everything admins do on server can also be done on cloud, but without the mess.

Is cloud better than on-prem?

We think so! In fact, we’re so all-in for cloud that we recently announced that Atlassian is retiring our on-prem software in 2024. Cloud is simply better—more innovative, more secure, more remote-friendly, more cost effective—and we expect that it’ll continue outpacing server by leaps and bounds in the next couple years.

89% of our customers say they saw benefits from cloud within six months. 60% say cloud gives them peace of mind around maintaining security and version upgrades. And 41% said when they moved to cloud, employee satisfaction shot upward*.

Even more compelling: 90% of customers who made the move from server to cloud say they recommend cloud*.

Hybrid cloud: the best of both worlds

And if you’re not sure you’re ready to go all-in on the public cloud? Many organizations take a hybrid approach, hosting some data on the public cloud and some on a self-hosted private cloud. This allows them to store data behind their firewalls while also having access to a public cloud environment where scalable computing power is available on demand.

Migrating to cloud

41% of Atlassian customers say migrating from on-prem to cloud was easier than they expected*. If a migration is in your future, check out the Atlassian cloud migration center, where you’ll find support, information, and step-by-step guides to ease you through the process.

* Based on a TechValidate survey of 300+ Atlassian customers.

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