In an on-premise environment, in-house dedicated servers are used. Obtaining them requires a considerable upfront investment. This cost includes buying servers, licensing software, and hiring a maintenance team. Additionally, maintaining the servers and the infrastructure also requires a significant budget for ongoing expenses to maintain server hardware, power consumption, and space. A cloud environment on the other hand has little to no upfront costs. The infrastructure is owned by the provider, and the client only pays for using devices on a monthly or annual basis. This financial model is known as the pay-as-you-go model, where you only pay for the units consumed and the time used. Additionally, cloud computing requires a lot less maintenance so the need for a technical team is drastically less than on-premise infrastructure.

Extra sensitive data is preferably kept in an on-premise environment for security reasons. Confidential or critical data such as data of financial transactions, patient medical information systems, or official governmental credentials are critical, and sharing with a third party requires extra precautions. In such a scenario, on-premise models serve the purpose better than the cloud. Some organizations prefer using on-premise models as they are more confident about keeping their data safe themselves or need to adhere to various security compliances. Companies in highly regulated industries such as banking, insurance, and healthcare with many compliance requirements normally do not immediately start using the cloud because of this reason. On the other hand in a cloud environment, ownership of data is not transparent. Contrary to on-premise, in a cloud environment, the data is stored on a third-party server. Data and its encryption keys reside within the infrastructure of the provider. If there is significant downtime in case of an unexpected event, it could be that the company can not be able to access its data. Despite cloud data being encrypted and only the provider and customer having keys to that data, most individuals and organizations tend to be concerned over the security measures of cloud computing. Cloud has proved its mettle and obtained many security certificates over the years. But the loss of authority over the data reduces the credibility of its security claims.

Critical system failure, technical glitches, unexpected blackouts, malware, and cyber & ransomware attacks are common threats in today's technology landscape for any system. Preparation for such a disaster is a real challenge. In an on-premise infrastructure, the responsibility of security and privacy lies entirely with the organization. In case of a disaster, the infrastructure may suffer physical damage or become unusable. Since the organization is solely responsible for managing its physical systems including servers, switches, and connectivity restoring data from damaged hardware or system with an untrustworthy state can pose a significant challenge that needs to be addressed beforehand. The cloud environment is a step ahead in this aspect as compared to the on-premises model. Cloud provides organizations instant access to virtual resources in case of any disaster. With such features, you can back up, restore, and reboot software and data in a virtual environment instantly whenever any natural or unnatural disaster hits your cloud infrastructure.

Due to the ever-increasing demand and changing user requirements, modern applications are continually evolving. Flexible and scalable infrastructure ensures that user experience is not compromised. On-premise environments offer less flexibility because of the limitation of the expension of physical servers. Running operations on-site implies resource scaling through buying and deploying new servers. Hence, scaling is a bit of a challenge under this type of model especially if your business grows exponentially. Another challenge is an enhancement of bandwidth and capacity related to physically deploying new servers. As one can manage things physically, you will have to make custom configurations based on organizational needs. The scalability that a cloud environment provides is superior to on-premise models. Here, scalability includes resizing server resources, bandwidth, and internet usage. Also, for cost-saving purposes, cloud servers are scaled down or shut down when the usage is low. This flexibility is possible due to the virtual location and resources of servers, which are increased or decreased as per convenience.