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Cloud vs. on-premises datacenters: How to choose for your workload

The cloud and on-premises datacenters have pros and cons in terms of scalability, cost, compliance, and other factors. How do you know which is best for a given workload?
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Photo by Fatih Turan from Pexels

Alongside the difficulty of keeping existing IT systems operations available and reliable, many businesses are also challenged to scale their systems based on variable business needs. They must also adapt to comply with changing standards, regulations, and trends. As they work to maintain business processes in the face of change, they may notice circular patterns, where an operation moves back and forth between different hosts, depending upon the business and operational needs at any given time.

[ Learn how to build a flexible foundation for your organization. Download An architect's guide to multicloud infrastructure. ]

With the rising popularity of cloud computing, there has been a spirited debate about whether it's better to use on-premises datacenters or cloud computing to handle changing requirements. Passionate camps have been established to defend each side. This article will detail each, try to gather the pros and cons, and draw insights into how to best handle cyclic business and operations patterns.

On premises vs. cloud computing

Whether cloud computing is better (or not) than on-premises datacenters for a particular case depends on various factors, such as the organization's size and needs, budget, security requirements, and the level of control it wants to retain over the systems it consumes.

With cloud computing, businesses can:

  • Access computing resources and services on demand
  • Pay only for what they use (intentionally or unintentionally)
  • Scale up or down as their needs change
  • Pay less (often nothing) for infrastructure maintenance and upgrades, which can reduce the burden on in-house IT teams

While cloud computing offers many benefits, on-premises datacenters can provide more granular control over infrastructure and data, which can be critical for specific industries and organizations with high security and regulatory requirements.

The decision to choose between cloud computing and on-premises datacenters ultimately depends on the organization's specific needs and circumstances. Security, compliance, scalability, cost, and performance must be carefully considered before deciding when to migrate workloads to or from the cloud.

[ Managed services vs. hosted services vs. cloud services: What's the difference? ]

Moving from an on-premises datacenter to the cloud

There are various reasons you may want to move to the cloud from on-premises datacenters:

  • Scalability: Organizations that experience fluctuating demands for computing resources may find it more cost effective to use cloud computing instead of maintaining on-premises datacenters sized for peak or burst demand. Cloud computing allows businesses to scale up or down easily as their needs change without investing in additional hardware and space.

  • Cost savings: With cloud computing, businesses can pay only for their resources (operational expenditures, or opex), and avoid investing in expensive hardware and infrastructure (capital expenditures, or capex).

  • Agility and innovation: Businesses can act faster to adopt new technologies and innovation. Cloud providers often release new features and services faster than on-premises datacenter vendors, giving businesses a competitive advantage.

  • Single pane (all you can access): Cloud service providers offer a central catalog and access to their products and services. This makes development and operations relatively easier to implement and more convenient with all-you-can-eat from their catalog, which dynamically changes behind the scenes.

  • Geographic reach: Businesses can extend their reach to new geographic locations without setting up physical infrastructure. This can be particularly useful for businesses with customers or employees in multiple locations.

  • Disaster recovery: Cloud computing can provide businesses with a more robust and reliable disaster recovery solution than on-premises datacenters. Cloud providers typically have redundant systems and backups in multiple geographic locations, which can help provide business continuity in the event of a disaster, based on the service or product in their catalogs.

Moving from cloud to an on-premises datacenter

Some reasons to move from the cloud to an on-premises datacenter include:

  • Cost: Depending on usage patterns and workload characteristics, in some cases on-premises datacenters can be more cost-effective than cloud computing. For example, if a business has stable and predictable traffic that requires significant computing and storage resources over a long period, it may be more cost effective to invest in on-premises infrastructure rather than pay for cloud resources over time.

  • Data sovereignty: Some organizations may be lawfully required to keep data within specific geographic locations, which may not be possible with cloud computing. In such cases, the organization may deploy workloads on premises to comply with data sovereignty regulations.

  • Security and compliance: Some organizations have strict security or compliance requirements that are difficult or impossible to meet with cloud computing. In such cases, the organization may bring the workload back on premises where they can better control the infrastructure and security policies.

  • Convenience vs. blast radius: Despite having central access to convenient all-you-can-eat products and services from a cloud service provider, the cloud operations track record shows that it increases the blast radius (or impact) for failures and outages on a global scale.

  • Balancing roles and responsibilities with SLAs: The roles and responsibilities of cloud service providers and their consumers have been a key area of friction in implementing end-to-end services with service-level agreements (SLAs). While cloud providers have established high levels of separation between these roles and responsibilities, issues can arise in the operational experience of handling these responsibilities and signing off on end-user SLAs. This can create challenges that are overwhelming for all parties.

  • Latency and performance: Applications that require low latency and high performance may not be suitable for cloud computing due to the inherent network latency and potential for contention with other workloads running on the same hardware. In such cases, on-premises datacenters can provide better performance and lower latency for critical applications.

  • Unforeseen costs: In some cases, businesses may experience unforeseen costs associated with cloud computing, such as unexpected network transfer fees, storage costs, or licensing costs. These costs may be difficult to control or predict, leading some businesses to bring a workload back on premises.

[ Check out Red Hat Portfolio Architecture Center for a wide variety of reference architectures you can use. ]

Other factors to consider

These are not the only challenges businesses face when deciding whether to place workloads on the cloud or an on-premises datacenter. Flexera's 2023 State of the Cloud Report indicates managing cloud spend is the top challenge, followed by security, lack of resources or expertise, governance, compliance, managing software licenses, cloud migration, balancing responsibilities between the central cloud team and the business uint, and managing multicloud.

Chart showing top cloud challenges from Flexera 2023 State of the Cloud Report
Source: Flexera, 2023 State of the Cloud Report


Cloud migration requires a range of specific skills and strong expertise. A migration task's difficulty will depend on various factors, such as the size and complexity of the organization, the number and types of applications and workloads migrated, and how much integration with existing systems is required. Successful migration requires careful planning, execution, and monitoring to ensure the process is seamless and disruption-free.

Flexera's report indicates that 80% of enterprises say lack of resources or expertise is a major challenge for enterprises.

Chart showing enterprise cloud challenges in 2022 and 2023, from Flexera 2023 State of the Cloud Report
Source: Flexera's 2023 State of the Cloud Report

Here are some talent factors that influence cloud migration:

  • Know-how: Cloud migration requires a range of skills and expertise, including cloud architecture, security, networking, DevOps, and vendor management. It may also require expertise in the specific cloud platforms and technologies being used and the ability to manage the migration process from planning to execution to ongoing management.

  • Effective program management: Gathering the right team with the appropriate skills and experience is crucial to a successful cloud migration. This requires a robust talent management program and well-established practices. This is where global systems integrators (GSIs) play a significant role. Many cloud migration projects are owned, executed, and managed by large GSIs, which are often close partners to cloud service providers with significant cloud spending commitments. A growing trend is for systems integrators to manage on-premises clouds through a containers-as-a-service offering. In this model, the GSI deploys platforms and workloads on demand and handles day-to-day lifecycle management for both, allowing active management of IT sprawl and reduced shadow IT efforts. Partnering with a GSI can be an excellent way to improve business agility and achieve successful cloud migration.

  • Time availability: Time is a crucial factor for shiny new technologies to be developed and used, as well as in the dynamics of personal and business life. Covid accelerated the cloud migration, and the post-covid economic slowdown shows that reverse migration is very real and happening. Over time, talent variety, strength, capacity, and capability will change for availability, accessibility, and affordability.

Sustainability and efficiency

Cloud service providers operate large datacenters designed to be energy efficient and reliant on renewable energy sources. They tend to be located in areas with low energy costs and abundant renewable energy sources, such as hydroelectric or wind power. This results in a relatively low carbon footprint for cloud providers.

Sustainability can vary among on-premises datacenters; smaller facilities often have lower energy efficiency and rely more on non-renewable energy sources. However, larger on-premises datacenters can be designed for high energy efficiency and using renewable sources.

While cloud service providers and on-premises datacenters can both be efficient, cloud providers tend to offer higher levels of efficiency due to economies of scale. They can spread the fixed costs of datacenters over more customers, resulting in lower costs for each customer. This allows cloud providers to invest more in advanced technologies, such as artificial intelligence (AI) and machine learning, that improve efficiency. On-premises datacenters can also be highly efficient, but this often requires significant upfront investments in technology and infrastructure.

One way to achieve more efficient operations is through workload migration, where legacy workloads move to modern server hardware. Refactoring legacy monolithic applications to be cloud-native and built from microservices can further optimize power savings and reduce the total cost of ownership. Advanced orchestration and automation can also optimize server hardware utilization with workloads distributed dynamically throughout the datacenter to improve cooling systems' performance.

Integrating data from infrastructure into advanced closed-loop automation can also be a significant tool for running a sustainable enterprise, regardless of whether the datacenter is on-premises or in the cloud. Organizations can achieve significant gains in efficiency and sustainability by taking a hardware-oriented approach and implementing software structures and layers that optimize performance.

Adapting to changing circumstances

We have adopted a "circle of life" perspective to guide our approach to migrating workloads to and from the cloud. This view recognizes that deployment spans go through different stages in their lifetime, each with unique growth and needs that require optimization to meet evolving total-cost-of-ownership (TCO) versus return-on-investment (ROI) expectations.

Yin-yang image showing advantages of on-premises and cloud deployments
Modified by Fatih Nar from licensed iStock image

Throughout this article, we have emphasized the yin and yang of cloud versus on-premises infrastructure. A hybrid cloud strategy helps avoid the limitations of an exclusive approach, providing greater flexibility by allowing workloads to be placed in the public cloud or in on-premises datacenters depending on performance, cost, and security factors.

If you have made it this far, we don't want to disappoint you with an ambiguous ending. However, the truth is that every business journey is unique with its own distinct characteristics, which means that the decisions you make at one time may need to be revisited later. A hybrid cloud strategy provides the freedom to adapt to changing circumstances and make necessary revisions. With a hybrid cloud approach, businesses can avoid being locked into rigid, predetermined paths and instead embrace the flexibility to evolve and grow with their changing needs.

[ Want to learn about Red Hat OpenShift Service on AWS (ROSA)? Watch this series of videos to get the most out of ROSA. ]

This originally appeared on Medium and is republished with permission.

Topics:   Cloud   Infrastructure  
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Fatih Nar

Fatih (aka The Cloudified Turk) has been involved over several years in Linux, Openstack, and Kubernetes communities, influencing development and ecosystem cultivation, including for workloads specific to telecom, media, and More about me

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Tom Conklin

Tom is the Senior Director of Partner Ecosystems Business Development for the Telecommunications and Media vertical at Red Hat.  His team manages relationships with strategic silicon partners like Intel, ARM, and NVidia.  He has held leadership positions at Ericsson, HPE, Tellabs, and Nokia. More about me

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Azhar Sayeed

Azhar is a Chief Architect at Red Hat responsible for developing and driving end-to-end solution architectures for telcos and communication service providers. More about me

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