What Is On-Premise Software and Technology?

April 30, 2024

On-premises software and technology refers to computing resources—like software applications and data storage—hosted locally on physical servers and infrastructure owned and maintained by the organization using them. On-premise systems give businesses direct control over their technology environment, offering benefits like enhanced control over security, compliance with specific regulatory requirements, and potentially faster access to data due to local hosting.

What Does On-Premises Mean?

"On-premises" (also “on-premise” or “on-prem”) refers to the localization of software, data, and systems on the physical premises of an organization as opposed to being hosted on the cloud. This means that all the servers, hardware, and networking equipment required to run applications and store data are housed within the organization's own facilities and managed and maintained by its IT staff.

Using on-premises technology allows an organization full control over its IT infrastructure, including security and compliance aspects. This setup is particularly beneficial for organizations that have specific requirements for data privacy, need high-performance computing directly accessible without relying on internet connectivity, or have to comply with legal or industry-specific regulations that mandate data to be kept within certain geographical boundaries or environments.

Who Uses On-Premises?

On-premises solutions are used by organizations across various industries, especially where there are specific needs for data control, security, compliance, or performance. Some of the key sectors and types of organizations that typically use on-premises infrastructure include:

  • Government agencies. Due to stringent security and data sovereignty requirements, many government bodies prefer to keep their data on-premises to ensure it is protected under the laws of their jurisdiction.
  • Healthcare organizations. Hospitals and healthcare providers often choose on-premises solutions to maintain tight control over patient data and meet compliance standards like HIPAA (Health Insurance Portability and Accountability Act) in the U.S.
  • Financial institutions. Banks, insurance companies, and other financial services institutions frequently opt for on-premises systems due to the highly sensitive nature of their data and strict regulatory compliance needs.
  • Large enterprises. Many large corporations with complex business operations and specific requirements for data integration and customization use on-premises solutions to have full control over their IT environments.
  • Educational institutions. Schools and universities may choose on-premises solutions to be able to securely manage student information systems and meet local data protection laws.
  • Manufacturing and industrial companies. These organizations often rely on on-premises solutions to handle sensitive data and ensure uninterrupted access to critical systems, which is crucial for maintaining operational efficiency.

On-Premises vs. Off-Premises

Here's a table that compares the key aspects of on-premises and off-premises (typically cloud-based) solutions:

Point of ComparisonOn-PremisesOff-Premises (Cloud)
ControlHigh control over hardware and software.Less control, managed by service providers.
CostHigher initial capital expenditure (CapEx).Lower upfront costs, operating expense (OpEx) model.
SecurityComplete control over security measures.Security managed by the provider, but typically robust.
ComplianceEasier to meet specific regulatory requirements.Compliance may be dependent on the provider.
ScalabilityScaling requires physical hardware updates.Easily scalable with demand fluctuations.
MaintenanceResponsibility for maintenance and upgrades.Maintenance handled by the provider.
AccessibilityTypically accessible only within the network.Accessible from anywhere with internet.
Data SovereigntyData resides within the organization.Data location depends on provider’s infrastructure.
CustomizationHighly customizable to specific needs.Limited by the offerings of the provider.
PerformancePerformance is reliant on in-house capabilities.Potentially faster deployment and updates.

On-Premises vs. Cloud

Here's a table highlighting the key differences between on-premises and cloud-based solutions:

Point of ComparisonOn-PremisesCloud-Based
DeploymentLocally on the organization's own hardware.Hosted on a provider's remote servers.
ControlComplete control over infrastructure and data.Limited control; dependent on the provider.
CostHigher upfront costs for hardware, software, and maintenance.Lower upfront costs, typically billed on a subscription basis.
ScalabilityScaling up requires purchasing additional hardware.Easily scalable; resources can be adjusted as needed.
MaintenanceManaged by the organization's IT staff; requires ongoing maintenance.Maintained by the provider; updates and management are handled externally.
SecuritySecurity is entirely managed in-house, allowing for tailored security measures.Security is managed by the provider, with standardized measures across clients.
ComplianceEasier to meet specific compliance requirements when data and processes are kept in-house.Compliance is dependent on the provider's ability to meet industry standards.
AccessTypically faster on-site due to local network access.Dependent on internet connectivity; can be accessed from anywhere.
Disaster RecoveryRequires a separate disaster recovery plan; potentially more vulnerable unless backed up externally.Often includes robust disaster recovery solutions as part of the service.
CustomizationHigh level of customization possible to meet specific business needs.Generally limited customization; depends on service offerings.

On-Premises Advantages and Disadvantages

On-premises solutions offer unique advantages and face certain disadvantages compared to other hosting models, such as cloud-based services. Below are detailed lists of the primary advantages and disadvantages of on-premises infrastructures:


On-premises solutions offer numerous advantages to organizations, including:

  • Control and customization. Organizations have full control over their hardware, software, and data. This allows for extensive customization to meet specific operational needs or integrate with other systems seamlessly.
  • Security and compliance. Hosting data and applications in-house can enhance security, particularly for sensitive or regulated data, as organizations can implement and manage their own security protocols directly. This also ensures easier compliance with regulations that require data to be stored within the organization or within national boundaries.
  • Performance. On-premises infrastructure offers faster data access and application performance, especially if the organization does not have high-speed internet connectivity or operates in data-intensive sectors.
  • No dependency on internet connectivity. Systems remain operational without internet connectivity, which can be crucial for locations with unreliable internet service or during network outages.
  • Long-term cost savings. Although the initial investment is higher, on-premises solutions can potentially lead to cost savings over time as there are no ongoing subscription fees once the infrastructure is in place.


On the other hand, there are some challenges that come with implementing on-premises solutions. They include:

  • High initial costs. Significant upfront investment is required for hardware, infrastructure, and software licenses. This can be a barrier for small to medium-sized enterprises.
  • Maintenance and upgrades. The organization is responsible for the system maintenance, updates, and security, which requires a dedicated IT staff and ongoing costs. Upgrading hardware and software can also be costly and disruptive.
  • Scalability issues. Scaling up requires additional hardware purchases, which can be time-consuming and expensive compared to the almost instantaneous scalability offered by cloud services.
  • Resource intensive. Managing an on-premises infrastructure requires substantial IT resources, including staff time and the expertise to handle everything from routine maintenance to unexpected issues.
  • Disaster recovery. Organizations need to implement their own disaster recovery and data backup solutions, which can be costly and less robust than those typically offered by cloud providers.

Anastazija is an experienced content writer with knowledge and passion for cloud computing, information technology, and online security. At phoenixNAP, she focuses on answering burning questions about ensuring data robustness and security for all participants in the digital landscape.