“On premises,” also referred to as “on-premise,” “on-premises,” or “on-prem,” is a method of deploying software. With on-prem, computer programs are installed right on users’ computers through CDs or USB drives. Whereas with off-premises, the installer can be found anywhere on the Web.

Many companies opt for on-prem because it doesn’t require third-party access, gives owners physical control over the server hardware and software, and does not require them to pay month after month for access.

Think of how you buy your fast-food meal. You could buy it and eat it on premises at the restaurant. Or you can call and order your meal and have it delivered to your home.


Read More about On Premises

On-prem software is located and operated within a user’s datacenter. As such, it uses the user’s computing hardware rather than that of a cloud provider. Also known as “shrinkwrap,” on-premises programs are among the most commonly used enterprise and consumer applications that require licenses per server or computer. Vendors are no longer responsible for their security and overall management but do provide after-sales technical support.

How Does On Premises Differ from Off Premises?

On and off premises refer to the two ways by which applications are managed. A software that is managed in-house or by employees of the company is an on-premises application. When issues arise, internal staff are the ones that handle them. An off-premises program, usually hosted in the cloud or accessible via the Internet, is run and managed by a third-party provider. All of the troubleshooting it requires is handled by the provider’s staff. In a lot of cases, therefore, off-premises applications are referred to as “cloud software.”

On-Premises versus Cloud Software

Compared with cloud software, on-prem applications are much more expensive. Apart from spending on licenses, users also need to purchase hardware and hire IT support personnel to maintain them. Integrating them into existing systems and processes may also take time. But a lot of users prefer the model because it is more secure compared with using cloud software.

Additionally, since the software is installed and operated within the confines of the users’ network, security and IT personnel can directly access it. This setup gives them direct control over its configuration, management, and security. The image below summarizes the key differences between on-prem and cloud software.

On-Premises versus Cloud Software

Pros and Cons of On-Premises versus Cloud Software

Users have varying requirements and resources, and so can choose between on-premises and cloud software based on these. Here are some factors they can consider.

Pros and Cons of On-Premises Software

CostLower long-term costs: Annual maintenance costs and one-time license fees are lower compared to paying recurring expenses associated with cloud software.Requires substantial capital investment for hardware and infrastructure: On-premises software users must deal with ongoing costs related to space, server, and other equipment, along with power consumption.
Control and management Full user control: An on-premises environment allows users complete control and management of assets. That is particularly useful for those who work in highly regulated industries where privacy is a top concern.Requires dedicated tech support: Since users have full control and management of all assets, the organization needs a dedicated IT support team for maintenance and troubleshooting.
SecurityAllows implementation of own security policies and procedures: Industries that deal with highly sensitive information often prefer to use on-premises software because it gives them more control over security. It allows them to contain information within their walls.Requires dedicated tech support: Again, an internal IT support team is needed so users can implement their self-devised security policies. However, on-premises security breaches can happen due to internal IT team issues or physical security breaches.
User accessNo need for Internet connection: On-premises software can be accessed even without an Internet connection. That makes it useful for areas where there is no reliable connection. Multiple users can also access the system simultaneously without affecting its speed.Can’t be accessed while on the go: On-premises systems have to be accessed within the vicinity of a user’s office or field. Remote access may be complicated to set up.

Pros and Cons of Cloud Software

CostRequires no capital expenses: Cloud software only requires users to pay for the infrastructure they use, which does not include maintenance costs.Can be more expensive over time: When recurring subscription costs are accumulated, cloud systems can cost more than on-premises software.
Control and managementCan be delegated to the vendor: Vendors can perform software updates and backups, so users don’t need a dedicated in-house IT team.Vendors have full control: Cloud computing users often deal with issues concerning responsibility. For example, there have been instances where users fail to access assets because their vendor has the encryption keys.
SecurityMost cloud software vendors have robust security: Several vendors have highly sophisticated security protocols.User security is only as good as the vendor’s: Not all cloud providers offer excellent protection. Once hacked, all of the data in their infrastructure is at risk of theft or leakage.
User accessRemote access is possible: Users can access the system and their data anywhere as long as there is an Internet connection. That makes it convenient for users since they can work remotely.Internet access is required: Users need an Internet connection to access all their assets. That could put users who don’t have a reliable connection at a disadvantage. Speed can also suffer when multiple users access a cloud system simultaneously.

Users have varying requirements and resources, and so can choose between on-prem and cloud software based on these. Here are some factors they can consider.

What Are Hybrid Solutions?

While cloud computing and on-premises software use are often considered competitors, vendors believe that the two can work together. And so they offer the best of both worlds through hybrid solutions.

Hybrid solutions use both on-prem and cloud software. The on-premises software makes up a so-called “private cloud” that resides within the confines of the user’s network. The less-sensitive applications are, meanwhile, hosted in the public cloud, so they don’t take up physical resources.

Who Uses On-Premises Software?

As mentioned earlier, companies in highly regulated industries or those that need to abide by specific and strict standards would do better in terms of compliance if they use on-premises software. Organizations that collect and keep the data of customers from the European Union (EU) are examples of those who can benefit more from on-prem program usage.

Hospitals and other healthcare service providers that need to strictly follow the mandates of the Health Insurance Portability and Accountability Act (HIPAA), tech firms that should adhere to the regulations of the National Institute of Standards and Technology (NIST) Framework, and credit card providers that should follow the Payment Card Industry Data Security Standard (PCI DSS) can benefit from on-premises software as well.

Ideally, organizations that keep confidential data run on-premises software to some degree, to keep their data in-house, where they can control who has access to it.

Do You Need to Set Up an On-Premises Infrastructure?

All of your company’s most sensitive data should be kept as much as possible in-house. This information includes employee and customer data, corporate secrets, and financial records. While storing them in the cloud could be beneficial in terms of access, that advantage could quickly turn into a disadvantage if your vendor isn’t as secure as it promises.

Key Takeaways

  • On premises is a software deployment method wherein applications are installed directly on users’ devices. No Internet connection is needed to access the applications.
  • Organizations using on premises infrastructure handle the overall management of the applications, including their security.
  • An organization’s most sensitive data must be kept on premises to avoid third-party vulnerabilities.
  • Organizations that use on premises infrastructure belong to the most highly regulated industries, such as healthcare and financial services.
  • Some entities choose a hybrid solution, a combination of on and off premises approaches.

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