Cloud or on Premise?

When looking at a new software solution one of the most critical factors to consider is whether it should be hosted on premises or on the cloud. In this article we look at the history of the cloud, the different types, comparing them to on-premise solutions, and how to choose between the alternatives.

What is the cloud and how did it evolve?

It has taken almost sixty years to reach the point where we are today, with cloud technology and usage moving faster than ever before. It started back in the early 1960s, when the US Defence Advanced Research Projects Agency (DARPA) funded a project at MIT to develop a computer to be used by more than one person at the same time. Although not called cloud computing at the time – the term “virtualisation” was used – this is thought to be where the idea originated.

The first prototype of the internet came later in the same decade when ARPANET (Advanced Research Projects Agency Network) was created. The vision was for an “intergalactic computer network”, where everyone would be connected and information could be accessed from anywhere. ARPANET adopted TCP/IP in 1983, a communications model setting standards for data being transmitted between multiple networks and from there the “network of networks” started to be developed, the start of the modern internet, necessary for access to the Cloud.

Tim Berners-Lee, currently a Professorial Fellow of Computer Science at the University of Oxford, is credited as having invented the more recognisable World Wide Web in the early 1990s.

In the late 1990s the cloud started to become popular, Saleforce being a good example of it being used successfully, using the internet to deliver software programs to thousands of end users. Software could be purchased when needed, often in a cost effective way without leaving the office.

Amazon Web Services (AWS) was launched in 2006, fundamentally transforming the IT industry and becoming the market leader, in 2018 with a 47.8% of the IaaS (Infrastructure as a Service) market according to Gartner. Following behind, but growing rapidly, are Microsoft, Google, IBM and Alibaba. Gartner predicts the worldwide public cloud service market will grow between 2018 and 2022 at a compound annual rate of 12.6% (see below).

Cloud or on premise – what’s the difference?


How software is deployed constitutes the biggest difference between the two systems.

Some other terminology related to cloud computing is as follows:

After that are the services made available through the cloud. These include

Infrastructure-as-a-Service (IaaS), the provision of data storage and virtual servers, think companies like Amazon Web Services (AWS) and Rackspace.

Platform-as-a-Service (PaaS), where a provider delivers hardware and software tools over the internet, often for use in application development where the user avoids having to install in-house hardware and software.

Software-as-a-Service (SaaS), where the user accesses applications on a pay-per-use basis as opposed to buying a licensed program, examples would include Salesforce, Gmail, Dropbox, QuickBooks and Pipedrive.

Pay-per-use and being able to increase or decrease usage are two of the most significant benefits of a move to the cloud. Probably the biggest concern is security – using the cloud means valuable, often sensitive data is stored outside of an organisation’s offices. Reputable software providers will however have strict standards to ensure that data is protected and it is essential that potential users satisfy themselves in advance that this is the case.

Cloud computing – growing in popularity


LogicMonitor’s Cloud Vision 2020: The Future of the Cloud Study suggests that 83% of enterprise workloads will be on the cloud by 2020 – split between 41% public platforms (AWS, Google Cloud, Azure, IBM Cloud etc), 20% private and 22% on a mix of the two (images courtesy of LogicMonitor).

So what is behind this growing popularity? The same report suggests that the integration of digital technology into all areas of a business is currently the leading factor (63%) behind greater cloud adoption, with IT agility coming a close second (62%).

The biggest challenge according to IT professionals, the report concluded, was concern over security when adopting an enterprise cloud computing strategy, 66% citing this as a factor for careful consideration when using the cloud.

Cloud: How to choose between the two


If your existing setup meets your needs, is easy to maintain and relatively inexpensive, in other words, everyone seems happy with the current set-up, why change?

To make that decision, particularly when considering a change in software and/or provider, it helps to look at the differences, one of which is the structure of costs. Whilst there are exceptions, cloud software is usually priced using a monthly or annual subscription. Much like a mobile contract that includes a handset, the provider will build the cost of the server into the monthly or annual fee, or show it separately if requested. The cost is therefore known and fixed in advance.

The alternative is for the buyer to incur the cost of investing in an appropriate server should their existing server(s) not have the necessary system requirements. Cloud based solutions are likely therefore to have a lower cost of entry, although over time the total costs of the two options are likely to converge. Alongside the cost of the server may be other software licences, needed to run the new programs, such as MS SQL. Added to this is the unpredictable cost of maintenance and having IT employees available to manage potential issues that may arise.

As a result of these differences, an on premise solution is probably going to have a significant element of capital expenditure, whereas on the cloud, with its monthly or annual fees, the likely classification is as operating expenditure.

In summary, cloud computing shifts IT expenditure to a pay-as-you-go model.

Whilst all companies need to protect their systems and data, some have extra sensitive information, for example government agencies and banks. The level of security they require may therefore lead them to an on premise solution. As mentioned above, with an on premises server, data security is in the hands of the buyer, whereas on the cloud it resides with the provider. Whilst there have been some well publicised data breaches, using Microsoft Azure, AWS or other such reputable services will give cloud users the peace of mind that security along with well-rehearsed measures for disaster recovery are at the highest possible standard.

When changing software or software provider, speed of installation and use can be very different.   Using the cloud, companies can make faster progress on projects and in testing ideas by avoiding lead in times for buying hardware along with the associated up front costs. Only those resources that are used need be purchased. This agility is a significant benefit derived from using the cloud, allowing new services to be launched that much quicker.

Cloud computing often makes sense for a growing business, where scaling resources quickly is challenging, and where keeping up with growing storage needs is difficult and expensive. Where speed of installation and geographical spread are important, this also makes the cloud the preferred choice.

In summary, control, cost, security and ease of deployment are the distinguishing factors between the two alternatives.

For some sectors there may be one more important consideration: compliance. Some companies are subject to regulatory control that requires they know exactly where their data is being stored. This does not necessarily rule out the cloud, and enquiries will need to be made to ensure the third-party provider complies with all regulations relevant to a particular sector. However, it does make compliance easier if you know the server on which the data is stored is on your own premises behind a firewall, locked doors and any other security features you deem necessary.

There are many reasons why a move to the cloud can make sense. Compare different service providers and what they offer in order to make the  right choice. That choice will determine your experience and ability to take advantage of the benefits available from cloud computing.

A few words about CompassAir

Creating solutions for the global maritime sector, CompassAir develops state of the art messaging and business application software designed to maximise ROI. Our software is used across the sector, including by Sale and Purchase brokers (S&P/SnP), Chartering brokers, Owners, Managers and Operators.

Through its shipping and shipbroking clients, ranging from recognised World leaders through to the smallest, most dynamic independent companies, CompassAir has a significant presence in the major maritime centres throughout Europe, the US and Asia.

Our flagship solution is designed to simplify collaboration for teams within and across continents, allowing access to group mailboxes at astounding speed using tools that remove the stress from handling thousands of emails a day. It can be cloud based or on premise. To find out more contact If you are new to shipping, or just want to find out more about this exciting and challenging sector, the CompassAir Shipping Guide might prove to be an interesting read.


Contact us for more information on our software and find out how we can help your teams improve collaboration and increase productivity.