Spencer Nguyen - February 7, 2024
Comparison of on-premises vs. virtual private cloud

Wondering which is the best way to host your business applications and IT infrastructure? Many enterprises are transitioning from on-premises software to cloud computing. On the other hand, several established companies are investing their capital in on-premises software. Both of these deployment models have advantages and drawbacks, and you can zero in on the right option by considering your specific requirements. The main difference between private cloud and on-premises hosting lies in the location and management of the infrastructure, with private cloud services being hosted and maintained by third-party providers off-site, while on-premises infrastructure is physically located and managed in-house by the company itself.

Here’s the key takeaways from this article:

  • On-premises hosting involves managing IT infrastructure and software on physical hardware located within a company’s facilities, offering greater control, customization, and compliance but at higher upfront costs and with scalability limitations.
  • Virtual Private Cloud (VPC) provides a secure, cloud-based environment for IT infrastructure, offering scalability, cost-effectiveness, and flexibility, but depends on the cloud provider and may have security and customization limits.
  • Hybrid cloud solutions blend on-premises and cloud environments, allowing businesses to leverage the control of on-premises hosting with the scalability of cloud services.
  • Choosing between on-premises, VPC, and hybrid cloud requires considering factors such as technical expertise, budget, and data security requirements.
  • The article suggests a trend towards hybrid cloud as a strategic approach to meet diverse business needs, combining the benefits of both on-premises and cloud environments for optimized performance, cost, and security.

Table of Contents

What is On-Premises Hosting?

On-premises hosting refers to hosting IT infrastructure and software on physical hardware located within the company’s facilities, such as dedicated servers or a data center. The enterprise owns, manages, and maintains the setup. The hardware is present in-house, within the company’s premises; hence the name on-premises hosting. This deployment model allows the organization a greater degree of control and customization. However, it comes with high installation costs and requires maintenance and regular management, which makes it capital-intensive. 

Pros of On-premises Hosting

On-premises hosting is often preferred by organizations with specific security, compliance, or customization needs that can be better met by hosting the resources in-house. Let’s look at how organizations can leverage on-premises hosting.

Offers Greater Control

With an on-premises environment, an enterprise can retain all its data and also get complete control of what happens to it. It allows them to configure their systems as they deem fit and implement custom security measures to safeguard sensitive information. This is especially beneficial in industries such as banking and healthcare, which deal with confidential customer data and have more privacy concerns. 

Provides the Highest Level of Customization 

On-premise hosting provides greater customization than a cloud environment, as you have complete control over your hardware, software, and data. It enables enterprises to configure and customize the server and install any applications or software they need. It makes on-premise hosting ideal for organizations with specific security or performance requirements. Moreover, it also helps enterprises that need to integrate their web applications and websites with existing in-house systems.

Costs are Predictable

Cost predictability is another significant advantage of on-premise hosting. As the enterprise owns and maintains the hardware and software necessary to run the applications, it gives them complete charge of the IT infrastructure. It implies that they can make informed decisions about the technology’s costs and budget accordingly.

Moreover, hardware and software costs are generally a one-time expense, so on-premise hosting can provide a predictable cost structure. You can also better understand the costs associated with maintaining and upgrading your technology, as you have full control over the process.

Ensures Compliance

Because the enterprise has complete control over the data assets, it can ensure that sensitive data is stored, processed, and transmitted in a compliant manner. VPCs, on the other hand, rely on the cloud service provider’s underlying infrastructure and security measures. Also, on-premise hosting prevents third-party hosting providers from accessing your data.

Cons of On-Premises Hosting

Although many enterprises benefit from on-premises hosting, it has some potential disadvantages.

Limited Scalability

When compared with VPC, on-premises hosting has very limited scalability.Companies might find it challenging to expand their computing resources and infrastructure, leading to physical limitations when adding more storage and computing power. Moreover, these additions can be time-consuming and expensive. 

Scaling can also lead to compatibility issues between the existing and the new hardware and software. These can cause outages and disrupt IT operations, adding to higher costs. 

High Upfront Costs

The major drawback of on-premises hosting is the enormous upfront costs associated with purchasing and setting up the software and hardware. Also, the enterprise needs a dedicated IT staff to manage the hardware and software, which costs more than outsourcing to a third-party service provider.

Requires Regular Maintenance

Compared to VPC, where maintenance is the provider’s job, the business must perform timely maintenance to ensure smooth functioning. These maintenance tasks include backups, security updates, software upgrades, hardware replacement, and tuning performance. Apart from this, you need a dedicated team of IT personnel to carry out routine maintenance, which further adds to the costs. 

Demands Technical Expertise

On-premise hosting typically requires a higher level of technical expertise to install, configure, and maintain the different components compared to VPC. This is because the software is installed on on-premises servers and IT infrastructure owned and managed by the enterprise.

Businesses require a dedicated in-house IT team or a contract with third-party service providers to manage and maintain the software, hardware, and network components that make up the on-premise infrastructure. This costs an enterprise significant time, money, and resources.

What are Virtual Private Clouds? (VPC)

Virtual private cloud (VPC) refers to a deployment model where the IT infrastructure and applications are hosted in a virtual environment that is provided by a cloud services provider, such as Amazon Web Services (AWS), Google Cloud Platform (GCP), or Microsoft Azure. In a VPC, a virtual network is created and isolated from the rest of the provider’s network. It provides a level of security and control similar to an on-premises deployment. 

VPCs are often used by companies that require the flexibility and scalability of the cloud but also need to meet specific security and compliance requirements.

Pros of VPC

Here are some of the key benefits offered by cloud solutions.

Highly Scalable

VPC enables enterprises to launch and configure virtual servers, storage, and networking components. They can scale VPCs up or down effortlessly as needed, which helps businesses manage their computing resources and respond quickly to new demands and requirements.

Cloud computing offers multiple scaling options, such as auto-scaling, manual scaling, and load balancing. All these scaling methods are beneficial in ensuring optimal performance.


VPC is often more cost-effective than on-premises hosting, particularly for businesses that do not have IT resources at their disposal. VPC providers take care of the maintenance and upgrades of the hardware and software, so enterprises can save on additional costs and resources for the maintenance and upkeep of their hosting infrastructure. 

Offers High Flexibility and Customization

Flexibility is another significant advantage of VPC, enabling a company to configure and manage its IT infrastructure. With cloud computing, your enterprise can create a custom network design that matches your needs. You can also customize the security options for your cloud infrastructure. 

Provides Easy Integrations

Cloud computing networks integrate seamlessly with other cloud services, such as Amazon Web Services and Google Cloud Platform. It allows enterprises to consolidate and manage their cloud infrastructure effortlessly. 

Cons of VPC

Like any technology, cloud solutions also have some drawbacks that must be considered carefully before deciding the best deployment solution. Some of the key disadvantages of VPC include the following.

Dependence on Cloud Provider

The major shortcoming of cloud-based services is that they rely on the service provider. If the provider encounters any outages or technical difficulties, the systems may not be accessible to the enterprise. 


Although VPC gives organizations a secure, isolated environment for hosting their applications and data, it also presents some security challenges. As cloud services are based on a shared infrastructure, they can be affected by cloud security breaches from other organizations using the same services. Moreover, small organizations with limited resources may find it difficult to manage security and compliance in a cloud computing environment.

Limited Customization

Compared to on-premise solutions, it is challenging to customize VPC completely. Although it offers a certain degree of customization, many organizations cannot benefit from it. This happens because a business’s requirement may not be fulfilled with the customization options available. For instance, configuring network settings or including personalized hardware is a challenge with VPC. In addition, the enterprise’s compliance requirements may not be supported by the cloud service, making it difficult to customize. 

A survey conducted by IDG in 2020 indicates that the cloud comprises a third of IT expenditures. Most companies plan to employ cloud computing for more than half of their infrastructure and applications. Although the recent trends favor VPC, on-premises hosting is still used by many organizations that need complete control over their data and applications.

Also, many organizations are moving toward a hybrid cloud solution, which combines the use of both public and private clouds. It allows businesses to take advantage of the scalability and cost benefits of public clouds while maintaining control and security over their sensitive data and workloads in a private cloud environment.

Before deciding on the best option for your enterprise, it is essential to consider technical expertise, budget, and data security requirements.

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