On-premises environments
Computing environment
On-premises environments require physical equipment to execute applications and services. This equipment includes physical servers, network infrastructure, and storage. The equipment must have power, cooling, and periodic maintenance by qualified personnel. A server needs at least one operating system (OS) installed. It might need more than one OS if the organization uses virtualization technology.
Licensing
Each OS that's installed on a server might have its own licensing cost. OS and software licenses are typically sold per server or per CAL (Client Access License). As companies grow, licensing arrangements become more restrictive.
Maintenance
On-premises systems require maintenance for the hardware, firmware, drivers, BIOS, operating system, software, and antivirus software. Organizations try to reduce the cost of this maintenance where it makes sense.
Scalability
When administrators can no longer scale up a server, they can instead scale out their operations. To scale an on-premises server horizontally, server administrators add another server node to a cluster. Clustering uses either a hardware load balancer or a software load balancer to distribute incoming network requests to a node of the cluster.
A limitation of server clustering is that the hardware for each server in the cluster must be identical. So when the server cluster reaches maximum capacity, a server administrator must replace or upgrade each node in the cluster.
Availability
High-availability systems must be available most of the time. Service-level agreements (SLAs) specify your organization's availability expectations.
System uptime can be expressed as three nines, four nines, or five nines. These expressions indicate system uptimes of 99.9 percent, 99.99 percent, or 99.999 percent. To calculate system uptime in terms of hours, multiply these percentages by the number of hours in a year (8,760).
| Uptime level | Uptime hours per year | Downtime hours per year |
| 99.9% | 8,751.24 | (8,760 – 8,751.24) = 8.76 |
| 99.99% | 8,759.12 | (8,760 – 8,759.12) = 0.88 |
| 99.999% | 8,759.91 | (8,760 - 8,759.91) = 0.09 |
For on-premises servers, the more uptime the SLA requires, the higher the cost.
Support
Hundreds of vendors sell physical server hardware. This variety means server administrators might need to know how to use many different platforms. Because of the diverse skills required to administer, maintain, and support on-premises systems, organizations sometimes have a hard time finding server administrators to hire.
Multilingual support
In on-premises SQL Server systems, multilingual support is difficult and expensive. One issue with multiple languages is the sorting order of text data. Different languages can sort text data differently. To address this issue, the SQL Server database administrator must install and configure the data's collation settings. But these settings can work only if the SQL database developers considered multilingual functionality when they were designing the system. Systems like this are complex to manage and maintain.
Total cost of ownership
The term total cost of ownership (TCO) describes the final cost of owning a given technology. In on-premises systems, TCO includes the following costs:
- Hardware
- Software licensing
- Labor (installation, upgrades, maintenance)
- Datacenter overhead (power, telecommunications, building, heating and cooling)
It's difficult to align on-premises expenses with actual usage. Organizations buy servers that have extra capacity so they can accommodate future growth. A newly purchased server will always have excess capacity that isn't used. When an on-premises server is at maximum capacity, even an incremental increase in resource demand will require the purchase of more hardware.
Because on-premises server systems are very expensive, costs are often capitalized. This means that on financial statements, costs are spread out across the expected lifetime of the server equipment. Capitalization restricts an IT manager's ability to buy upgraded server equipment during the expected lifetime of a server. This restriction limits the server system's ability to accommodate increased demand.
In cloud solutions, expenses are recorded on the financial statements each month. They're monthly expenses instead of capital expenses. Because subscriptions are a different kind of expense, the expected server lifetime doesn't limit the IT manager's ability to upgrade to meet an increase in demand.
Source: Microsoft