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Data Warehouse in the Cloud or On-prem?

If you're setting up your organization's data warehouse, then somewhere on your checklist is deciding whether it should be on-premise (on-prem) or in the cloud. The thing is, both options have their pros and cons; the best choice depends on your needs.

Whenever you see the word "cloud," other than on a weather report, it usually means the delivery of computing services, like databases or software, over the internet. If you take a photo and upload it to Instagram, you're using the cloud. Sending someone money through PayPal? That's also the cloud. The cloud enables companies, like Instagram, to offer their services to you wherever you are, as long as you have access to the internet.

Hosting your data on-prem means that hardware will be set up on your company's or provider's premises. All those high school assignments you wrote before the cloud were most likely saved on-premises – your computer – and would run locally on your word processing software.

Here's a breakdown of the key differences between on-prem and cloud solutions that will help you make the best decision for your business.


Cost and setup

On-prem data warehousing usually has a higher upfront cost since it is installed locally on your company's local hardware. This means you will have to invest time to understand your storage requirements before you start setting up the project. It will also be your responsibility to maintain the system and keep everything running smoothly. If you miscalculate your storage and computing resources needed, it can be quite costly to upgrade later on.

Enterprise cloud solutions come in a few different forms, public, private, hybrid, and any combination of the three, that will affect your set up and maintenance costs. The public cloud is hosted by your service provider (for example, SAP); you will just need to buy a license for your employees and set up their accounts. There's no upfront cost involved, and maintenance of the system is your provider's responsibility.

A private cloud, on the other hand, is custom-built for your business. Future upgrades to new versions of the cloud software will be possible but you may expect your costs to go up.

For any companies that are not ready to move all their data to the cloud, or simply have running investments in the on-prem infrastructure, there's the hybrid cloud. The hybrid cloud is a mix of public and/or private cloud solutions, as well as on-prem hardware. You can divide your data any way you choose between the three options.

Private and hybrid cloud solutions will have higher upfront costs because of the set up required. If you use the public cloud, you will only need to pay for the storage and computing resources you use, and this is usually adjustable as your needs change. The service provider will cover maintenance and upkeep costs.

The different cost structures are why on-prem data warehouses are generally considered a capital expenditure (an investment upfront), and the cloud subscription an operating expense (an ongoing cost).


Data management

To set up an on-prem data warehouse, servers will need to be installed onsite at your company to collect, store, and analyze your data. Once everything is up and running, including the team to manage it all, you can begin pulling data from different databases across the company and querying it.

Public cloud data warehouses let you collect, store, query, and analyze your data in the cloud. They don't require any upfront investments in hardware and IT teams or any additional time to configure and maintain the system. If your needs change, the cloud can be quickly scaled up, down, or even suspend.

Finally, a hybrid cloud data warehouse gives you the option to keep your data where it's currently located, on-prem or in the cloud.



Security is a top concern for most companies when it comes to their data in the cloud. However, there are security risks associated with both the cloud and on-prem solutions.

Security ownership (meaning, who manages the security) is the main difference between the cloud and on-prem data warehousing, with the latter offering companies complete end-to-end ownership. This end-to-end security might be appealing to customers that have particularly sensitive information. Security on the public cloud is a shared responsibility between your company and the service provider. Of course, most cloud providers have strict security standards to keep your data safe.

Finally, private and hybrid cloud options would let you split your data depending on its sensitivity. Some institutions, like governments and banks, are often required by law to keep their data on-prem, so a cloud data warehouse that can connect data from both on-prem and cloud sources would be a perfect solution for them.

Control and compliance

Just as some companies want to own their security end-to-end, some will also want complete control over the location of their data. For better or worse, on-prem gives companies full control. Depending on your requirements, your company might want to sacrifice a little bit of that control for improved accessibility. The cloud provides all of your employees secure access to your data from any place with an internet connection. It also puts all your reports and data in one central location, so everyone sees one real-time version of the truth.

When it comes to complying with data legislation, like GDPR in Europe or private health information in the US, it's imperative to know where your data is at all times. Compliance is where on-prem shines, giving you full control of your data's location at all times. If you decide to use the cloud, you will need to make sure that your provider is up to code and compliant with all the different regulatory mandates within your industry.


The answer

So, which solution should you implement? The answer "it depends" is a business cliché but deciding on what's best for your company is something that does depend on your company's needs.

It can help to think of on-prem and the cloud in terms of your prospective relationship with the service provider. On-prem is comparable to a single transaction. You buy a product from your hardware and software provider, and if something goes wrong that you can't resolve, the vendor will support you at a cost. However, you will have ownership over the security, software updates, and the location of your data. The cloud, on the other hand, is a relationship between you and the provider. You are paying for an ongoing service, and the provider takes care of security and updates; it's entirely on them to make sure everything is working correctly.

It may also be worth considering a hybrid solution that offers a combination of on-prem and the cloud (public and private). With a hybrid solution, you decide what data goes on-prem and what goes in the public or private cloud and when this transition should happen.


A solution for your needs – SAP Data Warehouse Cloud

If you are ready to try a data warehouse in the cloud, SAP Data Warehouse Cloud is the only end-to-end data management and decision-making cloud solution designed for business. It can be customized to meet the needs of your business and lets you access data stored on-premises, in the SAP Data Warehouse cloud, and in a private or public cloud.

Ready to see what SAP Data Warehouse Cloud can do for you? Sign up for the free trial today!

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Maarten Rikken Maarten Rikken
Maarten Rikken is a Senior Solutions and Product Marketing Specialist in the SAP Digital Strategy Team.
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