The Case for Keeping Servers In-House
Cloud computing is everywhere. Microsoft, Google, and Amazon want your data on their servers. And for many businesses, that's the right choice.
But not for everyone.
On-premise servers—computers you own and control in your own building—still make sense for certain businesses. The key is knowing when.
According to research by Gartner, while cloud adoption continues to grow, 65% of enterprise workloads will remain on-premise or in hybrid environments through 2025. For small businesses with specific needs, local infrastructure can offer advantages that cloud simply can't match.
When On-Premise Beats Cloud
1. You Handle Sensitive or Regulated Data
Some data shouldn't leave your building.
Legal requirements: Certain industries have strict rules about where data is stored. Healthcare, legal, financial services, and government contractors often face compliance requirements that are easier to meet with on-premise infrastructure.
Client expectations: Some clients—particularly larger enterprises or government bodies—require their data to be stored on systems you physically control. It's in the contract.
Peace of mind: Knowing exactly where your data is, who has physical access, and that it never travels over the public internet has value.
The UK's Information Commissioner's Office notes that while cloud services can be GDPR-compliant, you remain responsible for ensuring appropriate safeguards. Some businesses find this easier to demonstrate with on-premise systems.
2. You Work With Large Files
Uploading and downloading huge files over the internet is slow and frustrating.
Video production: A single hour of 4K footage can be 300GB or more. Working with that over cloud storage is painful.
Architecture and engineering: CAD files, 3D models, and building information models can be massive. Local storage is dramatically faster.
Photography: Professional RAW files add up quickly. A wedding photographer might generate 50GB in a day.
Scientific data: Research datasets can be enormous. Transferring them takes hours or days.
With on-premise storage, file access is limited only by your local network speed—typically 1Gbps or faster. That's 10-100 times faster than most internet connections.
3. You Need Guaranteed Performance
Cloud performance varies. Your internet connection can slow down. The cloud provider might have issues. Other users sharing the same infrastructure can affect your speed.
On-premise gives you consistent, predictable performance. The server is right there. Nothing between you and it except a network cable.
When this matters:
- Real-time applications that can't tolerate delay
- Database-heavy software where milliseconds matter
- Video editing and rendering
- Manufacturing systems and industrial control
4. Your Internet Is Unreliable
Cloud services need internet. If your connection goes down, you can't access your files, run your software, or do much of anything.
Some areas of the UK still have poor broadband. Rural businesses, industrial estates with outdated infrastructure, or buildings with problematic cabling can all suffer.
According to Ofcom, while average UK broadband speeds have improved significantly, 2% of premises still can't get decent broadband. For these businesses, depending entirely on cloud services is risky.
On-premise servers work even when the internet doesn't.
5. Long-Term Costs Favour Ownership
Cloud services charge monthly fees forever. On-premise equipment is a one-time purchase that depreciates over time.
The maths: A small server might cost £2,000 upfront and last 5 years. That's £400/year or £33/month. Equivalent cloud services might cost £100-200/month.
Over 5 years:
- On-premise: £2,000 + £500 running costs = £2,500
- Cloud: £100/month × 60 months = £6,000
The numbers don't always work out this way—cloud has advantages that justify the premium for many businesses—but for stable, predictable workloads, ownership can be cheaper.
The Honest Downsides
On-premise isn't all advantages. Be realistic about the challenges:
You're responsible for everything
- Hardware failures are your problem
- Security updates are your job
- Backups must be managed
- Power and cooling costs add up
Capital expenditure vs operating expenditure
- Buying servers requires upfront cash
- Cloud converts this to predictable monthly costs
- Some businesses prefer the cloud model for cash flow reasons
Scaling is harder
- Need more capacity? Buy more hardware
- Cloud can scale instantly
- Over-provisioning on-premise means wasted money
Disaster recovery needs thought
- If your office floods, your server floods too
- You need off-site backups regardless
- Cloud providers handle this automatically
The Hybrid Approach: Best of Both
Most small businesses that benefit from on-premise don't go all-in. They use a hybrid approach:
Keep on-premise:
- Large files that need fast local access
- Specialist software that requires local hosting
- Sensitive data with specific storage requirements
Use cloud for:
- Email (Microsoft 365 or Google Workspace)
- Off-site backup
- Collaboration tools
- Customer-facing services
This gives you the performance and control benefits of on-premise where they matter, while still benefiting from cloud convenience elsewhere.
According to Flexera's 2024 State of the Cloud Report, 87% of enterprises have a multi-cloud strategy, and hybrid cloud (combining on-premise with public cloud) remains the dominant approach.
What You Actually Need
If on-premise makes sense for your business, here's what to consider:
For File Storage (NAS)
A Network Attached Storage device is the simplest option for shared file storage.
Good choices:
- Synology DS923+ (4-bay, around £500)
- QNAP TS-464 (4-bay, around £450)
- Add 4 × 4TB drives for about £400
Total: £850-900 for a robust setup with 8TB usable storage (mirrored for safety)
For Running Software (Server)
If you need to run applications locally:
Entry level:
- HP ProLiant MicroServer Gen10 Plus (around £600)
- Suitable for small databases, file sharing, basic applications
Mid-range:
- Dell PowerEdge T150 (around £1,200)
- HPE ProLiant ML30 Gen10 (around £1,000)
- More power for multiple applications, larger teams
Supporting Infrastructure
Don't forget:
- UPS (Uninterruptible Power Supply): £100-300. Protects against power cuts.
- Network switch: £50-200. Connects everything together.
- Backup destination: Cloud backup service (£5-10/month) or second NAS at another location.
Running Costs: The Full Picture
Budget for ongoing costs:
Electricity: £50-150/year depending on equipment
Backup services: £60-120/year for cloud backup
Replacement drives: Budget £100/year average
Support: If you need professional help, budget £200-500/year
Software licensing: Depends on what you run (open source can slash this—see our separate guide)
Total: Expect £400-800/year in running costs for a small server setup.
Security: Non-Negotiable Steps
On-premise servers need proper security:
Physical security:
- Lock the server in a room or cabinet
- Limit who has physical access
- Consider a server room with controlled entry
Network security:
- Use a proper firewall (your router's built-in firewall is a start)
- Keep firmware and software updated
- Segment networks—don't put servers on the same network as guest Wi-Fi
Access control:
- Strong passwords (use a password manager)
- Limit admin access to those who need it
- Enable logging so you know who accessed what
Backup:
- Daily backups minimum
- Store copies off-site (cloud or another location)
- Test restores regularly
The National Cyber Security Centre offers free guidance for small businesses at ncsc.gov.uk.
When to Get Professional Help
Some things you can do yourself. Others benefit from expertise:
DIY-friendly:
- Setting up a NAS (good documentation from Synology/QNAP)
- Basic Windows Server installation
- Configuring backup software
Worth paying for:
- Complex networking (VPNs, multiple sites)
- Security configuration and hardening
- Migrating from existing systems
- Setting up virtualisation
A few hours of professional setup (£50-100/hour) can save weeks of frustration and reduce security risks.
Making the Decision
Choose on-premise if:
- You handle large files that would be slow over internet
- Regulations or clients require local data storage
- Your internet is unreliable
- You have stable, predictable workloads
- You're comfortable with IT maintenance or can hire help
Choose cloud if:
- Your team is distributed or works remotely
- You value simplicity and hands-off management
- Scaling up and down matters
- You prefer operating expenses to capital expenses
- You don't have IT expertise in-house
Choose hybrid if:
- You have some workloads that benefit from local, others that suit cloud
- You want cloud backup for on-premise data
- You need both performance and flexibility
The Bottom Line
Cloud is often the right choice. It's simple, scalable, and someone else handles the hard stuff.
But on-premise isn't dead. For businesses handling large files, needing guaranteed performance, facing regulatory requirements, or simply wanting more control, local servers still make excellent sense.
The key is matching infrastructure to actual needs—not following trends or vendor marketing.
Do the maths. Consider your specific requirements. And remember that hybrid approaches often give you the best of both worlds.
Sometimes the smartest cloud strategy is knowing when not to use it.
