What is On-Premise?
On-premise (also on-prem or, more correctly, on-premises) is a deployment model in which an organisation physically installs hardware and software at its own location, owns the infrastructure and is itself responsible for its management, maintenance and security. Think of a server room on the factory site, an in-house data centre or a rack of servers next to the control room. It contrasts with cloud solutions, where you consume computing power and applications from an external provider such as Microsoft Azure, AWS or Google Cloud. In industry, on-premise is not an outdated choice but the norm for everything that controls the physical process: PLCs, SCADA servers, historians and often the MES as well run locally.
🧱 What characterises an on-premise system?
| Feature | Description |
|---|---|
| Physical location | Equipment and systems are located on the organisation’s own premises |
| Ownership | The organisation buys or leases the hardware itself |
| Management | Fully in the hands of in-house IT or OT teams, or a contractor working on site |
| Network access | Primarily via the internal network; external access through a VPN or remote access solution |
| Cost model | Up-front investment (CAPEX) in hardware, plus licences, energy, cooling and staff |
| Security | The organisation is itself responsible for patches, backups and physical access |
| Delay (Latency) | Very low within the local network, suitable for Real-time applications |
A common misconception: on-premise says something about location and ownership, not automatically about security. A local server connected to the internet through a poorly secured link is just as vulnerable as a misconfigured cloud service.
🏭 Why do industrial companies choose on-premise?
- Low and predictable latency - control loops, motion control and safety functions must behave deterministically; a round trip to a cloud region does not fit that requirement
- No dependency on the internet - a plant must keep producing when the internet connection fails
- Control over data - recipes, process data and production records stay within your own walls
- Long OT lifecycle - control systems often run for 15 to 20 years, which fits poorly with the fast release cycles of cloud services
- Segmentation according to the Purdue Model - systems at levels 0 to 3 belong on site, with an IDMZ as the only crossing to IT and the cloud
- Regulation and compliance - pharmaceuticals is subject to GMP and 21 CFR Part 11, the energy and water sectors to the duty of care under NIS2; local systems can make validation and evidence gathering easier
Note: no Dutch or European law generally requires on-premise hosting. Laws such as the Dutch Cybersecurity Act (in force since 15 August 2026) and the GDPR (AVG) set requirements for risk management and data protection, regardless of where the systems are located.
🔄 What is the difference between on-premise and cloud?
| Aspect | On-Premise | Cloud |
|---|---|---|
| Hosting location | On your own premises | The provider’s external data centre |
| Hardware ownership | Organisation | Provider |
| Management | In-house IT/OT team | Shared; the provider manages the lower layers |
| Cost model | Mainly up-front investment (CAPEX) | Ongoing pay-as-you-go costs (OPEX) |
| Scalability | Limited; expansion requires purchase and installation | Fast scaling up and down, within the limits of the contract |
| Internet required? | No, available locally | Yes, for access and processing |
| Updates | Scheduled by your own team, when production allows | With SaaS by the provider; with IaaS you patch the operating system yourself |
| Latency | Sub-millisecond within the LAN | Depends on the connection and distance to the cloud region |
| Exit options | You own it, no switching charges | Switching rights under the Data Act since 12 September 2025 |
The biggest difference lies in the division of responsibility. On-premise, you are responsible for everything, from power and cooling to the application. In the cloud you share that responsibility with the provider, but configuration, access rights and data always remain your task.
💶 Is on-premise cheaper than the cloud?
That depends on the workload and the lifespan. On-premise is often cheaper for a constant, predictable workload that runs for years, such as a SCADA server operating 24/7. The cloud is often cheaper for variable workloads, short projects or analyses that temporarily need a lot of computing power.
A fair comparison includes the total cost of ownership (TCO):
- Hardware - servers, storage, network; usually depreciated over three to five years, in OT often used much longer
- Licences - increasingly sold as subscriptions, even for locally installed software
- Facilities - floor space, power, cooling and a UPS
- Staff - administration, patch management and on-call support
- Continuity - a second site or redundant servers for high availability
The old picture of “buy once, then pay only for maintenance” is increasingly inaccurate. Broadcom completed its acquisition of VMware in November 2023 and stopped selling perpetual licences a month later; since then, VMware products have been available only as subscriptions. Many organisations with virtualised OT servers saw their costs rise as a result and are evaluating alternative hypervisors.
🔧 How do you set up an on-premise OT environment properly?
A robust local environment for production usually follows these steps:
- Map your assets - which servers, operating systems and applications are running, and when do they go out of support? Windows Server 2012 R2 received its last update on 10 October 2023; Windows Server 2016 follows on 12 January 2027.
- Segment the network - separate OT from IT with zones and conduits according to IEC 62443-3-2 and place shared services in an IDMZ.
- Virtualise where possible - with virtualisation, several SCADA, historian and engineering servers run on a cluster of two or three hosts, which simplifies management and recovery.
- Plan for failure - redundant servers, a UPS and a tested disaster recovery plan.
- Protect your backups - follow the 3-2-1 rule and keep at least one copy offline or as an immutable backup, so that ransomware cannot reach it.
- Organise patching and lifecycle - test updates on an acceptance environment first and record replacement dates in lifecycle management.
- Control external access - suppliers connect through a controlled jump server, not through their own modem or a permanent VPN.
For the server room itself, the Uptime Institute’s tier classification is a well-known frame of reference: from Tier I (basic capacity without redundancy) through Tier II (redundant components) and Tier III (concurrently maintainable) to Tier IV (fault-tolerant: even a single failure does not bring the environment down). A factory server room rarely reaches Tier IV, but the classification helps you decide deliberately how much redundancy you need.
☁️ What is hybrid and where does edge computing fit in?
Hardly any industrial company is fully on-premise or fully cloud. The common architecture is hybrid: control, SCADA and the historian run locally, while reporting, analytics and ERP run in the cloud. Data flows from the inside out through the IDMZ, a data diode or a Unified Namespace.
Edge computing is a form of on-premise processing in this picture: an edge device next to the machine filters and enriches data before it goes to the cloud. Cloud providers are also bringing their platforms to your own site. Since late 2019, AWS Outposts has placed AWS-managed racks in customers’ data centres, and in November 2024 Microsoft renamed Azure Stack HCI to Azure Local. The hardware then sits on-premise, while management and licensing run through the cloud. Container platforms such as Kubernetes make it easier to run the same software both locally and in the cloud.
🧠 Which systems typically run on-premise?
| System | Purdue level | Why local? |
|---|---|---|
| PLCs and controllers | 1 | Deterministic control, safety |
| SCADA and HMI | 2 | Operation must work without internet |
| Historian | 3 | High data rates, local buffering during outages |
| MES | 3 | Direct link to production and order handling |
| Engineering, database and domain servers | 3 | Projects, local storage of production data, PLC program backups, user management |
| ERP | 4 | Increasingly in the cloud, but sometimes local because of customisation |
❓ Frequently asked questions
What does on-premise mean?
On-premise means that software and hardware are located at the organisation itself rather than at an external provider. Strictly speaking, “on-premises” is the correct form, because “premises” refers to a site or building, but both forms are widely used.
Is on-premise more secure than the cloud?
On-premise is not automatically more secure than the cloud. With on-premise you have more control, but also full responsibility for patches, backups, monitoring and physical security. A well-managed on-premise environment is secure; a neglected local server with outdated software is a major risk.
Does OT always have to run on-premise?
Control of critical processes should stay on-premise, because control loops and safety functions must never depend on an internet connection. Remote supervision, history and analytics can partly run in the cloud. Most plants therefore choose a hybrid setup with an on-premise core.
What is the difference between on-premise and private cloud?
On-premise describes where systems are located: at your own site. A private cloud describes how they are delivered: as a self-service platform for a single organisation, with virtualisation and automation. A private cloud can run on-premise, but also in an external data centre.
What does an on-premise environment cost?
The costs of an on-premise environment consist of hardware, licences, floor space, power, cooling, staff and spare capacity. Hardware is usually depreciated over three to five years, while licences are increasingly billed as annual subscriptions. A fair comparison with the cloud looks at the total cost of ownership over at least five years.
Does the Dutch Cybersecurity Act apply to on-premise environments?
Yes, the Dutch Cybersecurity Act applies to the organisation, not to a hosting model. An essential or important entity must also secure its on-premise network and information systems and report incidents. The duty of care covers risk management, backups, access control and supply chain security, among other things.
📌 In summary
On-premise means running hardware and software at your own site and managing them entirely yourself, giving you maximum control, low latency and independence from the internet. In IT/OT environments, process control therefore stays local, while analytics and reporting increasingly move to the cloud in a hybrid setup. That control does require discipline of your own: segmentation, a patch policy, protected backups and a realistic cost comparison.