Cloud vs On Premises: Which Data Warehouse Solution Is the Best Choice in 2025?

In 2025, organizations still face the decision of whether to operate their data warehouse solutions in the cloud or on premises. Both approaches offer specific advantages and disadvantages that must be carefully weighed.

Data security: Cloud or on premises? Which offers better protection?

Concerns about the security of cloud solutions have decreased in recent years, as leading cloud providers have made significant investments in their security infrastructures. They employ specialized teams that protect data around the clock. Nevertheless, control over sensitive data remains a central concern for many organizations. On premises solutions make it possible to retain full control over data and implement specific security policies directly. However, this requires substantial internal resources and expertise.

Cloud vs on premises data warehouses: seven key differences

Integration:: How can cloud and on premises data warehouses be connected?

Seamless integration of various data sources is crucial for the success of a data warehouse. In on premises environments, numerous ETL tools are available to consolidate data from different systems. In the cloud, providers offer specialized integration services that simplify data ingestion and often include additional features such as real time data processing or automatic scaling. Choosing the right integration approach depends on the organization’s specific requirements and existing IT landscape.

Data growth:: Scalability in the cloud vs on premises

The exponential growth of data presents challenges in terms of storage and management. Cloud solutions offer the advantage of virtually unlimited scalability. With just a few clicks, additional storage can be provisioned without purchasing physical hardware. This allows organizations to respond flexibly to growing data volumes and pay only for the resources actually used. On premises solutions, on the other hand, require forward planning and investment in additional hardware, resulting in higher fixed costs.

Performance:: How fast are cloud and on premises data warehouses really?

On premises data warehouses allow hardware and infrastructure to be tailored precisely to specific performance requirements, leading to consistent and predictable performance. Cloud data warehouses benefit from the ability to dynamically scale resources to handle peak workloads. However, performance can be affected by factors such as network latency and shared resources. Organizations should therefore carefully analyze their performance requirements before making a decision.

Cost comparison:: Which solution saves money in the long term?

Cloud data warehouses offer a flexible pricing model, while on premises solutions require high initial investments. But which solution is more cost efficient in the long run?

The cost structure differs significantly between cloud and on premises solutions. On premises setups involve substantial upfront investments in hardware, licenses, and infrastructure, whereas cloud solutions operate on a usage based pricing model. This can be particularly attractive for small and medium sized organizations, as no large initial investments are required and costs can be flexibly adjusted to actual demand. However, it is important to consider total long term costs, as with intensive and continuous usage, cloud costs may exceed those of an on premises solution.

A cost comparison for data warehouses

If we assume a server that meets the requirements of a data warehouse, particularly in terms of random access memory and storage capacity, acquisition costs can be estimated at around 5,000 euros. In addition, there are maintenance contracts of approximately 200 euros per year and costs for a Windows Server license and possibly a Microsoft SQL Server license. These license costs can be avoided by using equally capable open source solutions such as a PostgreSQL database on Linux. Electricity costs must also be considered. Our example server consumes approximately 4,000 kilowatt hours per year in continuous operation. At a cost of 10 cents per kilowatt hour, this results in 400 euros in annual energy costs.

What does a SQL instance really cost?

A SQL instance with similar specifications on Azure or AWS costs approximately 50 to 80 euros per month. The Platform as a Service model is recommended. Unlike Infrastructure as a Service, no server is required, which means there are no license costs and no administrative effort for the operating system. The SQL instance runs in the cloud without a dedicated server. Comparing both models, the first year results in approximately 5,600 euros for the on premises solution and 600 to 960 euros for the cloud solution.

On premises: a long term investment with hidden costs

The advantage of the on premises solution is that the server only needs to be purchased once. Although the depreciation period is usually four years, most servers are typically used for around ten years. However, only after ten years would the on premises option become cheaper than the cloud solution in this example. Even if the maintenance contract is discontinued after the fifth year, the break even point would still occur in year ten. By that time, a new server would likely be required. In addition, backup costs have not yet been included. These are not necessary for cloud databases, as integrated backup mechanisms are already provided.