7 Mar 2024



On-Premise vs. Cloud

Key factors: safety, efficiency and sustainability

The digital transformation of the economy is further increasing the global demand for server infrastructure and server performance. It is therefore not only the large cloud providers that are investing massively in the expansion and security of their data centres. According to a study by the digital economy industry association Bitkom on market development in Germany, cloud data centres will already account for 38% of total data centre capacity by 2022. Cloud growth is also driving the colocation data centre market segment, which already accounts for 44% of German IT capacity. And the growth trend continues unabated. In contrast, the on-prem operation of data centres is declining slightly according to Bitkom, but remains at a constant level overall. Despite all the hype surrounding cloud computing, independent on-site operation still appears to be worthwhile and sustainable.

In this blog post, we take a look at the advantages of an on-premise data centre, show which companies should continue to find it worthwhile in the future and how the use of used software licences opens up new financial leeway.

What qualifies as an on-premise data centre?

It is generally understood that a data centre is a central physical facility, such as a building or part of a building, designed to house so-called business-relevant computing technology, such as computers, storage, servers and network components or other IT devices, as well as the infrastructure required for their use. In particular, this includes the power supply, cooling units, fire protection equipment and technical systems that control access.

In Germany, Bitkom confirmed the number of 3,000 data centres with at least 10 server racks and more than 40 kW of IT connection power in its 2023 market development study. In addition, there are around 47,000 smaller IT installations, although these are not fully considered data centres. Incidentally, most data centres across Germany are located in Frankfurt am Main, and the relevant company density is particularly high, from large corporations to cloud and streaming providers to internet providers. The city on the Main is now considered the largest data hub in the world. Around 1,000 networks, mainly from Europe, are interconnected at the DE-CIX data hub.

What are the advantages of an on-site data centre for in-house operation?

How advantageous an on-premise data centre is for a company or public administration depends heavily on the specific requirements, budget and strategic goals. Irrespective of this, however, the following arguments speak in favour of having your own on-prem data centre:

1. Data security and data sovereignty

Direct control of physical security and access to business-critical data and thus minimisation of company-specific security risks of cloud-based solutions such as cyber attacks or vendor lock-in.

2. Availability 

On-prem operation also works in the event of internet disruptions or outages. Local network resources are available at all times as long as the network is intact.

3. Adaptability and scalability  

Flexibility in the selection of hardware and software solutions and the associated possibility of scaling according to the company's individual requirements.

4. Cost control and downstream savings effects

Predictable and therefore plannable investments for hardware and infrastructure. No ongoing monthly fees. Subsequent savings effects, for example through the use of used software in on-prem operation and a resulting lower internal support rate.

5. Latency and performance

Lower latency times and better performance for local applications as well as full control over the network infrastructure.

6. Compliance and data protection

More control over compliance with industry-specific regulations and data protection provisions. Easier implementation of company-specific compliance requirements.

Companies can also benefit from operating their own on-prem data centre in terms of sustainability. However, this currently requires certain prerequisites, which we will discuss separately.

How can an on-premise data centre be operated sustainably?

Sustainable management at all levels of a company already plays an important role in day-to-day business. This is ensured, among other things, by the EU-wide CSR Directive with its documentation and disclosure requirements for corporate activities, which will be gradually extended to more and more companies from 2024. Even small and medium-sized companies will be obliged to address the issue, develop their own sustainability strategy and monitor it on an ongoing basis. IT has a dual function here. On the one hand, it makes it possible to collect and analyse the data required for the documentation, while on the other hand it contributes to reducing the company's carbon footprint through various measures.

The following are particularly worthy of mention as so-called green IT solutions for the sustainable operation of an on-premise data centre:

Operation with renewable energies  

The fullest possible use of renewable energies for the operation of the on-premise data centre - either through in-house power generation using photovoltaics, wind or hydropower or the purchase of green electricity with corresponding certificates of origin.

Energy efficiency

Increasing energy efficiency through energy-saving infrastructure components, the use of technical solutions for heat recovery through internal waste heat utilisation for heating, cooling or in production as well as in-house energy generation through highly efficient combined heat and power plants, such as cogeneration units.

Extended hardware utilisation

The extension of hardware cycles through continuous maintenance, upgrades and reuse as well as control over environmentally friendly electronics disposal with a focus on recycling.

Used software

The consistent use of used software at all workstations whose structure and requirements allow this without any loss of effectiveness. This not only reduces high licence costs compared to purchasing new software, but also makes a measurable contribution to an active circular economy.

With the first two green IT solutions in particular, it must of course be taken into account that, depending on the size and energy requirements of an on-premise data centre, considerable investments are sometimes required, which generally only pay off in the long term and must be included in any cost-benefit calculation. These investments are particularly necessary for existing data centres, which, according to the International Data Corporation (IDC), are on average around nine years old. The resulting need for modernisation therefore often concerns not only the sustainability factor, but also the capacity to process significantly larger volumes of data and robust cyber security measures. Added to this are the skills required for more complex applications and their administration among employees.

On-premise duo - own data centre and used software licences

Despite complex challenges for the sustainable operation of an on-premise data centre, the risks of total cloud solutions are still too high for many IT managers. In our experience, this is particularly true for industries with high standards in the areas of data security, data availability, data sovereignty and compliance that are also under constant cost pressure, such as energy, healthcare, finance, transport and logistics or waste disposal, as well as public organisations and administrations. Instead, either hybrid cloud solutions or complete on-premise operation with their own data centre and the needs-based use of used software are preferred.

Swedex, the German SME and European market leader in document presentation, also relies on this on-premise duo. After three years in the cloud, those responsible switched back to on-prem operation with their own data centre and the use of used software licences, which led to savings in the six-figure range, mainly for cost reasons. You can find the entire customer case here.

Convincing advantages - used software from PREO for on-prem operation 

We are one of the pioneers in the European trade in used software licences. We offer companies, organisations and public administrations a large selection of used volume licences for servers, operating systems or application software, especially from Microsoft, with which they can sustainably optimise their licence costs and benefit in several ways:

  • High savings on ongoing licence costs of up to 70 percent compared to the respective new version.
  • Greater sustainability in the IT sector by promoting an active circular economy and reducing the company's CO2 footprint.

  • 100 per cent legally compliant and audit-proof licence acquisition with maximum transparency in all processing steps, including complete documentation in the PREO licence portal "Easy Compliance".

  • Many years of expertise in the integration of used software licences into classic network structures or hybrid licence models.

  • Detailed market knowledge and extensive experience through the audit-proof transfer of over one million used software licences.

  • Existing software licence management capacities for large IT infrastructure projects with thousands of workstations and cross-border locations.

  • Convincing reference projects for numerous medium-sized and large companies from a wide range of industries.