Data has become the biggest focal point in any company or organization for a while now. We constantly evaluate how best to store, process, and analyse data. The debate over whether all this should be done on-premises or cloud-based is still hot, with businesses weighing factors such as cost, performance, security, and scalability.
Although we have seen an increase in cloud adoption, on-prem solutions are still gaining ground among businesses with strict security and compliance needs. So, how do we decide which solution, on-prem or cloud, will best suit our organization?
Data Lake vs. Data Warehouse: Understanding the Difference
Before we go into discussing on-prem and cloud data warehouses, it’s important to distinguish between a data lake and a data warehouse, as they serve different purposes in data management.
A data lake is a centralized location where raw, unstructured, semi-structured, and structured data can be stored in its native format. It is highly scalable and designed for big data processing, allowing businesses to store vast amounts of data without needing a predefined schema. Data lakes are particularly useful for advanced analytics, machine learning, and AI-driven insights, as they provide flexibility for data scientists and analysts to work with diverse data types.
A data warehouse, on the other hand, is a structured and optimized storage system designed for analytical processing and reporting. Data is typically cleansed, transformed, and stored in a structured format with predefined schemas to support business intelligence and decision-making processes. Unlike data lakes, data warehouses focus on performance and query optimization, making them ideal for operational reporting and structured analytics.
Businesses often use data lakes and warehouses in tandem. Data lakes are used for raw data storage and flexible analytics. Data warehouses are used for structured reporting and optimized queries.
1. Understanding On-Prem Data Warehouses
On-prem data warehouses are completely managed by the business, and therefore, the business is responsible for purchasing, setting up, maintaining, and securing the hardware and software needed.
An on-premise solution allows the business complete control over its infrastructure, data, and security configuration. This level of control and customizability allows businesses to fine-tune performance to meet specific workload demands. Additionally, some businesses require strict regulatory compliance, justifying on-premises data storage due to its high security and compliance assurances.
However, this freedom of control and customizability comes at a price. Deploying and maintaining an on-premises data warehouse may require a significant upfront capital investment in hardware, software licenses, and infrastructure maintenance. Scaling may also be challenging, as expanding storage and processing power could involve purchasing and installing additional hardware, which can be both time-consuming and expensive. Not to mention that managing the updates, security patches, and overall system reliability falls entirely on your internal IT team unless you have outsourced this aspect of your data warehousing.
2. Understanding Cloud Data Warehouses
Cloud-based data warehouses, like Snowflake, offer your storage and processing needs as a service online rather than physically within your business. Businesses will make payments based on usage rather than owning hardware, benefiting from the flexibility and scalability of cloud computing.
Cloud-based data warehouses allow businesses to scale storage and processing power on demand without requiring a large upfront payment. Due to this, you will not be spending money on extra resources that are not in use. Your system’s maintenance will also be handled by your cloud provider, including updates, security patches, and infrastructure reliability. Due to a lack of hardware, your system deployment is faster and less cumbersome than an on-prem solution.
Despite these benefits, there are still instances where businesses would prefer to move to an on-prem data warehouse. Your system’s costs are ongoing and thus accumulate over time, especially when your data storage and processing needs grow. Moving large datasets between on-prem and cloud environments can result in large data transfer expenses. Compliance may also be troublesome for certain industries that have strict data regulation policies, as certain organisations require sensitive data to remain within a specific region.
3. Key Considerations When Choosing On-Prem vs Cloud
| Factor | On-Prem | Cloud |
|---|---|---|
| Cost | High upfront capital investment and lower long-term costs if well-managed. | Pay-as-you-go, but expenses can accumulate. |
| Scalability | Limited—requires purchasing and installing new hardware. | Instantly scalable with elastic resources. |
| Security & Compliance | Full control is better for industries with strict regulatory requirements. | Provider-managed security, but data sovereignty can be a concern. |
| Performance | Provider-managed security, but data sovereignty can be a concern. | Fast and optimized for distributed workloads. |
| Maintenance | Requires in-house IT team for updates and troubleshooting. | Requires in-house IT team for updates and troubleshooting. |
4. Hybrid: The Best of Both Worlds?
For businesses that require the best of both solutions—the control of on-prem but the flexibility of the cloud—we recommend a hybrid solution. Solutions that we offer, making use of Delta Lake, allow businesses to store sensitive data on-prem while utilizing the cloud for analytics and scalable processing.
5. Final Thoughts: Which One Is Right for You?
- Choose On-Prem if you have strict compliance needs, predictable workloads, and a strong IT team to manage infrastructure.
- Choose Cloud if you want scalability, cost-efficiency, and managed infrastructure without the burden of maintenance.
- Consider Hybrid if you need a mix of both. Hybrid allows for secure on-prem storage while leveraging the cloud for analytics.
At Decisioneering, we help organizations navigate their data warehouse architecture, whether on-prem, cloud, or hybrid. If you’re considering modernizing your data strategy or want to see how you can cut back costs on your existing data warehouse, contact us today to see how we can help you.
