SharePoint On-Premises vs. SharePoint Online: is it a question?

SharePoint On-Premises vs. SharePoint Online: is it a question?

January 13, 2020

Sandra Göğer

Digital Experience Strategist

For over a decade, business owners could use SharePoint as an on-premises platform only. Finally, in 2011, Microsoft released Office 365 and SharePoint Online. However, this didn’t make companies rush into the cloud. That’s why Microsoft started to promote the suite actively in 2015–2016. This promotional effort brought quick results, so already in 2017, the Global SharePoint Survey by Sharegate, Hyperfish, and Nintex, showed a 167% increase in SharePoint Online deployments.

It is easy to explain why businesses all over the world are so much interested in Microsoft’s cloud collaboration suite:

  • Functional uniqueness. To date, there has been no comparable software that could cover all aspects of enterprise collaboration, communication and content management
  • Easy deployment. Compared to all the server versions of SharePoint, the cloud suite requires less effort to deploy, customize and support it.
  • Flexible payment model. The monthly subscription model attracts organizations that need a powerful collaboration solution but can’t afford SharePoint Server licenses.

These advantages translate into a constantly growing number of organizations owning SharePoint Online and Office 365 deployments. Having revealed their FY20 Q1 earnings in October 2019, Microsoft reported hitting 200 million Office 365 monthly active users, with 100 million monthly active users of SharePoint Online, according to SharePoint father Jeff Teper.

Office 365 monthly active users

Looking at these numbers and judgind by Microsoft’s promotional efforts, organizations might think that Office 365, as well as its successor Microsoft 365, have pushed SharePoint On-Premises out of the competition.

However, the skyrocketing growth of SharePoint in the cloud doesn’t mean that its on-premises versions are dead. SharePoint Server still plays an important role in enterprises both as a standalone platform and as part of hybrid deployments.

Now let’s take a closer look at the state of SharePoint On-Premises today and how it’s been evolvingd over the years.

Ins and Outs of SharePoint On-Premises

Since its first release in 2001, the platform has seen 7 versions, SharePoint 2019 being the latest one.

Even today, SharePoint 2013 stays the most popular version, and there are three key reasons for that:

  1. SharePoint 2013 is still under the extended support that will terminate only in 2023.
  2. SharePoint 2016 didn’t manage to reach the same popularity as SharePoint 2013. Most of the new features and benefits of SharePoint 2016 were aimed at the developers, while everyone expected user-side improvements.
  3. Some organizations prefer to stay on-premises, since cloud migration is not that easy.
SharePoint versions in organizations

The mission left incomplete by SharePoint 2016 is now taken over by SharePoint 2019. Released in 2018, the 2019 version finally came with a reworked modern design of SharePoint components, from libraries to sites, as well as with fresh features adopted after SharePoint Online.

SharePoint Server 2019 represents a whole new generation of SharePoint, […] it was built on the same core platform as SharePoint Server 2016, providing the scale and performance you’ve come to expect in addition to new, modern experiences for users, that are both intuitive and familiar.

Bill Baer

Bill Baer

Senior Product Marketing Manager, Microsoft Certified Master, SharePoint Product Group, Microsoft Corporation

SharePoint 2019 can be a compromise for companies looking for the stability and customization flexibility of SharePoint Server and wanting to leverage the cloud-first user experience. Like SharePoint Online, SharePoint 2019 provides a ready-to-use mobile application, so mobile collaboration is no longer a challenge.

SharePoint 2019 team site

All in all, if your organization opts for SharePoint Server, there are several key characteristics to keep in mind.

Farm-based architecture. With any SharePoint On-Premises version, an organization will still need a farm—a collection of servers hosting SharePoint. The farm size depends on such factors as the number of active users, content volume, the average load, and the number of requests per user per day.

Server/CAL licensing model. SharePoint On-Premises is licensed according to the Server/CAL (Client Access License) model. A server license is required for each software instance, and CALs are required for each user or device accessing SharePoint Server.

There are two types of CALs: Standard CALs for core SharePoint features (sites, communities, content, and search) and Enterprise CALs for the fully-functional SharePoint including business solutions and business intelligence capabilities. If a company decides to use SharePoint as a platform for their public site, no CALs are required for external users.

The greatest advantage is that companies pay licenses only once. If they want to extend the deployment, they will only need to cover the price of additional servers or CALs.

Customization freedom. SharePoint On-Premises is well-known for its broad customization capabilities. An out-of-the-box SharePoint is a set of tools and features rather than a ready-made solution. SharePoint owners can transform the platform into enterprise solutions they need, be it a SharePoint-based project management system , a corporate intranet, a customer portal, or a document management solution.

Security. Security is a stumbling block for every company choosing between SharePoint options, especially as cloud collaboration can be more vulnerable to cyberattacks. While Microsoft has been improving its cloud security features, the risk that corporate data can be compromised never goes away. Although cybercriminals can attack SharePoint Server deployments too, SharePoint owners feel more confident when their data and content are stored locally.

At the same time, the owners of SharePoint On-Premises deployments have to be ready to take up the following responsibilities:

Ongoing maintenance. An actively used SharePoint On-Premises deployment requires regular maintenance and support to perform steadily and correctly. If a company has internal resources, their in-house SharePoint team can carry out all the maintenance activities. The other option is to go for SharePoint consulting to handle user requests, perform functional and security upgrades, control SharePoint metrics, and deliver new features.

Customization roadmapping. SharePoint On-Premises owners often radically customize their solutions. However, to avoid never-ending development, decision-makers should elaborate a clear customization roadmap that will allow them to stay reasonable in terms of feature implementation and related costs.

Migration planning. Every SharePoint On-Premises version has a predefined lifecycle. Before a certain version goes unsupported, its owners have to migrate their SharePoint deployments to a higher version. This migration can be tricky, especially when it involves multiple steps through several versions or when companies need to migrate large deployments. There is a variety of automated migration tools that facilitate the migration process. However, none of them covers the migration process from end to end, so the manual effort of SharePoint developers is still required.

Taking a closer look at SharePoint Online

SharePoint Online first appeared as the cloud version of SharePoint On-Premises. Since then the platforms went down separate evolutionary paths, which is why there are several critical differences between them, including licensing and ownership models, feature sets, maintenance and customization approaches.

SharePoint Online subscriptions. Currently, organizations have three options for becoming SharePoint Online subscribers:

  • SharePoint Online as a standalone app. SharePoint Online is available via Plan 1 and Plan 2 at the price of $5 and $10 user/month respectively. The second option offers an unlimited OneDrive file storage, advanced search, content management and security features, such as data leak prevention (DLP).
  • SharePoint Online as part of Office 365. SharePoint Online is included in Office 365 plans, except Office 365 Business and Office ProPlus. If purchased with the Office 365 package, SharePoint Online comes as one of its multiple collaboration and productivity apps such as Outlook, Microsoft Teams, Yammer, Stream, Power BI, and more.
  • SharePoint Online as part of Microsoft 365. Microsoft 365 is a comprehensive offering that unites Office 365, Windows 10, Enterprise Mobility, and Security tools within one subscription. Microsoft 365 Business and the three enterprise plans—such as Microsoft 365 E3, E5 and F1—all include SharePoint Online.

This subscription model is very attractive for companies, especially compared to the initial implementation costs of SharePoint Server. There is a hidden pitfall, though. The subscription payments for any cloud suite are recurring, which leads to the permanently increasing TCO of a SharePoint deployment. At the same time, even a small company will run into paying the full SharePoint Server implementation costs within several years, not to mention large companies will have to foot enormous bills.

SharePoint Online ownership. Unlike SharePoint On-Premises that is always deployed to organizational servers, SharePoint Online is hosted on Microsoft Data Centers in different parts of the world, which ensures the platform’s availability for customers globally. At the same time, while Microsoft owns the platform, each subscribing company owns their SharePoint solutions. Microsoft ensures sleek performance and availability of the service regardless of its location.

If a company unsubscribes, they still have 90 days to transfer all the data from SharePoint Online to their local storages until the subscription is deprovisioned. Such a deployment model also means that companies don’t need farms to use SharePoint Online, which allows them to cut infrastructure costs substantially.

The functional superiority of SharePoint Online. Once considered the offspring of SharePoint On-Premises, today SharePoint Online is the first to get all new features and updates. Only after being rooted in the cloud environment, selected features get introduced to on-premises versions. For example, communication sites that have been available in SharePoint Online since 2017, became available for on-premises users only after the release of SharePoint 2019 in the fourth quarter of 2018. SharePoint Spaces, intelligent sites with mixed-reality capabilities, are available in the cloud only, and it’s not clear if they are coming to the server feature pack anytime soon.

SharePoint Spaces

SharePoint Online customization. Companies are free to tune their cloud collaboration solutions. However, Microsoft recommends being moderate with SharePoint Online customizations to avoid potential performance issues. In the worst-case scenario, overcustomizations can lead to functional failures. Regular updates within the cloud suite can also affect implemented custom solutions.

SharePoint Online maintenance. Since Microsoft is responsible for SharePoint performance and upgrades, companies don’t have to allocate enormous SharePoint support budgets. At the same time, the platform’s centralized management has a downside. Since Microsoft rolls out upgrades for the entire environment, companies have no other choice but to accept them. In case of downtimes, subscribers have no way to fix performance issues.

Even though Microsoft is the one to do all essential management activities within SharePoint Online, Office 365 and Microsoft 365, it doesn’t mean that the users can give it up completely. Just like SharePoint On-Premises owners, SharePoint Online subscribers have to control SharePoint performance and users’ activities, as well as plan development and customization of their solutions.

SharePoint On-Premises vs. SharePoint Online: a comparative table

Keeping in mind all the described aspects of both deployment models, let’s summarize the key differences between SharePoint On-Premises and SharePoint Online.

SharePoint On-Premises vs. SharePoint Online
  SharePoint On-Premises SharePoint Online
Deployment model Server-based farm Cloud deployment (Microsoft Data Centers)
Licensing model Server/CAL licenses User/month subscriptions
Ownership Organizations own their deployments Microsoft owns the suite; organizations own their solutions
Cost High initial investment due to licenses and server costs; further costs of customization and maintenance Snowballing TCO due to recurring subscription fees plus customization costs
Functional and security upgrades Released by Microsoft, deployed at the discretion of solution owners Released and implemented by Microsoft in a centralized way
Feature availability Predefined set of features; updates are delivered in feature packs Microsoft releases new features regularly in a centralized way
Customization Unlimited Limited by the shared nature of SharePoint Online infrastructure and ongoing updates

Choose an optimal SharePoint deployment model wisely

The competition between SharePoint On-Premises and SharePoint Online continues. It is obvious that Microsoft puts a greater emphasis on its cloud collaboration suite, but SharePoint On-Premises hasn’t become any less powerful. On the contrary, the latest server version proves that SharePoint On-Premises has evolved to become more user-friendly and easier to customize.

If your organization is considering SharePoint as a collaboration platform at the moment, it is still worth weighing the pros and cons of both on-premises and cloud versions. SharePoint On-Premises and SharePoint Online have several critical differences that can be determining for you. Among them, there are various deployment models, licensing, and management methods.

SharePoint On-Premises is a robust enterprise solution. It suits both large and medium-sized organizations with developed infrastructures and appropriate IT budgets. It is also the right option for companies that need a variety of solutions but don’t want to invest in multiple scattered tools.

SharePoint Online as a standalone app is a more lightweight platform. It can be a good choice for smaller organizations looking for a dynamic collaboration solution that doesn’t require much effort to support it. At the same time, the standalone SharePoint Online might be insufficient for large organizations. The latter can opt for an enterprise-level Office 365 or Microsoft 365 subscription with a larger set of collaboration and productivity apps.