SharePoint On-Premises vs. SharePoint Online: What’s best for your organization?

10 min.

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, it didn’t make companies rush to the cloud, so Microsoft started to promote the suite actively in 2015–2016. This promotional effort brought quick results. According to The Global SharePoint Survey by Sharegate, Hyperfish and Nintex, SharePoint Online deployments rose by 167% in 2017.

Of course, a skyrocketing growth of SharePoint in the cloud doesn’t mean that its on-premises versions are dead. If you look at the stats, you will see that SharePoint On-Premises still plays an important role in enterprises both as a standalone platform and as part of hybrid deployments.

SharePoint deployment version

Data source: Hyperfish ‘2017 Global SharePoint Survey’

For you to understand which kind of SharePoint is most suitable for your organization, let’s analyze SharePoint On-Premises and SharePoint Online and compare their capabilities.

Ins and Outs of SharePoint On-Premises

Since its first release in 2001, the platform has seen 6 versions, SharePoint 2016 being the latest one. However, the most popular server version even today is SharePoint 2013. Its release caused a revolution in the SharePoint community and the business world, as it came with a reworked UI and new collaboration capabilities: community portals and sites, microblogs and activity feeds. It also gave a positive spur to Client Side Object Model (CSOM) in SharePoint development, which allowed building deeply customized and user-friendly SharePoint apps.

As for SharePoint 2016, its code has much in common with SharePoint Online, which makes it optimal for hybrid deployments. The look-and-feel and functionality of SharePoint 2016 are pretty similar to SharePoint 2013, so end-users won’t see visible differences between these two versions. At the same time, SharePoint administrators can benefit from the MinRole farm topology, information rights management and better control over sensitive content via data leak prevention (DLP) queries and policies.

SharePoint On-Premises: Key Characteristics

Although each on-premises version of SharePoint has its peculiarities, several aspects are relevant to them all.

Get ready to ‘farm.’ Whatever version of SharePoint On-Premises you deploy, you will need a SharePoint 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 of the deployment and the number of requests per user per day.

Follow 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 a SharePoint Server.

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

A reasonable result of such deployment and licensing model is that your initial investment into SharePoint On-Premises can be considerable. For this reason, smaller companies always were the rarest users of SharePoint On-Premises.

Take up the full ownership. With your own farm and licenses purchased, you’re the sole owner of your SharePoint deployment. It’s totally up to you to plan SharePoint upgrades and migrations according to organizational needs and budget. Total control over a SharePoint deployment and content stored within it is among the key reasons for companies to stay on-premises rather than go to the cloud.

Plan ongoing maintenance. An actively used SharePoint On-Premises also requires regular maintenance and support to ensure the platform’s stable performance and correct operation. If a company disposes of internal IT resources, an in-house SharePoint team can carry out all maintenance activities. Otherwise, an organization can turn to a SharePoint consulting company to handle user requests, perform functional and security upgrades, control SharePoint performance and deliver new features.

Feel free to customize your solutions. SharePoint On-Premises is well-known for its broad customization capabilities. An out-of-the-box SharePoint represents rather a set of tools and features than a ready-made solution. So SharePoint owners are welcome to transform the platform into solutions they need, be it a corporate intranet, a customer portal or a document management system.

Consider drawbacks in advance. Organizations running a SharePoint On-Premises deployment face several common issues:

  • Unfriendly out-of-the-box From the end-user’s point of view, SharePoint isn’t attractive out-of-the-box. Usually, organizations spend substantial effort on customization to make the default SharePoint UI look nice.
  • Complex management. Normally, SharePoint is tuned to the extent when end-users don’t need to change anything within their solution. The complex SharePoint On-Premises structure is a good reason for business users to stay away from its management. For example, if employees need a new SharePoint site, they usually have to contact a SharePoint administrator, instead of launching the site themselves.
  • Making an on-premises SharePoint intranet mobile was always a great challenge for companies. As a result, organizations prefer either going with mobile views of their sites or developing a standalone mobile app, which requires additional investment.

Does SharePoint On-Premises have future? During Microsoft Ignite 2017, the corporation announced the upcoming release of SharePoint 2019. According to Microsoft plans, the preview of SharePoint Server 2019 will become available by mid-2018. Both the SharePoint community and the platform owners are excited about the new version of SharePoint, as it is expected to come with the modern UI that will ensure a more positive user experience within server-based SharePoint solutions.

Taking a closer look at SharePoint Online

While SharePoint Online can be considered as the offspring of SharePoint On-Premises, two platforms have several critical differences, including licensing and ownership models, as well as feature set.

SharePoint Online subscriptions. Currently, organizations have at least 4 options to become SharePoint Online subscribers:

  • SharePoint Online as a standalone cloud app. SharePoint Online is available with Plan 1 and Plan 2 at a price of $5 or $10 per user per month respectively. The second option offers unlimited OneDrive file storage, advanced search and security features, such as data leak prevention (DLP). In all other respects, the plans are similar.
  • SharePoint Online as part of Microsoft Office 365. SharePoint Online is included into Office 365 plans, except Office 365 Business. Purchased as part of Office 365, SharePoint Online is grouped with other collaboration and productivity apps, such as Outlook Online, Planner, Microsoft Teams, Yammer, Skype for Business and more.
  • SharePoint Online as part of Microsoft Dynamics 365. SharePoint Online Plan 2 is also available within Dynamics 365. This allows CRM users to couple Dynamics 365 capabilities with SharePoint document management features and use it as a collaboration medium.
  • SharePoint Online as part of Microsoft 365. Microsoft 365 is a brand-new offering from Microsoft that unites Office 365, Windows 10, Enterprise Mobility and Security within one subscription. Both enterprise plans of Microsoft 365, E3 and E5, include SharePoint Online.

SharePoint Online location. Unlike SharePoint On-Premises that is deployed to an organization’s servers, SharePoint Online is hosted in 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 app, each company-subscriber owns their SharePoint Online solution. Microsoft pledges to ensure high performance and availability of the service regardless of its location. If a company decides to quit the suite, they still have a period of 3 months to transfer all the data from SharePoint Online.

From the ownership standpoint, such a deployment model means that:

  • You don’t need a server farm to use SharePoint Online. This is a great advantage for organizations that want to cut infrastructure costs.
  • You don’t have to put much effort into the platform’s maintenance. Microsoft is responsible for SharePoint performance and upgrades. That’s good because you can reduce SharePoint support budget. However, since Microsoft rolls out upgrades in a centralized manner over the entire suite, you have no other choice than to accept them. In case of downtimes, you won’t be able to fix performance issues.

SharePoint Online functional superiority. Microsoft’s attention to the cloud resulted in a certain functional imbalance between SharePoint On-Premises and SharePoint Online. At the moment, all new features come to SharePoint Online before they appear in SharePoint On-Premises. For example, SharePoint Online offers not only SharePoint team sites but also communication sites. Hub sites that will be released in 2018 will also be available for cloud users first.

SharePoint Online user-centricity. SharePoint Online is much more user-centric than its on-premises brother. Modern UI is one of the benefits of SharePoint Online. So users without any knowledge of SharePoint can launch and tune a SharePoint site or a page according to their needs. SharePoint Online also comes with a ready-made mobile app, so there is no need to develop it separately.

Giving their users more freedom in SharePoint Online, organizations have to pay more attention to user training. Employees should understand clearly how to use SharePoint Online both on their PCs and on their mobile devices as well as how to manage their cloud solutions effectively and securely while taking advantage of all the available features.

SharePoint Online customization. SharePoint Online is a customizable platform, however, Microsoft recommends to be moderate with customizations in the cloud to avoid potential performance issues. In the worst scenario, over-customizations can lead to functional failures. Regular updates within the cloud suite can also affect implemented custom solutions.

  SharePoint On-Premises SharePoint Online
Deployment model
Server-based farm Cloud deployment (Microsoft Data Centers)
Licensing model
Server/CAL licenses User/month subscriptions
Your organization owns the deployment Microsoft owns the suite/ your organization owns the solution
High implementation costs due to licenses and servers costs; customization + maintenance Ongoing subscription payments; customization
Functional and security upgrades
Upon an organization’s decision Released and implemented by Microsoft in a centralized manner
Mobile views/custom mobile app Default mobile app
Needs professional knowledge of SharePoint User-centric

Which SharePoint is optimal for your organization?

As you can see, SharePoint On-Premises and SharePoint Online have several critical differences that can affect your choice. Among them, there are deployment models, licensing approaches and management methods.

SharePoint On-Premises is a robust enterprise solution. It can fit large and medium-sized organizations with a developed infrastructure and relevant IT budget. It is also the right option for companies that need a variety of solutions but don’t want to invest in scattered software.

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