Why On-Prem Data Centers Still Matter In The Cloud Era

Forbes

30-06-2025

Cloud computing has reshaped how businesses manage IT infrastructure, but it hasn't eliminated the need for on-premises data centers. For many companies—especially those with strict compliance requirements or performance-sensitive workloads—on-prem infrastructure still offers key advantages, including better security, cost control and sustainability.
As cloud costs continue to rise and data demands increase, hybrid cloud strategies that combine cloud services with on-premises solutions are gaining momentum. Below, members of Forbes Technology Council share why companies should still consider on-premises data centers as part of a modern, flexible infrastructure strategy.
1. They Meet Data Sovereignty And Compliance Requirements
One key reason is data sovereignty and compliance—certain industries and regions require strict control over where and how data is stored. On-prem data centers offer full control, enabling companies to meet regulatory requirements, reduce legal risk and safeguard sensitive information that can't legally reside in the cloud. - Anuj Tyagi
2. They Support Real-Time Operations In Manufacturing
On-prem or edge presence is critical for manufacturing companies where a large amount of Internet of Things data gets generated from the production line. If you talk to plant managers, their No. 1 priority is to ensure there are no downtimes in production. Network downtime or cloud bandwidth bottlenecks can bring production to a halt, causing losses of millions of dollars and, worse, loss of customer trust. - Apurva Wadodkar, Autodesk INC
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3. They Give Companies Control Over Critical Infrastructure
It's important to stay in control of your tech core. Cloud vendors may refuse needed features, and even a minute of downtime on Black Friday—even if within service-level agreement limits—can cost a fortune. Your own team is more motivated to fix issues than a vendor, especially if you're not a top client. Cloud fees for traffic or requests scale poorly and get expensive fast. - Alexander Krizhanovsky, Tempesta Technologies
4. They Address The Rising Cost Of Cloud-First Infrastructure
The rising cost of using cloud-first infrastructure is one of the main reasons to consider an on-prem data center as an option. With the adoption of more gen AI tools, this cost will continue trending up. - Swati Kirti, Walmart Global Tech
5. They Power Real-Time AI Inference At The Edge
Manufacturers using machine vision to inspect for defects on the production line cannot afford a cloud round trip. These systems need to capture, analyze and respond in milliseconds. A slow decision could allow a defective product through or falsely reject a good one. On-prem AI inference (via GPU or edge servers) ensures this analysis happens in real time. - Amy Gu, Dynamsoft
6. They Protect IP And Sensitive Data
Intellectual property protection is a primary reason companies should still consider on-prem data centers. Whether it is insights into business processes, code, proprietary customer data or financial information, the exposure envelope and risk for data leakage are reduced with a properly structured and protected on-prem data center versus a cloud-based data center. - Mark Francis, Electronic Caregiver
7. They Maximize Financial And Tax Advantages
One reason is the financial management opportunities they present. On-prem data centers are capitalizable, unlike most SaaS and cloud platforms, which are typically operational expenditures. The costs are recorded as assets, enhancing asset-to-liability ratios that support borrowing. There are potential tax opportunities from depreciation or amortization of capitalized costs that can reduce taxable income over time. - Gladwin Mendez, GEC Prudentia
8. They Boost Security And Reduce Cloud Dependence
Two of the main reasons are enhanced security and independence. When dealing with real-time data—especially from machines generating gigabytes daily—it's daunting to rely solely on the cloud. A hybrid solution offers a balance, even if it's less cost-effective. Plus, there's the risk of third-party providers cutting off access to your data if you stop paying. On-prem keeps you in control, reducing dependency. - Adrian Stelmach, EXPLITIA
9. They Minimize Data Gravity
One key reason is data gravity: When massive volumes of data are generated or consumed locally (as happens in manufacturing and healthcare), moving it to the cloud comes with latency, cost and complexity. On-prem lets companies process sensitive or high-throughput data faster, with more control. In hybrid strategies, it's not legacy, but at that point, it becomes a performance and compliance enabler. - Raghu Para, Ford Motor Company
10. They Reduce Latency For Bandwidth-Hungry And Legacy Systems
One of the major reasons for considering an on-prem data center is data latency, particularly for bandwidth-hungry and AI- and graphic-intensive apps like enterprise resource planning, the IoT, shop floor manufacturing execution systems, and real-time microsecond and millisecond trading floors. The other reason for non-data-intensive apps to stay on-prem is legacy workloads like mainframe or client-server, as they may not be able to leverage cloud-native functions. - Rajat Sharma, NGN Advisory
11. They Offer Improved Resilience
When your entire infrastructure depends on a single cloud provider, any outage becomes a full stop. That's not innovation; that's risk consolidation. On-prem isn't about resisting the cloud; it's about balancing it. Real resilience means having a fallback, especially when everything else is floating and moving to more decentralized environments. - Doug Shannon
12. They Deliver Deterministic Performance For Sensitive Sectors
One key reason is the need for deterministic performance in ultra-sensitive operations. In sectors like aerospace or financial trading, even minor latency or unpredictable network behavior can disrupt mission-critical outcomes. On-prem data centers offer direct control, physical isolation and architectural consistency that cloud environments cannot fully replicate in high-stakes scenarios. - Nicola Sfondrini, PWC
13. They Ensure Dependable Access To Data
Going by my personal experience with the migration of an on-prem financial fraud screening platform into a vendor's cloud, I can definitely say that dependable accessibility to data gets severely impacted post cloud migration if crucial details are not looked into thoroughly. - Sunny Banerjee, First Citizens Bank
14. They Enable Cost Analysis And Vendor Flexibility
Having an on-prem data center enables companies to perform cost predictability analysis for new and existing apps, especially in terms of performance, storage or latency-sensitive workloads. It allows organizations to negotiate better cloud pricing, avoid vendor lock-in and retain the flexibility to host critical, sensitive or regulatory workloads on-prem when the cloud isn't a perfect fit. - Harikrishnan Muthukrishnan, Florida Blue
15. They Allow The Use of Local Renewable Energy Sources
One unique sustainability-driven reason to consider on-prem data centers is the ability to leverage local renewable energy sources and advanced cooling innovations, such as geothermal or liquid cooling. Unlike hyperscale cloud, on-prem could provide companies direct control to design efficient, net-zero facilities tailored to their region's green energy infrastructure. - Rahul Wankhede, Humana
16. They Maximize Uptime And Operational Control
While cloud offers flexibility, on-prem still excels when uptime and operational control are absolutely critical. In industries like semiconductor manufacturing or real-time logistics, even brief cloud delays can disrupt output. On-prem lets companies build systems with zero tolerance for downtime, ensuring continuous, uninterrupted operations. - Umesh Kumar Sharma
17. They Give Teams Physical Access For Fast Troubleshooting
Sometimes unplugging is the fastest fix. Physical control equals instant accountability. When you need to yank a cable, swap a drive or keep a trade secret actually secret, on-prem puts your hands where your cloud console can't. - Joel Frenette, TravelFun.Biz
18. They Accelerate Recovery During Critical Incidents
On-prem data centers provide direct control over recovery operations during critical incidents. When hardware failures, human errors or cyberattacks occur, having physical access to your infrastructure allows for immediate, hands-on recovery implementation without dependencies on third-party response times or Internet connectivity, significantly reducing data restoration timeframes. - Chongwei Chen, DataNumen, Inc.
19. They Allow Greater Precision In Governing AI Models
One reason companies should still consider on-prem data centers is AI model governance. As enterprises train and deploy proprietary models, especially in regulated sectors, they need granular control over data lineage, compute environments and audit trails. On-prem setups offer unmatched visibility and security, ensuring responsible AI practices that cloud abstractions may not fully guarantee. - Pawan Anand, Ascendion
20. They Strengthen Leverage In Cloud Vendor Negotiations
Owning on-prem infrastructure gives companies leverage in cloud vendor negotiations. On-prem provides an 'exit option' from the cloud. This optionality is a strategic asset, especially when cloud bills creep up and cloud platform loyalty gets expensive. Running even part of your stack in-house lets you demand better pricing, support or custom terms from a cloud vendor. - Kehinde Fawumi, Amazon