Why would you select SharePoint Server 2013 on-premises over SharePoint Online and Office 365? In this article we consider the pros, cons, similarities, and differences between these two services.
Latest posts by Timothy Warner (see all)

First of all, let me clear something up: When part or all of your data center exists physically on your campus(es), then you have an on-premises (not "on premise") solution. I can't tell you how many people I've seen refer to "on premise" when a premise is an idea, not a physical location. Okay, off yer soapbox, Tim...

Let's face it: maintaining a SharePoint farm on-premises is startlingly complex and expensive. SharePoint is a Windows Server-based, multi-tier ASP.NET Web application that uses SQL Server for its data tier and relies heavily upon Web standards and the .NET Framework.

When you add in other, related Microsoft servers such as Exchange and Lync, then between physical hardware, electricity, licensing, and support costs, you are facing a huge investment of time, money, and effort.

Imagine if you could outsource some or all of this infrastructure to the proverbial cloud. Cloud providers such as Microsoft operate on a simple premise (pun intended!): you can focus on helping your users and optimizing their experience, and you can leave all the rest (installation, configuration, maintenance, upgrades, troubleshooting, etc.) to your hosting provider.

To that end, Microsoft gives us SharePoint Online and Office 365 as a cloud-based alternative to deploying and maintaining an on-premises farm. Specifically, the Office 365 product is a particular type of cloud computing known as software as a service, or SaaS.

Let's take a look at five key points to consider before you make a purchase decision between maintaining on-premises SharePoint, going to the cloud entirely, or considering a hybrid scenario.

Point #1: SharePoint Online is only part of the picture.

Microsoft is happy to sell you a subscription to SharePoint Online, but their true value proposition lies in the Office 365 offering. As you can see in the screenshot below, Office 365 for business (specifically the Enterprise E3 subscription level, with a cost of $20 per user per month), you get a whole lot more than just a SharePoint Server 2013 instance:

  • Hosted e-mail/calendar/tasks/contacts with Exchange Server
  • Web conferencing, presence, chat with Lync Server
  • Browser-based versions of core Office 2013 applications

Office 365 gives you a wide range of collaboration options besides just SharePoint

Office 365 gives you a wide range of collaboration options besides "just" SharePoint.

A common question that systems administrators have with regard to hosted SaaS solutions such as Office 365 is, “Well, as long as our Internet connection is functional, then everything is fine. However, what will my users do if the Internet connection goes down?”

In this case, all is not lost. For instance, users can synchronize their SharePoint files with local copies. Also, some Office 365 subscription levels grant each user up to five installations of Office 2013 Professional Plus, so they can keep on working even in the absence of an Internet link.

Point #2: SharePoint On-Premises and SharePoint Online are Not Identical in their Feature Sets.

Microsoft seems to be doing an admirable job in attempting feature parity between SharePoint running on-premises as compared to SharePoint Online. However, some key features, particularly tied to the new app model and connectivity to external line of business (LOB) data gives on-prem SharePoint the decided edge.

For instance, take a look at the screenshot. You’ll see that with Office 365 we don’t have a Central Administration Web application. Instead, the portal administrator gets a series of “admin center” apps that offer stripped-down SharePoint administrative features.

The Office 365 SharePoint Admin Center is nowhere near as comprehensive as Central Administration

The Office 365 SharePoint Admin Center is nowhere near as comprehensive as Central Administration.

In any event, you’ll want to view the feature comparison matrices between SharePoint on premises and SharePoint Online in order to determine which features you can live without and which you can’t. I found an excellent comparison matrix at the Millennium Multimedia Network Web site.

Point #3: Administration in SharePoint Online Starts at the Site Collection Level.

Here is another possible deal-breaker for some current or aspiring SharePoint farm administrators: with Office 365, your “farm” management begins and ends at the site collection, and not the Web application, level. In point of fact, you have no ability to create or manage Web applications in Office 365.

This situation results in the unfortunate situation of having to maintain all of your infrastructure components, including the MySite host, within a single tenant Web application; that’s not cool.

I show you the site collection administration interface in Figure 3. Don’t be misled by the reference to “Website” in the figure; all that is a SharePoint Web site that Microsoft exposes to the Internet by using Anonymous authentication.

In Office 365, you have to deploy all your services at the site collection level

In Office 365, you have to deploy all your services at the site collection level.

Among my friends who work with SharePoint, the general consensus is that Office 365 is a decent enough offering for small and perhaps certain medium-sized businesses. However, larger shops with several hundred or several thousand users may be better off burning through the learning curve and expense of setting up a local farm.

Point #4: You can Combine On-Premises and Cloud-Based SharePoint.

It’s certainly neither easy nor intuitive, but it is possible to maintain some on-prem components and some cloud-based ones. For instance, you may need to maintain your current on-prem Active Directory Domain Services (AD DS) domain and provide your users with single sign on (SSO) to an Office 365 instance.

By contrast, you may want to eventually migrate your on-prem Lync, Exchange, and SharePoint to the cloud, but for the time being you’ll need to keep most services local and consume only selected Office 365 resources.


Office 365 provides guidance for setting up SSO, migration, and co-existence scenarios.

Point #5: Cloud Storage Opens You Up to Privacy and Legal Concerns.

For me, the issue of data sovereignty is the biggest point of concern with cloud-based services like Office 365. Do you trust Microsoft to keep your company’s internal data safe?

Microsoft’s Azure fabric embraces data centers that are peppered around the world; what are the laws in each of those host countries, states, provinces, towns, etc., with regard to data search and seizure?

Naturally, I can’t answer any of those questions for you. It’s up to you to perform due diligence, ask the difficult questions, find answers, and make your on-premises vs. cloud decision in the light of your company’s professional circumstances.

  1. Ha Ah 9 years ago

    Wow, this article wasn’t biased at all.

  2. Kunu 9 years ago

    After going through a bunch of fan-boy sites for MS, it is nice to read an article that doesn’t pull punches.

    As much as I like the idea of clouds and Saas, I don’t think we live in a world where we let others handle our sensitive data. Ask Target and Ebay about it.

  3. Joe 7 years ago

    Gary please refer to Code Space hacked on MS network. It ruined them in one day.

  4. Chintan 6 years ago

    Simple article to understand O365 in brief. thanks.

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