SharePoint On-Premise vs SharePoint Online – head to head


If you’re still wondering which way to go when it comes to choosing SharePoint On-Premise or SharePoint Online for your business, here’s an overview of the basic differences and a features comparison that can help you decide.

This comparison is between the features offered in SharePoint 2016 On-Premise vs. the current options available in SharePoint Online.

Features Comparison

Features SharePoint On-Premise SharePoint Online
Document Versioning                    √                    √
Co-authoring                    √                    √
Microsoft Teams Integration                    X                    √
Office 365 Groups                    X                    √
Workflows                    √                    √
Server Hardware Doesn’t Need Support                    X                    √
Custom Development Supported                    X*                    X*
Network Administrator Needed                    √                    √*
Ongoing Patching of System Not Needed                    X                    √
Immediately receive new features and fixes                    X                   √
Security & Compliance Tools               Limited                    √
Multi-factor Authentication                    X*                    √
Backup and Restore OOTB                    X*                    √
External Access (Extranet)                    X*                    √


√ = Yes                      X = No

√* = Recommended but not required

X* = Not required/Included but can be done/used

OOTB = Out of the Box (included by default)

Main Differences

Resources Required

Whenever the debate is between an on-premise or a cloud solution, the foremost point is the dependency on internal resources. SharePoint On-Premise requires a dedicated IT support to help you manage the hardware, software and the users. On the other hand, SharePoint Online reduces the dependency on internal resources and has better global deployment for fail-over and redundancy features. There’s also a huge difference when it comes to costs involved, compliance standards, storage requirements and technical features.

Data Storage Location

While information in SharePoint On-Premise stores in the physical server farm located within the corporate network, in SharePoint Online (Office 365), the company data stores in the cloud, which resides in the Microsoft Data Center (MDC). Some companies find this a stumbling block due to legal or compliance reasons and choose SharePoint On-Premise instead.


With the traditional on-premise system, companies need to have a more significant upfront investment on the purchase of hardware, cost of licenses and other associated expenses. On the other hand, SharePoint Online offers annual subscriptions for Office 365 plans and bill monthly on a per user basis only where there’s little additional upfront costs.

Maintenance of SharePoint On-Premise environments are often costlier than a SharePoint Online environment primarily because of the resources needed to manage the hardware and software. SharePoint Online does not require an engineer for smaller setups, but for larger and/or more complex deployments you need an Office 365 Engineer/Architect/Administrator.

Also, storage requirements are often costlier in an on-premise environment. But, SharePoint Online requires lesser storage cost with various economy plans available from Office 365.

Typically, backup/restore and disaster recovery (DR) costs associated with on-premise SharePoint are higher than SharePoint Online. The need for an outside data center and offsite location for mirroring of content can be very expensive. Office 365 offers these services included with its Enterprise plans.

Infrastructure and Maintenance

In the on-premise environment, the company’s IT team deploys and manages the farm; latest updates and patches may not always be deployed, and this depends on the organization’s internal resources. In the online solution, Microsoft manages the environment and ensures all updates and patches deploy automatically.

External Access

SharePoint Online or Office 365 is a collaborative solution for teams, and the documents are accessible from any device and from anywhere in the world. SharePoint Online has a built-in Multi-Factor Authentication (MFA), which users need to acknowledge a phone call, text message or app notification on their smartphones after entering their passwords. The sign-in happens only after the satisfying the second authentication factor. The MFA is an option for users and can turn on or off, depending on the level of security the user needs for Office 365 data. The external access feature is not available on SharePoint On-Premise.

Business Continuity

While the on-premise solution gives you more direct control of your information and compliance standards, it more heavily relies on your internal capabilities than the online solution, which relies on the Microsoft Master Data Services (MDS). In the online environment, Microsoft offers built-in redundancy and fail-over for data centers but does not provide end-user backups or data recovery.

However, companies could worry about letting industry-specific standards or verification by third parties control their information security, and this makes them unsure about migrating to SharePoint online.

Customization Options

When it comes to custom development, On-Premise gives full support for server-side and client-side code; it allows app usage from OAC and SAS. In the online solution, while custom development isn’t necessary, there’s full support for client-side code but only limited support for server-side code.

Server Patching and Updates

SharePoint Online has a big advantage here where you do not to be very concerned about ongoing patching of the system or receiving the latest and greatest features. You get them right away with SharePoint Online. However, sometimes this could cause issues, such as if you have any customizations. For example: Modern Lists was released to SharePoint Online and it broke some branding customizations as the CSS changed for the new ‘Modern Lists’. The feature is great but with these releases it can be difficult to foresee issues until they happen. Microsoft does however offer some beta programs to get these releases early for testing and can be configured in the Office 365 SharePoint Administration section. In addition, you can opt to set up a developer site or test ‘Tenant’ to beta test before official releases hit your production Office 365 SharePoint instances.

Backup and Restore

A critical piece of the equation that is often overlooked when comparing the two options is that SharePoint Online provides backups automatically whereas in on-premise it is a more elaborate process, which involves a lot of time, resources and associated costs. While on-premise administrators ensure that data is backed up consistently with the help of some on-site storage medium, in SharePoint Online, Microsoft takes backups of the site collections every 12 hours and kept intact for 14 days.

If you need a restore, you will have to opt for a full-restore of the site collection because in SharePoint online you can’t restore a single item, document, list or library. However, there are two other ways to restore your data. You can either turn to the recycle bin, which holds deleted files for 30 days after deletion in SharePoint Online or use versioning to restore a previous version of the same file.

To overcome the problem of the 14-day restore window and to enable restoration of information at a more granular level, some users opt for third-party backup solutions for SharePoint Online. However, in comparison to the expenses involved with backup on-premise, these third-party solutions provide cost-effective solutions that improve data recovery in SharePoint Online.


Due to the increasing number of data breaches happening on networks around the world, data encryption plays a vital role in safeguarding information in the cloud or on-premises. In the online environment, data encryption happens at three different stages: (i) when data is used outside the storage system’s control, (ii) when data is at rest and (iii) when the data is in transit (i.e., between user and data center). Although cloud-based systems like Office 365 are doing everything they can to keep the data safe, there’s no security team that can guarantee complete protection of data privacy in either environment.

Organizations are yet to gain confidence in migrating their data to SharePoint Online or Office 365 rather than keeping the data on-premises. However, looking at overall benefits of cost, maintenance, resource requirements, etc., companies are increasingly making the move and slowly gaining more trust in cloud services.

Since data in SharePoint On-Premise is stored within the corporate network on the server farm, people tend to perceive the on-premise environment to be more private and secure than its cloud counterpart. However, in both cases, it’s the organizational practices, data governance policies and the infrastructure setup that will help dictate how secure an organization’s sensitive content is from a data breach. 

The Verdict

Whether you’re a new SharePoint user or in the deciding stages of changing your IT environment from on-premises to online, you need to take into account the differences in infrastructure and support required for each of these solutions. Get the main stakeholders on-board while making important considerations, and based on your business goals, it will become much clearer which path to choose.

Microsoft is making rapid progress in helping organizations become a cloud-first, mobile-first enterprise. With the changing landscape in terms of roles and tools, users will increasingly learn that SharePoint On-Premise itself could undergo several makeovers.

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Chris Ang

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