SharePoint 2016 On-Premises Versus Hosted in the Cloud Which One is Better?

SharePoint Online vs SharePoint 2016

Sharepoint Cloud Benefits

SharePoint environments and their various strengths and weaknesses differ, which can make it tricky to navigate their subtle nuances.

Why should this matter to you?

The deployment you choose for your business will have a variety of impacts on how you operate — from cost structure and resources needed, to your ability to scale and meet needs for reliability.

Making the proper choice now is about fine-tuning your operations to be as efficient and effective as possible. We’ve put together this guide to take a quick look at the key differences between SharePoint (on-premises) and the latest iteration of SharePoint Online. Let’s get started and examine SharePoint online vs SharePoint server  by looking at your specific business objectives for your server.

Office 365 Quick Update Note

SharePoint has seen a significant boost in overall reliability in 2016 and its user interface will be easier to operate for many. The 2016 update made UI changes so that all SharePoint deployments look and feel like Office 365, making it easier to navigate if you’re a Microsoft power-user.

SharePoint Online is designed to integrate specifically with Office 365 and the new update has really boosted this capability, making the online option leaner and easier to share information across.

SharePoint (on-premises) now includes a hybrid option that allows it to work with Office 365, which eliminates some of the burden of older versions where this integration was very difficult. There are still some tricky aspects to that integration, including linking scenarios where users accessing files in OneDrive may be accessing content on the Office 365 My Site instead of the On-Premises’ local storage.

These problems aren’t significant to overcome and often have practical benefits — such as working on files that all team members can easily access — but it’s a shift that may introduce some training needs for your team.

Understanding Your Resources

Firmware Update Graphic

At the 50,000-foot level, SharePoint (on-premises) takes up more physical space to house and run, with your IT team devoting more attention to site and server room maintenance than they would with the Online version.

Your on-site deployment will create a larger need for hardware, local bandwidth and teams to manage it. The Online version will not have these same needs, so your budget and your team are generally freer to work on your core business needs.

In most cases, this means that the cloud option will deliver better productivity, but you may have more difficulty with platform integration and the development of custom tools because you do not have complete control over the hardware.

Using Your Resources:
Maintenance and Updates

SharePoint Online has the benefit of relying on Microsoft teams for maintenance and updates of the underlying hardware and platform, ensuring that your servers are upgraded or patched when the need arises.

If you’re managing an on-premises deployment, then you’ll have to assign a team that stays on top of the latest patches and updates to test them and ensure that your system is properly updated when necessary. Your team will also need to consistently review your hardware to know that everything is in working order, making replacements to blades, racks, cooling equipment and other items as necessary.

Downtime for updates has been reduced for both deployments, thanks to the 2016 update. Packages have been reduced in size and number so you won’t have to worry about business loss or extensive planning for upgrades, which is a huge improvement for both options.

Maintenance cycles are expected to be consistent for this version and, so far, patches have not come in great floods, so maintenance and updates are not likely a significant concern for a business. The one area where this is not true could be on small teams where the time of your team is very valuable and it’s a more affordable option to pay Microsoft to do the online maintenance for you.

sharepoint server 2016

Information Location

As with all cloud platforms, using an online system means your information is not sitting in a final, physical location that you control. It’s parked in a server farm somewhere that is hopefully safe and secure.

On-premises solutions place your information in a very specific location and you have greater control over who has access to that data, both through digital connections and who can access the physical room where the information is stored.

Here is where you’ll want to check with your compliance officer, especially if you’ll be undertaking a SharePoint migration effort. If you have regulatory or privacy concerns that would normally prevent you from using online backups — or if your data is extremely sensitive and any unauthorized access could put customers at a risk of significant fraud or harm — it may be best to look at the SharePoint (on-premises) solution.

Examining Your Data Expertise

sharepoint server 2016One of the core differences between the two SharePoint configurations is how your data will be managed, especially in terms of compliance, security and general business continuity.

SharePoint Online will turn to Microsoft for data center redundancies. SharePoint Online will also have its own set of controls that let you set some compliance requirements, and allow you to configure broad settings for anti-malware/spam control and data encryption. In its 2016 release, Microsoft noted that much of the controls and tools will be consistent with Office 365 content controls.

Office 365 does support integration with an on-premises Active Directory or other directory stores and identity systems such as Active Directory Federation Services (ADFS) or third-party secure token systems (STSs) to enable secure, token-based authentication to services.

SharePoint Online also supports advanced features like federated identity and single sign-on that you have available through Office 365.

Virtually all of this functionality support is available for a SharePoint on-premises deployment, but your staff is the one responsible for initializing and maintaining it. You will need internal experts to manage all of this data governance, third-party application support, compliance standards management and other informational controls.

The upside is that a robust IT team for a larger organization can often create systems that run more smoothly and meet your specific needs, leading to less downtime and optimized platform lifecycles. You set the standards that your industry and security needs demand, and your team meets them, without having to give up control or take on broad security packages.

For industries that need third-party compliance verifications, On-Premises deployments can make more sense because it’s easier to adjust your system to fill any gaps that an analyst finds and you’re able to close any holes that could lead to potential problems.

Understanding the Add-In Model

Part of the improvement to SharePoint 2016  on-premise features is the add-in model that supports customized solutions in terms of trust. This was previously often called the app model, but in 2016 it got an upgrade that allows you to enable customizations that are compatible with a myriad of processes.

One important note for Online users is that the add-in model now supports more custom deployments based on specified compatibility requirements, so it’s easier to create a package that’s truly your own.

A full trust farm build is possible for On-Premises but industry experts are saying it’s not as viable for cloud strategies, especially if you plan to migrate in the future. Today’s add-in model isn’t quite compatible with full trust so the transition can get a bit rocky.

It’s a good best practice to make sure that your customizations would be supported by SharePoint Online, even if your plan currently is to stick with SharePoint On-Premises.

Scaling and Sizing

Software Image for SharePoint Migration article

SharePoint Online is going to require a closer watch when it comes to managing data sprawl because of the imposed capacity limits. Yes, you can typically request, and pay for, more space, but that can quickly add up if you’re not closely monitoring how your people uses data. Capacity limits can be a significant concern if your budget is tight.

Remember, SharePoint Online is a resource under the Office 365 umbrella, so it’s just one piece of the overall management you’ll have to watch. This requires vigilance to make sure you’re optimizing your investment and not pushing limits with activities like duplicating information across internal components and OneDrive or other digital storage.

SharePoint On-Premises frees you up to focus on managing just SharePoint on its own and building the capacity you need. Your team may also find it easier to run proper database governance rules on hardware and systems they have complete access too, though this depends largely on their experience and skill level.

If you won’t be managing data governance yourself, it’s an important area to sit down with your IT team leads to discuss. Knowing what they’re capable of and how they can use their existing skills — plus where the gaps are — can help you determine where you’ll be best positioned to manage the growth of your data in order to control overall costs.

Determining Infrastructure Needs and Support

sharepoint server 2016SharePoint Online and On-Premises both have a list of infrastructure requirements and prerequisites that you’ll need to have, but there will be less for the Online version. Part of your monthly per user payment in the Online space goes toward shifting that burden from your site to Microsoft’s data centers.

That said, it’s important to take a look and be certain that you have or can get what you need for the deployment.


Microsoft has a precise list of full requirements for prerequisites and operating systems that you can view, but we’ve chosen a few of the most important for our list below:

  • Windows Server 2012 R2 with .NET Framework 4.5.2 or above
  • Required prerequisites that are “installed by the SharePoint Prerequisite installer,” such as SQL 2012 Native Client, ODBC Driver 11, Application Server Role and Web Server (IIS) Role
  • SQL Server 2014 (it does support SQL Server 2016)

Beyond that, you’ll need proper servers, racks and other hardware to run On-Premises, connect it to your entire network, manage traffic flow, provide security and have the capacity for all of the activity and data you’ll be storing.

Again, it’s worth noting that you’ll need a team to manage all of this IT.

SharePoint Online

Infrastructure requirements are virtually nonexistent when it comes to SharePoint Online, with one important caveat: you’ll need the hardware and support systems to properly migrate to SharePoint Online and perform any other migrations in the future.

A smoother SharePoint migration is often facilitated by tools. If you take this route, you’ll need the infrastructure to offer support during your migration, and you’ll want to keep equipment around that can support future migrations just in case the need arises.

On the operational level, there aren’t any true requirements for running your SharePoint that will apply across the board. You need to do a thorough review of your business operations and come up with a proper set of equipment requirements and on-team talent to manage your day-to-day.

Your team becomes your most important asset because they’ll be managing your infrastructure and will be needed to routinely check back and make sure you can adjust to changes in business objectives and practices.

Cost and Affordability

Save Money with Link Fixing Software

Cost is usually the first thing businesses consider, but a true and proper SharePoint cost calculation depends on a lot of factors of your business in terms of size, scope and users.

You need to have a strong view of your existing IT infrastructure, talent on staff, users who will need access and your business goals to be able to make a proper estimate.

We typically believe that you should turn to Microsoft directly to understand SharePoint 2016 licensing and the associated costs.

Looking at cost broadly, SharePoint Online tends to be cheaper, so migrating to it is a better option for many when compared to the costs of upgrading to SharePoint (on-premises):

  • SharePoint Online is licensed on a per-user basis either as a standalone plan or as part of your Office 365 plans.
  • On-Premises requires licensing, infrastructure upkeep and maintenance, equipment purchases and more IT resources. SharePoint Server 2016 will be required for each instance and CALs are required for each person or device accessing your SharePoint Server. Microsoft offers both standard and enterprise-grade CALs.

Every deployment is a little different, so work with Microsoft and your existing vendors to get a true estimate of your costs.

A Few Final Decision Thoughts

sharepoint server 2016Part of the goal of this guide is to help you make a decision on SharePoint (on-premises) vs Online, so we want to provide some basic questions and considerations for each option to help you make the right choice. These are broad generalizations and should only be viewed as a very high-level guide that doesn’t consider the granular nature of your operations.

SharePoint (on-premises):

Select when:

  • Your company policies, regulations or considerations do not allow the use of cloud services.
  • Your existing budget, hardware and staff can maintain the SharePoint environment. This includes having the right data center controls and hardware.
  • You want to limit access to SharePoint to a physical location, preventing access for mobile users, customers or outside business partners.
  • Customizations you use aren’t supported by SharePoint Online.

Don’t pick when:

  • You want to provide access to people or partners off-site.
  • You lack a data center or the capacity in your existing data center to fit the increased demand.
  • You lack the physical space to install and properly care for new hardware.
  • You don’t have the budget for new equipment and staff, plus storage and maintenance cycles.

SharePoint 2016 Online

Select when:

  • You have a small IT team.
  • Policies give you the go-ahead to use cloud services.
  • You want to extend support and access to people not on your site.
  • Your customizations don’t interfere with the Online edition — or you aren’t using any customizations
  • Your budget and space don’t support the addition of new infrastructure, team members and connections.

Don’t pick when:

  • Policies, regulations, customizations or other business practices prohibit the use of cloud services and online storage of data.
  • You want tight control over access or are concerned with the ability to secure outside access to your SharePoint.
  • You have a large staff and existing infrastructure that support exiting environments and custom development.
  • You have specific data control and usage needs, requiring your team to create custom interactions and apps.

Your Data Migration Partner

Network Adminstrator with Cloud Migration Icon

We hope this guide put you closer to making the right decision for your business. LinkTek is here to support your SharePoint usage and make it easier on your IT team every single day. We do that by offering tools like LinkFixer Advanced that make SharePoint migration simpler by fixing or even preventing broken file links.

We hope this helped and wish you luck on your SharePoint 2016 journey.

Related Posts

joseph popp

Malice, Money, Monkeys and a Madman: The Origin of Ransomware

Feb 19, 2024

IT Tips & Tricks Malice, Money, Monkeys and a Madman: The Origin of Ransomware Published 19 February 2024 Share on Facebook Share on Twitter Share…

Read More
Setting Icon

IT Professionals: Do This One Trick and Never Worry About Broken File Links Again

Feb 15, 2024

IT Tips & Tricks IT Professionals: Do This One Trick and Never Worry About Links Not Working Again! Published 8 June 2017 Updated 13 February…

Read More
Server refresh

How To Determine Whether You Need a Server Refresh or Not

Feb 9, 2024

3 Reasons Shorter Might be Better. Sometimes shorter just is better. Think of meetings, almost always better when shorter, if you could only keep Richard from opening his pie hole with one more of his redundant “points of discussion”.

Read More
box migration tool

Release of New Version of Link-Fixing Software Offers Support for Migrations To or From

Feb 25, 2022

Data migrations can be tricky. Migrating to or from Box is no different. Get some help.

Read More
Software Update

Latest Release of LinkFixer Advanced™ Streamlines Cloud Data Migrations

Jan 27, 2020

Migrating to the cloud? Link-fixing software helps prevent post-migration data-loss. Chat with us about options, including a free webinar.

Read More
Computer Server

Newest Release of Automatic Link Fixing Software Simplifies the Process of Protecting Links When Moving to SharePoint On-Premise or Online

Oct 2, 2018

Whether on-premises or online, a migration to SharePoint could result in data loss without the best tool for the job. Chat with us about your options.

Read More