SharePoint Online vs On-Premise: Which Is Right for Your Business?
Compare deployment options, costs, features, and security to make the right SharePoint decision for your organization
Choosing between SharePoint Online and SharePoint On-Premise affects everything from your IT budget to your team's collaboration capabilities. Both platforms offer powerful document management and collaboration features, but they differ significantly in deployment, cost structure, maintenance requirements, and control.
This guide breaks down the key differences between SharePoint Online (cloud-based) and SharePoint On-Premise (self-hosted) to help you determine which option aligns with your organization’s needs, resources, and long-term strategy.
SharePoint Online vs On-Premise: At a Glance
| Factor | SharePoint Online | SharePoint On-Premise |
|---|---|---|
| Deployment | Cloud-based (Microsoft 365) | Self-hosted on your servers |
| Cost Model | Subscription per user/month | Upfront licensing + infrastructure |
| Maintenance | Managed by Microsoft | Managed by your IT team |
| Updates | Automatic, continuous | Manual, controlled by you |
| Customization | Limited (modern framework) | Extensive (full server access) |
| Storage | Plan-based limits (expandable) | Limited by your server capacity |
| Security Management | Microsoft's responsibility | Your organization's responsibility |
| Remote Access | Native cloud accessibility | Requires VPN or configuration |
| Best For | SMBs, distributed teams, rapid deployment | Large enterprises, unique compliance needs |
Cloud-Based vs Self-Hosted: What This Means for You
Understanding the difference starts with one question: who manages your SharePoint environment? Below are the three options—see our decision framework section for detailed guidance on choosing.
SharePoint Online (Cloud-Based)
Microsoft's cloud-hosted collaboration platform, included with Microsoft 365—Microsoft handles all infrastructure, updates, and maintenance.
SharePoint On-Premise (Self-Hosted)
SharePoint installed on your own servers—your IT team owns and manages the entire infrastructure, updates, and backups.
Hybrid SharePoint
Connects on-premise and cloud environments—ideal for phased migrations or specific data residency requirements.
Total Cost of Ownership: Online vs On-Premise
Understanding the true cost of SharePoint requires looking beyond licensing fees to include infrastructure, personnel, and ongoing operational expenses.
SharePoint Online: Subscription + Services
Monthly subscription costs (per user):
- SharePoint Online Plan 1: $5.00/month
- Microsoft 365 Business Standard: $12.50/month (recommended - includes full Office apps)
- Additional storage: ~$0.20 per GB/month beyond plan limits
Typical 50-user organization:
Year 1 (including migration/setup)
$12,500 - $22,500
Ongoing Annual Cost
$7,500 - $9,000
What's included:
- Automatic updates and new features
- Infrastructure and security management
- 99.9% uptime SLA
- Built-in disaster recovery
- Microsoft-maintained compliance certifications
SharePoint On-Premise: Capital Investment + Operations
Initial investment:
- SharePoint Server 2019 license: ~$5,000-$7,000
- Windows Server + SQL Server licenses: $4,000-$11,000
- Client Access Licenses (50 users): $1,500-$7,500
- Hardware (servers, storage, networking): $15,000-$50,000
- Initial setup/configuration: $10,000-$40,000
Typical 50-user organization:
Year 1 Total
$80,000 - $150,000
Ongoing Annual Cost
$50,000 - $100,000
(Includes IT staff, hardware maintenance, utilities, updates)
Which Is More Cost-Effective?
For most small-to-medium businesses:
SharePoint Online is 60-80% less expensive over five years. The cloud subscription model eliminates capital expenditure, reduces IT staffing requirements, and provides predictable monthly costs.
SharePoint On-Premise may be more economical if:
- You already have substantial server infrastructure and dedicated IT staff
- Your organization exceeds 500+ users (economies of scale)
- You're planning 7-10+ year deployment without major changes
The key consideration isn't just the sticker price - it's the total cost of ownership including hidden costs like IT time, downtime risk, and opportunity cost of maintaining infrastructure instead of focusing on business innovation.
Feature Differences and Update Frequency
Both platforms offer robust collaboration capabilities, but feature availability and update frequency differ significantly.
SharePoint Online
Exclusive features:
- Modern SharePoint sites with responsive design
- Deep Microsoft Teams integration (SharePoint powers Teams file storage)
- Real-time co-authoring with Office Online
- AI-powered content understanding and recommendations
- Power Platform integration (Power Apps, Power Automate, Power BI)
- Microsoft Search across all Microsoft 365 content
Update cycle:
- New features: Monthly to quarterly
- Security updates: Immediate and automatic
- No manual updates required
SharePoint On-Premise
Advantages:
- Custom farm topologies and server configurations
- Full-trust solutions and custom code deployment
- Direct control over update timing
- Legacy feature support (InfoPath, classic workflows)
Update cycle:
- Major features: Every 3-5 years (new SharePoint Server versions)
- Cumulative updates: Released monthly, must be manually applied
- Your IT team controls update schedule and testing
Both Platforms Offer:
Key difference: SharePoint Online receives new features continuously while SharePoint On-Premise requires waiting for major version releases.
Security Responsibilities and Compliance
Security and compliance considerations often determine which SharePoint platform organizations choose. The key difference: who's responsible for what.
SharePoint Online: Shared Responsibility Model
Microsoft Manages:
- Physical data center security
- Infrastructure and network security
- Encryption at rest and in transit
- DDoS protection and threat monitoring
- Automatic security patch deployment
- Compliance certifications (SOC 2, ISO 27001, HIPAA, GDPR)
You Manage:
- User authentication and multi-factor authentication
- Permission structures and access controls
- Data loss prevention (DLP) policies
- Retention policies and records management
- External sharing controls
- User security training
Compliance Features Included:
- Microsoft Purview for data governance
- eDiscovery and legal hold capabilities
- Advanced compliance tools with appropriate licensing
- Regional data residency options
- Comprehensive audit logging and reporting
Best For:
Organizations whose compliance needs align with Microsoft's certifications (HIPAA, SOC 2, ISO 27001). You can leverage Microsoft's audit documentation and their data residency options match your requirements.
SharePoint On-Premise: Full Control Model
You Manage Everything:
- Physical security of servers and data center
- Network security (firewalls, intrusion detection)
- Operating system and SharePoint security patches
- SQL Server security and encryption
- Backup encryption and offsite storage
- Disaster recovery planning and testing
- All compliance audits and documentation
Advantages:
- Complete control over all security measures
- Data never leaves your premises
- Custom security solutions tailored to your needs
- Direct control over encryption keys
Challenges:
- Requires dedicated security expertise
- Manual patching can create vulnerabilities
- Full responsibility for security incidents
- More complex disaster recovery
Best For:
Organizations with unique data residency requirements Microsoft can't meet, custom compliance controls unavailable in cloud, auditors requiring physical control of infrastructure, or highly regulated environments (defense, certain government agencies).
What It Takes to Run SharePoint
The infrastructure and maintenance burden differs dramatically between platforms.
SharePoint Online: Minimal Management
What you need:
- Stable internet connection (10-20 Mbps per 50 users)
- Modern web browsers
- Microsoft 365 subscription
Your management tasks:
- User provisioning and permissions (1-2 hours/week)
- Site administration (1-2 hours/week)
- Storage monitoring (quarterly)
Microsoft handles:
- All infrastructure and servers
- Security patching
- Performance optimization
- Disaster recovery
- Scaling
Typical IT resource
5-10 hours/week for 50-100 users (can be part-time role)
SharePoint On-Premise: Substantial Infrastructure
What you need:
- Multiple servers (web front-end, application, database)
- Storage systems (SAN or NAS)
- Networking equipment (load balancers, firewalls)
- Backup infrastructure
- Data center space, power, and cooling
Minimum hardware for 50-100 users:
- 4-6 physical or virtual servers
- 16-32GB RAM per server
- Fast storage (SSD/NVMe recommended)
- Redundant components for high availability
Your management tasks:
- Daily server health monitoring
- Daily backup verification
- Weekly SQL maintenance
- Monthly security patching (4-8 hours)
- Quarterly cumulative updates (8-16 hours)
- Major upgrades every 3-5 years
Typical IT resources
Part-time SharePoint admin (20-30 hours/week) for 50-100 users; Full-time admin for 100-500 users; Plus infrastructure team support
Maintenance Comparison
60-80%
SharePoint Online maintenance is lighter because Microsoft handles infrastructure, patching, and scaling. Your IT team focuses on governance and user support rather than keeping servers running.
100%
SharePoint On-Premise requires ongoing infrastructure attention at every layer of the stack. Patches must be tested before deployment, updates can break customizations, and infrastructure failures are your responsibility.
Customization: How Much Control Do You Need?
The extent of customization you require significantly impacts which platform fits your needs.
SharePoint Online
Modern Framework Customization
SharePoint Online uses the SharePoint Framework (SPFx), a modern development model that prioritizes security and cloud compatibility.
What you can customize:
- Site designs, themes, and branding
- SharePoint Framework (SPFx) web parts using React, Angular, etc.
- Power Apps custom forms and applications (no code required)
- Power Automate workflows with hundreds of connectors
- Microsoft Graph API integrations
- Custom APIs and external integrations
What you cannot do:
- Install farm solutions or full-trust code
- Access or modify SharePoint databases
- Create custom timer jobs (use Azure Functions or Power Automate)
- Deploy custom authentication providers
SharePoint On-Premise
Unlimited Customization
SharePoint On-Premise supports both modern and legacy development approaches with full server access.
What you can customize (everything):
- Farm solutions with full-trust server-side code
- Custom timer jobs for scheduled tasks
- Master pages and page layouts
- Custom authentication providers
- Direct database access (not recommended but possible)
- Custom service applications
Practical Customization Scenarios
Custom Approval Workflow
Integration with Third-Party CRM
Automated Nightly Data Processing
Reality Check
In our experience implementing SharePoint across dozens of organizations, 90%+ of business requirements can be met with SharePoint Online's modern customization capabilities. The question isn't usually "can we do it?" but rather "is this the most efficient way?"
Performance Comparison and Scalability
Performance depends on your infrastructure, user distribution, and growth expectations. Here are the key factors to consider:
Global Content Delivery
How your content reaches users around the world affects performance significantly, especially for organizations with distributed teams.
Scalability and Growth
Your ability to handle growth in users, storage, and usage patterns without performance degradation.
Uptime and Reliability
Guaranteed availability affects productivity and business continuity planning.
Network Dependencies
What your users need to access SharePoint effectively from their locations.
Large File Handling
Performance with files over 1GB or high-volume uploads can vary between platforms.
Real-World Comparison
For most organizations with modern internet infrastructure, SharePoint Online performance equals or exceeds well-maintained on-premise environments—especially for distributed or remote teams. On-premise has advantages for very large files on local networks, but SharePoint Online's OneDrive sync client mitigates most performance concerns.
Making the Right Choice for Your Organization
With over 30 years of IT consulting experience and dozens of SharePoint implementations, we've developed a clear framework for this decision.
Choose SharePoint Online If...
Your organization fits this profile:
- Small-to-medium business (under 500 users)
- Distributed or remote workforce
- Limited IT staff or infrastructure
- Cloud-first approach to technology
Your priorities include:
- Predictable monthly costs vs. capital expenditure
- Access to latest features
- Reduced IT maintenance burden
- Quick deployment (4-8 weeks)
- Native integration with Microsoft Teams and Office
Success story: A 75-person professional services firm migrated from file shares to SharePoint Online integrated with Teams. Result: eliminated aging server infrastructure, enabled secure client collaboration, and reduced IT costs by 60%.
Choose SharePoint On-Premise If...
Your organization fits this profile:
- Large enterprise (500+ users) with established IT infrastructure
- Substantial existing investment in on-premise SharePoint
- Dedicated SharePoint administration team
- Highly specialized workflows on legacy SharePoint
Your priorities include:
- Complete control over infrastructure and data
- Extensive customizations beyond modern framework
- Integration with on-premise line-of-business systems
- Specific performance requirements
Important: Microsoft's development focus is clearly on SharePoint Online. SharePoint Server 2019 support ends in 2026. Long-term, most organizations will eventually migrate to cloud.
Consider Hybrid SharePoint If...
Hybrid makes sense when:
- You're planning gradual migration from on-premise to cloud
- Specific sensitive data must remain on-premise
- You need unified search across both environments
- Your organization is too complex for immediate cloud migration
Hybrid deployments require both on-premise infrastructure and Microsoft 365 subscriptions. They're typically transitional states rather than permanent solutions.
How Abel Solutions Helps You Decide
We don't push a preferred platform - we help you find the right solution. Our SharePoint Strategy Assessment includes:
Discovery Phase
- Infrastructure and IT resource evaluation
- Requirements analysis
- Compliance and security assessment
- User distribution patterns
- Integration needs with existing systems
Analysis Phase
- Total cost of ownership comparison (5-year)
- Feature gap analysis
- Migration complexity assessment
- Risk evaluation
- Customization requirements review
Recommendation
- Clear recommendation with detailed justification
- Migration roadmap if applicable
- Phased approach options
- Budget and resource requirements
- Implementation timeline
No-pressure consultation
We provide transparent advice even if it means recommending a solution that requires less of our services. Our goal is helping you make the right decision.
Schedule Your SharePoint Strategy AssessmentHow Abel Solutions Manages SharePoint Migrations
Whether you're moving to SharePoint Online or implementing on-premise, our proven methodology ensures zero data loss and minimal disruption to your team.
Discovery & Assessment
We begin with comprehensive discovery—inventorying your source content, analyzing structures and permissions, and understanding your business requirements.
What We'll Analyze
- Complete file inventory (volumes, types, ages)
- Permission models and access patterns
- Custom workflows and third-party integrations
- Compliance and retention requirements
Deliverable: Migration assessment report with complexity scoring and timeline
Strategy & Planning
Based on discovery findings, we design your optimal SharePoint architecture and create a detailed migration plan with minimal user disruption.
Planning Includes
- Content reorganization recommendations
- Permission simplification strategy
- Workflow modernization approach (Power Automate where applicable)
- Phased cutover schedule based on your priorities
Deliverable: Detailed migration plan with site architecture and timeline
Pilot Migration
We migrate a representative subset of content first—validating our approach, identifying issues, and refining the process before full deployment.
Pilot Phase Includes
- Select pilot group of content and users
- Test migration tools and validation procedures
- Verify permission translation accuracy
- Gather user feedback and optimize approach
Deliverable: Pilot results report with refinements for full migration
Full Migration
Using enterprise-grade migration tools, we execute your migration in phases—with continuous monitoring, delta synchronization, and rollback capability.
Migration Approach
- Phased migration by department or content type
- Delta sync for changed files during cutover
- File count and checksum validation
- Daily status reporting and issue resolution
Deliverable: Migrated content with validation reports
Post-Migration Support
After migration, we provide comprehensive validation, user training, and hypercare support to ensure successful adoption and address any issues quickly.
Support Includes
- Complete validation and sign-off documentation
- End-user, power user, and admin training
- Quick reference guides and video tutorials
- Hypercare support during transition period
Deliverable: Training materials, validation sign-off, and source decommissioning plan
Ready to plan your SharePoint migration? Let's assess your needs and create a risk-free roadmap.
Discuss Your Migration ProjectCommon Questions About SharePoint Online vs On-Premise
Yes, migrating from SharePoint On-Premise to SharePoint Online is common and well-supported. Microsoft provides migration tools, and the process has become increasingly streamlined. However, custom code and certain features may need rebuilding with modern frameworks.
Most organizations complete migrations within 8-16 weeks depending on content volume and complexity. Abel Solutions specializes in these migrations and can assess your specific situation.
Yes—for most organizations with modern internet infrastructure, SharePoint Online performance equals or exceeds on-premise. See our detailed performance comparison above covering global CDN, scalability, uptime guarantees, and large file handling.
If you have specific performance concerns, Abel Solutions can assess your requirements during a consultation.
Yes—Microsoft maintains extensive compliance certifications (HIPAA, SOC 2, ISO 27001, GDPR, FedRAMP, and more). See our security and compliance section above for details on the shared responsibility model and compliance capabilities.
For highly regulated industries with unique requirements, on-premise may still be necessary. Abel Solutions can assess your specific compliance needs.
SharePoint Online supports extensive customization using modern frameworks—SPFx, Power Apps, Power Automate, and Microsoft Graph APIs. See our customization comparison above for a detailed breakdown of what each platform supports.
The key distinction: Online uses sandboxed, cloud-compatible development; On-Premise allows full server access. Most business requirements work well with modern Online tools.
Yes, this is called hybrid SharePoint. Hybrid configurations allow unified search across both environments, cloud hybrid search indexing, OneDrive redirection, and shared taxonomy.
Common hybrid scenarios include: gradual migration to cloud, keeping sensitive data on-premise while using cloud for general content, and maintaining legacy customizations while moving to modern workloads.
Hybrid deployments require both on-premise infrastructure and Microsoft 365 subscriptions. They're typically transitional states rather than permanent solutions.
Abel Solutions can design and implement hybrid SharePoint environments during your cloud transition.
Ready to Choose Your SharePoint Platform?
Still weighing your options? Our decision framework above walks you through the key factors. Or skip straight to expert advice—we'll assess your environment and provide unbiased recommendations.
Partner with Abel Solutions
As a Microsoft Solutions Partner with 30+ years of IT consulting experience, Abel Solutions brings deep SharePoint expertise across industries. We've implemented SharePoint in organizations from 25 to 500+ users.
How we help:
- SharePoint Strategy Assessment with unbiased recommendations
- Implementation services for Online, On-Premise, or Hybrid
- Expert migration from any platform to SharePoint
- Ongoing managed services and optimization
Our approach:
- Vendor-neutral advice (what's right, not what's profitable)
- Industry-specific best practices
- Proven methodologies
- Long-term partnership beyond go-live