Local server or cloud server? Advantages and disadvantages

Although cloud technologies have become increasingly popular and affordable, many companies still prefer to use their own application servers, connected to their local infrastructure.

In this article, I’ll walk you through a side-by-side comparison, explained in plain language.

Local application server

Setting up a local application server means buying the physical server, which involves a fairly high upfront cost. Plus the fee for setting up the application server.

On top of that come the cost of the electricity the equipment uses, an internet subscription and an IT maintenance and support plan for managing and securing the server.

One of the big advantages of a local server is that data is accessed over the internal network, which gives you faster access. And if you choose a hardware configuration that suits your business needs, the workflow should be pretty smooth.

Upgrading a local server’s resources is fairly hard to plan, because the server has to be shut down while the work is being done.

How many times has the internet gone down at the office, bringing all work to a halt? Or has there been a network failure that either slowed work down or stopped it completely?

The big problem with local servers is that they depend on the power and internet connections at the company’s office.

Cloud application server

Cloud-hosted servers come with a monthly fee, which is fairly small compared with the cost of buying a physical server. The price is usually calculated either by the hardware resources allocated or by the number of users.

On top of the monthly cost come the price of setup and configuration, as well as the cost of managing and supporting the application.

The main advantage of this kind of setup is that it doesn’t depend on the local infrastructure or the office internet connection. Since it’s hosted in the cloud, if it’s configured correctly, it will run 24/7.

Increasing a cloud server’s resources also means less downtime than upgrading a physical server.

In terms of security, both the cloud server and the local server can be secured so that malicious people can’t access them.

To sum up

Physical servers:

• involve a higher upfront cost
• depend on the local infrastructure
• are harder to scale
• involve lower monthly costs

Cloud servers:

• involve a monthly cost based on your business needs
• don’t depend on the local infrastructure
• are scalable

What should you choose in 2026: a local server, a cloud server or a hybrid solution?

For most companies, the answer in 2026 is a hybrid solution: email, documents and collaboration in the cloud (Microsoft 365 or Google Workspace), and applications that need fast access on the local network, such as some accounting, ERP or design software, on a local server or in a private cloud.

A few things have changed since 2021, when we wrote this article:

• Local email servers are increasingly hard to justify. Exchange Server 2016 and 2019 haven’t received updates since October 14, 2025. The successor for on-premises installations is Exchange Server Subscription Edition, which requires a subscription, and for many small companies Microsoft 365 is the simpler option.
• Old servers have an expiration date. Windows Server 2012 and 2012 R2 haven’t received updates since October 10, 2023, and support for Windows Server 2016 ends on January 12, 2027. A local server running these versions now belongs in the migration plan. Details in our article on end-of-life (EOL) technologies.
• Cloud costs should be calculated over several years. The monthly fee is small at first, but for servers that run around the clock, a few years of cloud can cost more than a physical server. Compare the total cost over 3–5 years: equipment, licenses, power, internet, management and backup.
• Backup remains essential in both cases. Neither the local server nor the cloud server replaces a backup. Keep at least one copy of your data in another location, following the 3-2-1 rule. See also Backup as a Service.
• A second internet connection matters in both cases. With cloud applications, the office needs internet to work. A backup connection, from another provider or over 4G/5G, with automatic failover, keeps it connected when the main internet goes down.

For servers in the office, RezolvIT handles IT infrastructure: networks, servers, virtualization and migration to Microsoft 365, Google Workspace or AWS. For hosted applications, see our managed cloud service.

RezolvIT is an IT outsourcing company with the expertise to serve clients who use both physical servers and cloud servers. If we’ve convinced you, ask for a quote right now: we start with a free IT audit, which also gives you the exact price.