Is on-premise still up to date?

On-premise is expensive, maintenance-intensive and ties up valuable IT resources. According to the Bitkom Cloud Report 2025, around 90% of all German companies already use cloud applications. Almost two thirds even state that they would no longer be competitive without cloud solutions. The trend is clear, but it does not mean that on-premise is outdated across the board. In this article, you will learn

• under what circumstances it may make sense for companies to stick with a dedicated IT infrastructure,
• which points need to be considered in particular,
• how managed hosting provides relief and security
• and why hybrid solutions are currently in particularly high demand.

On-premise and managed hosting: what's behind it?

On-premise means that the server, storage, network and software run on the company's own hardware in its own data centre or server room. The company bears full responsibility for operation, maintenance, security and backups. Investments flow into the balance sheet as capital expenditure (CAPEX).

Managed hosting means that the hardware is located at the external service provider, who takes over operation, monitoring, patching and backups on the basis of contractually agreed service level agreements (SLAs). The customer pays a recurring operating fee (OPEX) without having to maintain their own hardware. Unlike public cloud offerings, managed hosting can also include dedicated, physically separate server environments, which is particularly relevant for data protection and compliance.

The key difference is therefore not just in the technology, but in the question of responsibility: who operates, who is liable and who sleeps more soundly at night?

On-premise: strengths, weaknesses and relief options

On-premise is justified where control and independence count: for specialised hardware, industrial control systems without WAN dependency or very specific compliance requirements. But many people underestimate this: In-house operation is more expensive than it appears at first glance. TCO analyses consistently show that the total costs over several years are significantly higher than for comparable managed hosting solutions as soon as electricity, cooling, licences and personnel costs are fully taken into account. In addition, scaling means new hardware and can take weeks, while disaster recovery, high availability and security expertise must be provided entirely in-house. This requirement is simply not feasible in the long term, especially for SMEs, as IT security specialists are rare and expensive.

Managed hosting solves precisely these pain points. Resources can be adapted at short notice and in line with requirements, without tying up capital in hardware. Round-the-clock monitoring, automated backups, patch management and certified security standards such as ISO 27001 are included in the service instead of having to be painstakingly set up and permanently financed internally. Geo-redundant data centres with automatic failover and contractually secured availability SLAs offer a level of resilience that a single server room in the company building can hardly achieve. Monthly operating costs protect liquidity and make IT budgets easier to plan than large, multi-year hardware investment cycles.

From in-house operation to managed hosting: procedure, choice of provider and data sovereignty

For SMEs with an existing on-premise infrastructure, a structured evaluation is recommended rather than a hasty switch: applications on specialised hardware or with offline requirements can remain local for the time being. Standard workloads such as email, collaboration, CRM or DMS, on the other hand, are typical candidates for managed hosting, as they clearly benefit from professional external operation. If hardware has only recently been procured, a step-by-step approach makes sense: run existing systems to the end and develop a migration roadmap in parallel.

The choice of the right provider plays a decisive role here, particularly with regard to data sovereignty.

Anyone who decides to outsource all or part of their IT operations should first clarify the following: Where is my data located, who has access to it and under what law? Since the NIS 2 Implementation Act came into force on 6 December 2025, this question is no longer a voluntary consideration for many organisations, but a legal obligation. Companies with 50 or more employees must register with the BSI, provide evidence of risk management measures and report significant security incidents within 24 hours. The EU Data Act also strengthens the right to data mobility and makes it easier to switch between cloud providers.

The key insight here is that data sovereignty is not a question of on-premise or managed hosting, but a question of choosing the right provider. EU-sovereign managed hosting can be just as data protection compliant as a dedicated server room in Germany, provided the provider operates exclusively under EU law. This is precisely where the danger lies with providers with a US corporate structure: the US CLOUD Act can allow American authorities to access data, even if it is physically located in a German data centre. This is a real legal conflict with the GDPR that is often underestimated in practice.

If you want to be on the safe side, check four specific criteria when choosing a provider: the provider's registered office within the EU, the physical location of the data centres in Germany or the EU, relevant certifications such as ISO 27001 and contractual guarantees regarding data residency and sub-processors. Qualified managed hosting providers that fulfil these criteria provide the relevant evidence as an integral part of their service portfolio, thereby significantly reducing the internal effort required for auditing and compliance documentation.

The pragmatic way: hybrid as the norm

Many medium-sized companies today are not faced with the question of whether, but rather how they should further develop their existing on-premise infrastructure. The practical answer is clear: for companies with 50 to 500 employees, the majority of analysts recommend a hybrid model in which sensitive core systems remain in a controlled environment, while standard workloads migrate to professionally operated external environments.

In concrete terms, this means that critical specialist applications on specialised hardware or production systems with offline requirements remain local for the time being. If hardware has only recently been procured, it makes economic sense to operate it until the end of the amortisation period and develop a migration roadmap in parallel instead of making a hasty investment. At the same time, according to Eurostat, standard applications such as email, collaboration, CRM, ERP or DMS are the most common cloud workloads in EU companies and therefore the most obvious first candidates for switching to managed hosting.

The decisive impetus here does not come from technology, but from regulation and the shortage of skilled labour. For those who cannot build a team internally to operate NIS-2-compliant security processes on a permanent basis, professional managed hosting with an EU-sovereign provider is no longer an option, but a strategic necessity.

What managed hosting actually does in hybrid environments

The added value of managed hosting is particularly evident in hybrid setups. Three practical examples make this tangible:

• Manufacturing companies: Production control continues to run locally, ERP and DMS have been migrated to an EU-sovereign managed hosting provider. The IT team is thus relieved of ongoing operations, patching and backup management and can concentrate on its core business. A site-to-site VPN tunnel permanently secures data traffic between the company network and the data centre, while field technicians connect via remote access VPN.
• Retail company with seasonal peak loads: The web shop runs in managed hosting and scales at peak times without the need to procure new hardware. The merchandise management system remains on-premise and is securely connected via site-to-site VPN. The provider takes over 24/7 monitoring and DDoS protection, which would not be feasible internally either in terms of personnel or finances.
• Service companies with distributed locations: Several branches access a central CRM and collaboration platform operated in managed hosting. Instead of operating its own servers at each location, the company utilises the provider's geo-redundancy and contractually secured availability SLAs. Compliance certificates such as ISO 27001 are supplied directly by the provider, which significantly reduces the internal auditing effort.

What all three examples have in common: The greatest benefit of managed hosting is not just in the technology, but in the transfer of responsibility to specialised service providers. Operation, security, availability and compliance become a service instead of having to be maintained internally around the clock. VPN is the secure connection layer between the two worlds, but is no substitute for a well thought-out overall concept comprising endpoint security, patch management and network segmentation.

Conclusion: On-premise is not dying - but it needs to reinvent itself

On-premise is not outdated and obsolete per se. For certain workloads, specialised hardware, offline scenarios and industries with very specific requirements, it remains a valid or even the best option. However, pure on-premise as a standard strategy for the entire IT operation is rarely still the best choice in 2026.

The combination of increasing cost pressure, a shortage of skilled labour, growing regulatory requirements (NIS-2, GDPR, EU Data Act) and the demand for greater agility is clearly driving the market towards hybrid architectures. The pragmatic approach for companies with an on-premise infrastructure is therefore: don't rush to migrate, but don't wait either. Instead: Analyse workloads, protect critical systems, gradually transfer standard IT to sovereign managed hosting environments - and use VPN as a secure link between the two worlds.

Those who rely on EU-sovereign providers with certified German data centres win on both sides: Control over sensitive data and the relief that professional external operation brings.