Cloud Hosting Services or Premise Servers: Which are Best for Banks and Credit Unions?

“It’s in the cloud.” It’s a common phrase used in various situations today, from looking for work files to describing how video game players pick up where they left off in their last session. “It’s in the cloud,” says that there is data out there somewhere and it is accessible, but how does that work? What is the cloud? How is a file being in the cloud different from it existing on the computer you use at work or existing in the big computer closet at the office? Why should financial institutions use a cloud hosting service instead of keeping servers on their premises? Keep reading for the answers to these questions and more.

digital art of a cloud and a desktop computer representing cloud computing

What is the Cloud?

What is this technology that allows banks and credit unions to pull files from computers and servers that exist elsewhere? That question is the answer! The cloud is a set of servers (servers are computers) that are run by databases and software, stored remotely in specialized data centers, and accessed via the internet. When someone says a file is in the cloud, they mean the file is accessible from a network of advanced computers stored in a facility built to house those computers. The computer servers, and the information contained within them, are maintained and managed by a technology firm dedicated to server management, a cloud host.

Why do we call servers housed in a facility “the cloud?” Let’s think about an actual cloud for a moment. A cloud is high in the sky, away and out of reach, much like the servers that make up a business’s cloud computing. These servers are stored in a safe facility, away from the physical location of the business. A business that uses a cloud hosting service to access remote servers is taking advantage of cloud computing technology. There are several advantages to housing business servers with a cloud hosting service instead of keeping such critical computers in the same location as regular business operations.

What are the Benefits of Cloud Computing for a Financial Institution?

What are the advantages of cloud computing over on-premise servers? Cloud computing allows for heightened server security and scalability, with quick deployment at affordable and predictable costs. The power of cloud computing lets machines across a financial institution connect as needed, without the hassle and physical presence of server computers on the premises. Read on for more details about these advantages.

Cloud-Hosted Servers are More Secure than Premise Servers

Cloud hosts keep servers in highly-secure data centers featuring security measures that most businesses cannot afford. The servers are kept in a physically secure location to prevent the possibility of physical tampering, and due to advanced digital security measures, the threat of a logical attack is also greatly reduced. Machines kept on premise are subject to the security efforts of the financial institution itself. An office may not be the safest place for expensive computers containing critical banking data.

Cloud Services are Scalable

No matter the rate of a bank or credit union’s growth, its server capacity is limited by the number of computers and the space in which those computers can be housed. With cloud services, physical space is not an obstacle to business success. Similarly, using cloud host technologies makes it easy to scale down at decreased demand. The cloud services of Edge One allow our bank and credit union customers to add or remove licenses as needed, and they only pay for what they use, which is powerful flexibility. It is difficult, if not impossible, for most financial institutions to quickly scale physical servers on their premises.

Deploying Servers Via Cloud Hosting is Fast, Seamless, and Hassle-Free

Deploying new premise servers is a process. The financial institution must first ensure that there is room for the needed servers. Once space is confirmed, the institution must ensure that the IT support team is prepared and available to physically install the new servers and get them up and running. Delivering and installing server hardware to completion takes time, and the process can lead to disruptions in the normal business operation of the bank or credit union. How much time is invested, or lost, in prepping on-premise servers? How much value is lost in terms of reduced time spent managing institution-customer relationships, as the focus turns to technological modifications? Banks and credit unions can avoid an inefficient expenditure of resources by turning to a cloud hosting service. Edge One can deploy and build a server environment in the matter of a few short weeks, noticeably reducing the wait-time until server project completion compared to installing premise servers.

There are Several Drawbacks in the Deployment of On-Premise Servers

The advantages of hosted servers come down to convenience for the financial institution. Banks and credit unions that choose to run on-premise servers have additional expenditures and responsibilities, compared to those institutions that deploy cloud hosting.

In running on-premise systems, expect heavy costs upfront. On-premise servers typically require an immediate purchase, with support and functionality-upgrade costs on top. A large initial expenditure of capital is part of the process of establishing on-premise physical servers, and this expenditure could be a drain on resources that are usually allocated to other aspects of financial institution operation.

Premise servers are expensive upfront, but dollar signs are not the only component of setting up servers on-premise. There are also the matters of implementation, maintenance, and IT support. Deploying servers on-premise means building an in-house IT team, establishing a system for regular hardware and maintenance updates, and creating a solution for data backups, storage, and disaster recovery. These components require resources, like IT subject-matter experts and technicians, that are likely to impact the budget of the average community bank or credit union and reduce an institution’s capabilities as far as serving customers or members effectively.

Cloud Servers are Affordable

A low up-front cost and monthly payments make hosted technologies a regular operating expense that is easy for banks and credit unions to afford. Hosted services also eliminate the need for annual contracts, as the monthly payment is inclusive of server maintenance and support. Using cloud hosting services from Edge One means predictable payments that cover all upgrades, server support duties, daily backups, and software. In general, cloud hosting services simplify the task of managing servers.

digital art of a cloud superimposed over computer servers

What are the Disadvantages of Cloud Computing, Compared to On-Premise Servers?

Perhaps the most significant drawback to cloud-hosted service is its long-term costs. Deployment of cloud computing requires less of an initial capital expenditure than on-premise server deployment does, but cloud computing is more expensive over time.

What are the Advantages to On-Premise Servers Over Cloud Computing?

Some institutions may choose to deploy on-premise servers instead of cloud hosting because they prefer to control the data, hardware, and software of their servers, in-house. Cost is another issue, and banks and credit unions sometimes opt for the reduced total cost of on-premise servers over the ease, simplicity, convenience, and security of hosted servers. Another advantage of on-premise servers is that they leave the financial institutions deploying them in complete control of server up-time.


Is Cloud Computing Better than On-Premise Servers?

While both options are viable, and on-premise servers have a few advantages in terms of control, cloud computing is better for banks and credit unions because cloud-hosted servers are more secure, more scalable, easier to deploy, and more affordable than on-premise servers, overall. Cloud computing offers a level of flexibility and convenience in allowing financial institutions to outsource technical and computing issues to dedicated experts. Institutions that deploy cloud computing have room to center resources on better banking and customer experiences. It is safe to say that cloud-hosted servers, cloud computing, is an investment that pays dividends in improved efficiency and increased potential for customer or member growth in local banks and credit unions.

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