Businesses need a data warehouse to analyze data over time and deliver actionable business intelligence. But should you deploy your data warehouse on premises — in your own data center — or in the cloud? The answer depends on factors like scalability, cost, resources, control, and security.

cloud_vs_onprem - an illustration of the two approaches to data warehousing

A data warehouse consolidates business data from in-house applications and databases and SaaS platforms and serves as a single repository that an organization can consult to make decisions with analytics and business intelligence tools. Data warehouses are the best solution for business intelligence and analytics reporting because transactional databases aren't suited for analytical processing. A data warehouses offloads analytics processing from transactional databases, and provide faster processing through the use of a columnar data store, which allows users to quickly access only relevant data elements.

Businesses may deploy a data warehouse on-premises, in the cloud, or a combination of the two.

On-premises vs. cloud data warehouses — a summary of the differences

Cloud-hosted data warehouses are rapidly replacing on-premises ones in many business applications. Here are the key strengths and weaknesses of both:

On-premises data warehouses provide:

  • Complete control over the tech stack
  • Local speed and performance
  • Governance and regulatory compliance

Cloud data warehouses provide:

  • On-demand scalability
  • Cost efficiency
  • Bundled capabilities such as IAM and analytics
  • Security
  • System uptime and availability

Data warehouse concepts

With an on-premises (commonly misstated as "on-premise" and shortened to "on-prem") data warehouse, an organization must purchase, deploy, and maintain all hardware and software.

A cloud data warehouse has no physical hardware. It's software as a service. A business pays for the storage space and computing power it needs at a given time. Scalability is a simple matter of adding more cloud resources, and there's no need to employ people to deploy or maintain the system because those tasks are handled by the provider.

All data warehouses share certain characteristics, regardless of the deployment model. They feature column-oriented databases, where data is stored in columns rather than rows. Instead of accessing a row with, for example, first name, last name, and address, it would access a column of all last names. This allows for faster access and processing of the data.

Data warehouses contain both historical and current enterprise data. And they form the storage and processing platform underlying reporting, dashboards, business intelligence, and analytics.

A data warehouse sits in the middle of an analytics architecture. On the input side, it facilitates the ingestion of data from multiple sources. On the output side, it provides granular role-based access to the data for reporting and business intelligence.

On-premises data warehouses

On-premises data warehousing uses a three-tier architecture, generally referred to simply as bottom, middle, and top tiers.

  • Bottom tier – storage layer

This is the data warehouse itself. It includes the database server, the storage media, a meta repository, and data marts.

  • Middle tier – compute layer

This is the online analytical processing (OLAP) server. It processes the complex queries to present results in a form suitable for data mining, analytics, and business intelligence.

  • Top tier – services layer

This is the user front end: the actual data mining, analytics, and BI tools.

Let's take a look at a few on-premises data warehouses and what makes each of them unique:

Micro Focus Vertica Enterprise On-Premise

Vertica's on-prem data warehouse runs on commodity hardware. Nodes are configured in clusters, and data can be replicated across nodes within a cluster. A cluster runs a single database, distributed across all nodes in the cluster in read-optimized storage (ROS) containers.

IBM Integrated Analytics System

IBM IAS is based on Db2 Warehouse running in a Docker container. It's deployed in purpose-built rack configurations. Data partitions are balanced across nodes within each cluster. Partitions automatically rebalance upon restart after a node is added or removed.

Pivotal Greenplum

Greenplum uses an array of individual databases based on PostgreSQL. A master host coordinates the individual database instances to allow them to function as a single database. A standby master can take over if the master host fails. Greenplum components can run on either commodity hardware or the EMC Data Computing Appliance.


SAP HANA can be deployed on SAP-certified appliances or commodity hardware. An SAP HANA host has one system database and any number of tenant databases. Tenant databases may be deployed across multiple hosts.

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On-premises: benefits

Benefits of on-premises data warehouses include control, speed, security, governance, and availability.


An organization has complete control of what hardware and software to use, where it sits, and who has access to it with an on-premises deployment. The hardware could be the same kind of commodity servers and storage devices used for other applications, or purpose-built servers.

In the event of a failure, an IT team has physical access to the hardware and access to every layer of software to facilitate troubleshooting. They can see indicator lights, cycle power, or replace hardware as required. They don't have to rely on third parties to get the system back up and running.


Locating all hardware and tools on premises alleviates concerns over network latency, although some data sources may be off-site, accessible only over the net. Keep in mind, though, that other factors may impact performance more than network latency. This is especially true if your on-prem solution is not sized properly.


Data governance and regulatory compliance often are easier to achieve using an on-premises data warehouse. For example, many organizations struggle to meet General Data Protection Regulation (GDPR) requirements concerning the ability to identify data location. You know exactly where your data is located with an on-prem data warehouse.

On-premises: challenges

An on-premises data warehouse provides total control — and total responsibility. Database administrators and analysts, systems administrators, systems engineers, network engineers, and security specialists must design, procure, and install on-premises systems. They must handle moves, adds, and changes — all administration and maintenance of hardware and software. They have full responsibility to ensure that the underlying infrastructure stays up and running efficiently, reliably, and securely.

Additionally, an on-premises data warehouse cannot accommodate bursts of activity that require more compute or memory. An organization must purchase "up," sizing its data warehouse to handle peak load, even if that level of usage occurs only intermittently. And scaling up to meet changing needs may require replacing systems that cannot meet new demands.

Cloud data warehouses

Many organizations that currently use on-premises data warehouses are choosing to migrate the data to cloud data warehouses. Sometimes, they choose a hybrid solution that includes both on-premises and cloud data warehouses.

Let's look at a few popular cloud data warehouses:

Amazon Redshift

Amazon Redshift's approach might be described as platform-as-a-service (PaaS). Redshift is highly scalable, provisioning clusters of nodes to customers as their storage and computing needs evolve. Each node has individual CPU, RAM, and storage space.

To set up Redshift, one must provision the clusters through Amazon Web Services (AWS). As of March 2019, Redshift has concurrency scaling that lets users automatically add clusters in times of high demand.

Google BigQuery

Perhaps the best thing about BigQuery's architecture is that you don't need to know anything about it. BigQuery is serverless, so the underlying architecture is hidden — in a good way — from users. BigQuery can scale to thousands of machines by structuring computations as an execution tree. It sends queries through a root server, intermediate servers, and ultimately leaf servers with local storage.


Snowflake separates storage, compute, and services into separate layers, allowing them to scale independently. The automatically managed storage layer can contain structured or semistructured data. The compute layer is composed of clusters, each of which can access all data but work independently and concurrently to enable automatic scaling, distribution, and rebalancing. Snowflake is a data warehouse-as-a-service, and operates across multiple clouds, including AWS, Microsoft Azure, and, soon, Google Cloud.

Microsoft Azure SQL Data Warehouse

Azure SQL Data Warehouse is an elastic, large-scale data warehouse platform-as-a-service that leverages the broad ecosystem of SQL Server. Like other cloud storage and computing platforms, it uses a distributed MPP architecture and columnar data store. It gathers data from databases and SaaS platforms into one powerful, fully-managed centralized repository. Storage and compute are billed separately, so they can scale independently.


Cloud data warehouse: benefits

Cloud data warehouses provide the same benefits that drive organizations to migrate other applications to the cloud. According to NIST's definition of cloud computing, "Cloud computing is a model for enabling ubiquitous, convenient, on-demand network access to a shared pool of configurable computing resources (e.g., networks, servers, storage, applications, and services) that can be rapidly provisioned and released with minimal management effort or service provider interaction." Benefits of a cloud data warehouse include scalability, cost, security, availability, and time to market.


With a cloud data warehouse, capacity isn't an issue, so data can flow seamlessly at peak and slow times.


With a cloud data warehouse, there are no physical servers to buy or set up. Businesses pay only for the storage and CPU time they need. This pay-as-you-go pricing means no capital expenditures for idle resources to handle peaks in demand. Additionally, the cloud provider handles ongoing maintenance, administration, and updates.

Built-in ecosystem

The top-tier data warehouses can leverage other cloud services on their platforms, such as identity and access management services and data analytics tools.


Security often is cited as a concern when migrating to the cloud — but it's also mentioned as a benefit. Cloud service providers invest heavily in physical and logical security controls. Few organizations are capable of investing more in security than Amazon, Google, or Microsoft. They also ensure the tightest security controls with certifications such as ISO 27001 and SOC 2. Odds are that an organization's security posture is better with a cloud data warehouse than an on-premises solution.


Availability and reliability is another area in which cloud service providers invest heavily. A service level of 99.9% availability is common among cloud data warehouses. The ability to have data replicated across different regions and zones within the cloud environment makes your data highly available, even in the event of a failure.

Time to market

All of these benefits of cloud data warehouses lead to another — time to market. Cloud computing leads to faster deployment, scaling, analytics, and access to business intelligence. That means faster time to insight and, ultimately, faster time to market.

Cloud data warehouse: challenges

The challenges that come with a cloud data warehouse include data integration, provider lock-in, security, and, possibly, latency.

Ingesting data into a cloud data warehouse is not a trivial task. It typically requires writing ETL code, which consumes time and expensive resources, and the introduction of any new data source requires more coding. However, third-party ETL tools make this task faster and easier.

Once you select a cloud data warehouse provider, changing to a different platform can be a difficult process, involving technical challenges and contractual issues.

Data latency, the time it takes to store or retrieve data, may be a challenge, depending on your performance requirements. If data that is an hour old meets your requirements, then latency is less of a challenge than if you need data that is less than a minute old. Several factors contribute to latency, such as the location of data sources, quantity of data, and type of data. The best way to assess the impact of latency is to do testing in as close to a production environment as possible. Some cloud data warehouse services have free trials that you can use for testing purposes.


A critical component in a functioning data warehouse is the ETL process. ETL stands for "extract, transform, and load." ELT is a variant of this process ("extract, load, transform").

ETL requires the data to be transformed into a specific data format before being loaded into a data warehouse. For this reason, on-premises data warehouses are better suited to ETL because the hardware is limited; you'll want to perform the processing off the platform, keeping the system available for running analytics.

Cloud data warehouses have nearly unlimited scalability, so you can load raw data without concern about overtaxing CPUs or consuming storage. That makes them well-suited to use the ELT (extract, load, transform) process wherein data transformation takes place after it has been loaded into the data warehouse. Data analysts and business intelligence users can then transform the raw data in ways that fit their specific use cases.

On-premises or in the cloud: Which is right for you?

According to the Forrester Wave: Cloud Data Warehouse, Q4 2018 report, cloud data warehouse deployments are on the rise. It states, "Most organizations find at least a 20% savings over on-premises data warehouses, while some have seen as high as 70% to 80% savings."

When your organization is ready to replicate data to a cloud data warehouse, Stitch makes it easy to extract data from more than 100 sources and pipe it to your destination. Sign up for a free trial and get your data into a cloud data warehouse in minutes.

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