A lot of Perth businesses are sitting on an ageing server that's due for replacement, and facing a genuine decision: invest in new on-premise hardware, or move to the cloud? Here's an honest breakdown of both options - not a push toward cloud, just the facts.
What does an on-premise server actually do?
In a traditional setup, an on-premise server handles one or more of:
- File storage - a shared network drive where staff store and access business files
- Authentication - Active Directory / domain join, managing user logins and group policies
- Line-of-business applications - accounting, ERP, practice management, or industry software that requires a local installation or database
- Print services, DHCP, DNS - network infrastructure roles
Many Perth businesses have servers that do all of the above. The cloud question is really about which of these workloads can be moved - and which still need to stay local.
The real cost of on-premise servers
Hardware is just the start. A proper cost comparison includes:
- Hardware purchase - a business-grade server suitable for 10–30 users typically costs $8,000–$25,000
- Windows Server licencing - Windows Server 2025 Standard starts at ~$1,200 AUD, plus Client Access Licences (CALs) per user
- Hardware refresh - servers should be replaced every 5 years; this is a recurring capital expense
- UPS (uninterruptible power supply) - essential to prevent data corruption from power events
- Maintenance and support - monthly managed IT cost to monitor, patch, and support the server
- Backup - a separate solution to back up server data, ideally offsite
- Physical space, power, and cooling - a server in a data cupboard generates heat and needs reliable power
Amortised over 5 years, a small on-premise server environment typically costs $4,000–$8,000/year in capital plus ongoing support. That's before factoring in the risk of unplanned failure.
What the cloud replaces
File storage → SharePoint / OneDrive
Microsoft 365 with SharePoint replaces the shared network drive entirely. Files are stored in the cloud, accessible from anywhere, with version history, real-time co-authoring, and no server required. For most Perth businesses whose server primarily hosts a shared drive, this is the most straightforward migration.
Active Directory → Microsoft Entra ID
Entra ID (formerly Azure Active Directory) handles cloud-based identity and access management. Combined with Intune for device management, it replicates most of what an on-premise Active Directory domain provided - login management, group policies, conditional access - without needing a local domain controller.
Line-of-business apps → SaaS or hosted options
This is where it gets complicated. If your business runs accounting, ERP, or practice management software that requires a local SQL server or has no cloud-native equivalent, you may not be able to fully eliminate the server. Check whether your vendor offers:
- A SaaS (cloud-hosted) version of their software
- A hosted option where the vendor or a third party hosts the server in a data centre
- A cloud-compatible version that can run on Azure Virtual Desktop
Many Perth businesses in accounting, legal, dental, and allied health are still running legacy software that requires a local server. That's a legitimate reason to keep some on-premise infrastructure - at least until the software vendor catches up.
Honest pros and cons
On-Premise Server
Advantages
- ✓ Works without internet (useful for poor NBN areas)
- ✓ Faster local file access for large files
- ✓ Required for some legacy line-of-business software
- ✓ Data stays physically on-site
- ✓ Predictable fixed costs once hardware is purchased
Disadvantages
- ✗ Hardware failure = potential downtime and data loss
- ✗ High upfront capital cost
- ✗ Requires regular patching and maintenance
- ✗ Physical security risk (fire, flood, theft)
- ✗ Remote access requires VPN setup
Cloud / Hybrid Cloud
Advantages
- ✓ No hardware to maintain or replace
- ✓ Access from anywhere without VPN
- ✓ Built-in redundancy and high availability
- ✓ Scales with your business
- ✓ Microsoft handles patching and uptime
Disadvantages
- ✗ Requires reliable internet (NBN quality matters)
- ✗ Ongoing subscription cost - never "paid off"
- ✗ Not suitable for all legacy applications
- ✗ Migration has upfront cost and complexity
The hybrid approach: what most Perth businesses actually do
Most Perth businesses don't go fully cloud or stay fully on-premise - they end up hybrid. A common pattern:
- Move file storage and email to Microsoft 365 (SharePoint / Exchange Online)
- Keep a small local server (or use Azure Virtual Desktop / hosted app) for legacy line-of-business software
- Manage devices with Intune rather than a local domain controller
This gets most of the benefit of cloud - no large capital spend, remote access, better resilience - while accommodating software that isn't cloud-ready yet.
When to act: your server is a ticking clock
If your server is more than 5 years old, or is running Windows Server 2012/2016, you are already overdue for a decision. End-of-life servers are security liabilities - unpatched vulnerabilities can't be fixed. The choice isn't "cloud vs on-premise" in the abstract - it's "cloud vs new hardware," and the cost difference often favours cloud migration when total cost of ownership is calculated.
Frequently Asked Questions
Is cloud always cheaper than keeping an on-premise server?
Not always, it depends on your total cost of ownership over several years, not just the monthly subscription price. On-premise has a big upfront cost but becomes a fixed, predictable expense once purchased, while cloud spreads the cost out as an ongoing subscription that never gets "paid off," so the better option really depends on your specific setup and how long you plan to keep it.
Can our line-of-business software stop us from moving to the cloud?
It can, if your accounting, ERP, or practice management software requires a local SQL server and has no cloud-native or hosted equivalent. It's worth checking directly with your software vendor whether they offer a SaaS version, a hosted option, or support for something like Azure Virtual Desktop before assuming a full migration is possible.
What happens if we keep running an old server past its use-by date?
Once a server passes end of life, security patches for newly discovered vulnerabilities generally stop, which leaves it as an ongoing security liability rather than just an inconvenience. If your server is more than five years old or running an older Windows Server version, it's worth treating the decision as a genuine priority rather than something to defer.
Do we have to choose fully cloud or fully on-premise?
No, most Perth businesses end up somewhere in between. A common pattern is moving file storage and email to Microsoft 365 while keeping a small local server, or a hosted equivalent, just for the specific legacy software that isn't cloud-ready yet.
If SharePoint and Entra ID can replace your ageing server, we handle the licensing, migration, and setup end to end.
Microsoft 365 & Cloud →Not sure what to do with your ageing server?
We'll assess your current environment, identify what can move to the cloud, and give you an honest cost comparison - at no charge.
For related reading, see our guides to Azure Cloud for Perth Businesses and Moving to the Cloud: A Guide for Perth Businesses.