Cloud Architecture vs. On‑Premise: A selection guide for enterprise applications

The digitalization process has accelerated significantly among Romanian companies in recent years, and the decision to implement cloud or on‑premise solutions has evolved from a purely technical matter into a fundamental strategic choice for businesses.

Whether we refer to warehouse management systems (WMS), transport management systems (TMS), yard management systems (YMS), or manufacturing execution systems (MES), the chosen architecture directly influences operational efficiency, scalability, and data security.

In this article, we aim to analyze the advantages of each deployment model for business applications of the types mentioned above. A particularly important characteristic of these systems is that, in most cases, they require customized workflow implementations — a factor that significantly changes the decision‑making landscape, as we will see further on.

First, it is essential to understand the terminology used when discussing how software applications are deployed and operated, highlighting the differences introduced by business‑critical applications. We will examine three concepts: OnPrem, Cloud, and Cloud‑Based.

OnPrem (On‑Premise) applications are, so to speak, the classic model — installed within the client’s network using dedicated servers and computers. In fact, until a few years ago, all applications were OnPrem. Later, data center hosting services emerged, offering a way to transform large CAPEX investments into OPEX operational expenses. Data centers employ specialized personnel who configure the infrastructure, including the required servers. Even in a data center, these applications still operate in an OnPrem model.

We can say that an OnPrem application is one used by a single entity — a company or a group of companies. In this context, the concepts of PaaS (Platform as a Service) and IaaS (Infrastructure as a Service) appeared. Architecturally, however, the applications themselves remained unchanged.

As demand for data centers increased and the CAPEX‑to‑OPEX shift became widely adopted, it became clear that OPEX was also desirable for IT infrastructure. This led to the rise of cloud solutions, which surpass traditional data centers through the services they provide — configurability, cloud‑native services and applications, scalable resources, and more. It became extremely easy to configure a virtual server and move it from one server farm to another. This new technology reduced costs while offering superior flexibility. The cloud wave began in the United States and expanded to Europe. Under these new conditions, applications also had to adapt — or rather, take advantage of the new capabilities.

Naturally, the cloud was initially used as a platform on which applications were installed and accessed remotely. These are known as Cloud‑Based applications because they use the cloud platform but do not leverage the specialized services offered by the cloud. If an application can be deployed OnPrem and can also be installed in the cloud, it is not a Cloud application – it is a Cloud‑Based application, regardless of its complexity. Below, we detail several characteristics of the three deployment models.

Characteristics of On-Prem Applications

Local infrastructure – servers, network, storage, everything is owned and managed by the company.

Full control – the organization controls the application, data, security, and policies.

High initial costs – purchasing servers, software licenses, equipment, backup systems, and more.

IT responsibility – the internal team handles maintenance, patches, updates, and security.

Limited access – the application is usually accessible only from the company’s internal network or via VPN.

Response speed. Application response time to user queries is extremely important for certain types of enterprise systems. For example, in a WMS, it is essential that communication with the database is very fast so that a field operator receives a response to an action – such as scanning a barcode – in under 100 ms. This speed can be influenced by internet connectivity. In Romania, this is generally not an issue, but in other regions where data transfer speeds are relatively low, OnPrem becomes a necessary choice.

Cloud-Based Application

• Not necessarily built natively for the cloud.
• A traditional (on-premise) application that has been moved or adapted to run in the cloud.
• May still require local components or dedicated servers.
• Uses the cloud mainly as infrastructure (IaaS or PaaS), not the full set of cloud-native advantages.
• Examples: a classic ERP installed on a server hosted in a cloud environment, a desktop application that synchronizes data with the cloud.

In practice, it is an application that has been “migrated or adapted for the cloud.”

Cloud Application

• Designed and built natively for the cloud.
• The entire architecture, application logic, and data reside in the cloud.
• Relies on cloud services such as auto-scaling, microservices, containerization, serverless computing, distributed databases, and more.
• Can run anywhere with an internet connection, without dependence on a local server.

When discussing enterprise applications, we divide cloud applications into two main categories:

1. Applications that use shared resources, where access to a company’s data is controlled at the application level. For example, all data is stored in a single database for all users of that application.
2. Applications that use separate resources for each company, where access to data is controlled at the cloud level, above the application layer.

Cloud with Shared Resources

This type of cloud implementation is preferred for applications that offer the same set of functionalities to all users, without the need for customizations. Consumer applications are typically developed using this approach. For enterprise applications, the most important aspect is the data stored in the database. When shared resources are used, there is a single database for all companies using the application.

Advantages

• Application upgrades are much simpler
• Cloud resources are used more efficiently
• Only one application instance needs to be managed

Disadvantages

• Customizing the application is difficult because changes may affect multiple companies
• Later separation of companies onto different resources becomes more complex

Cloud with Separate Resources

These applications, even if installed in the cloud – whether Cloud or Cloud-Based – can operate with separate resources. This implementation model is chosen for applications that require a high degree of customization from one client to another. For ERP systems or applications like those provided by Axes Software, the complexity of workflows and their customization require separate application instances, from the database layer all the way up to the application itself.

Advantages

• Optimized data structures based on each company’s business specifics
• Customized workflows
• Mobility. Response speed to user requests is critical, especially in a WMS. At Axes Software, we aim for a response time under 100 ms on handheld devices. To achieve this, you must choose the cloud server cluster that is best optimized for the target country or region
• Increased data security

Disadvantages

• Higher resource consumption
• Greater effort required to manage resources
• Higher costs

Cloud at Axes Software

At Axes Software, we have chosen to use both types of cloud implementations. With more than 20 years of experience delivering highly customized logistics solutions, many of them extremely complex, we use independent resources for most of our applications. However, we also have applications that use shared resources in cases where we believe no additional development or customization is required.

As A Service

As mentioned earlier, the general trend is to convert capital expenditures (CAPEX) into operational expenditures (OPEX). In IT terms, OPEX means you pay for what you use (As A Service). There are several forms of As A Service:

• PaaS – Platform As A Service
• IaaS – Infrastructure As A Service
• SaaS – Software As A Service

Below, we detail what each of these means.

PaaS

What it is: A cloud platform where developers can build, test, and run applications without managing the underlying infrastructure (servers, networks, storage).

Responsibilities: You handle the application code and logic, while the platform provider manages the infrastructure and development tools.

Examples: Microsoft Azure App Services, Google App Engine, Heroku.

Who it is for: Developers and IT teams who want to create applications quickly without spending time configuring servers. At Microsoft, the following tools are available:

• Azure App Service – hosts web applications without server configuration
• Azure SQL Database – managed database service
• Azure Functions – runs code without dedicated servers (serverless)
• Power Apps – build low-code applications

IaaS

What it is: Basic IT resources (virtual machines, networks, storage) delivered in the cloud and paid based on consumption. Essentially, you “rent” the infrastructure.

Responsibilities: The provider offers the infrastructure, but you manage the operating systems, applications, and data.

Examples: Microsoft Azure, Amazon Web Services (AWS EC2), Google Cloud Compute Engine.

Who it is for: Companies or IT teams that want full control over the infrastructure without the cost of purchasing and maintaining hardware. At Microsoft, the main resources include:

• Azure Virtual Machines (VMs) – rented virtual servers
• Azure Storage – raw storage space (blob, file, disk)
• Azure Virtual Network – private virtual networks in the cloud
• Azure Backup / Azure Site Recovery – infrastructure solutions for backup and continuity

SaaS

What it is: Ready-to-use software applications accessible directly through the internet, without needing installation or maintenance on a local computer or server.

Responsibilities: The provider handles everything (application, infrastructure, maintenance, security).

Examples: The xTrack suite from Axes Software (WMS, TMS, MES, POD, ReT, and others)

Who it is for: End users or companies that need fully functional applications immediately, without worrying about the technical side.

How to Choose the Right Model

Decision criteria

Budget If CAPEX budget is available, some companies choose an OnPremise solution installed in the client’s cloud, which is used as an IaaS. Depending on the size of the company, internal servers may also be an option, although this approach requires a higher initial investment.

Process complexity A company at an early stage, where processes are simpler, can easily adapt to the standard workflows of a SaaS application, which is typically less complex. This approach brings several advantages: lower training and configuration costs, and as processes become more complex, the application can be customized accordingly.

Digitalization level Companies with a mature IT infrastructure can efficiently manage on-premise deployments, either on their own servers or on an IaaS infrastructure. For this, internal IT resources must be available to administer the application being implemented.

Type of application Applications that manage production or warehouse flows require high communication speed, especially when data must be collected from IoT sensors or machine PLCs. For this reason, companies often choose to install the application server directly in the warehouse or factory. You cannot stop or slow down production flows if the connection to the server does not ensure very high speed.

Regulations and compliance Some industries require local data storage.

Security and Compliance Considerations

Cloud security

Major cloud service providers invest heavily in security, often offering a higher level of protection than what small and medium-sized companies could implement on their own. They provide:

• Data encryption in transit and at rest
• Multi-factor authentication
• Continuous threat monitoring
• International security certifications

On-premise security

On-premise systems offer full control over security measures, but require:

• Continuous investment in security technologies
• Specialized cybersecurity personnel
• Rigorous backup and recovery procedures

Impact on Performance and Integration

Latency and response time

On-premise systems can offer faster response times for critical applications that require real-time processing. Cloud systems may introduce additional latency due to data transmission over the internet.

Integration with existing systems

Integration with legacy systems can be more complex in a cloud environment, while on-premise solutions offer greater flexibility for customizing connections with existing equipment and software.

Long-Term Cost Analysis

Cloud cost model

• Predictable monthly costs
• No hardware investments
• Maintenance costs included
• Scaling costs based on usage

On-premise cost model

• High initial investment
• Maintenance and upgrade costs
• Need for specialized IT personnel
• Depreciation over 5-7 years

How These Models Apply to Enterprise Systems for Production, Logistics, and Distribution

WMS – Warehouse Management System

Cloud: ideal for companies with multiple warehouses that need real-time visibility and integration with ERPs.

On-prem: preferred in environments with strict security or latency requirements, such as the pharmaceutical or automotive industries.

TMS – Transport Management System

Cloud: enables real-time transport tracking and integration with external platforms (WMS, GPS, ERP). Most existing tracking solutions are web-based and hosted in the cloud, making cloud deployment an optimal choice for TMS.

On-prem: suitable for companies with strong IT infrastructure and complex customization needs.

YMS – Yard Management System

Cloud: flexible for seasonal operations and accessible from mobile devices. For Yard Management solutions, transport companies often need to schedule loading or unloading. In such cases, external access to the application is required, and the cloud becomes a viable option.

On-prem: useful in logistics yards with complex infrastructure and integration requirements with local systems (automated gates, video cameras, RFID).

MES – Manufacturing Execution System

Cloud: suitable for expanding companies with multiple locations or those seeking rapid ERP integration. However, it presents a significant risk when machine data is collected automatically.

On-prem: essential where uptime is critical and where the MES must communicate directly with industrial equipment. For this reason, at Axes Software, together with our clients, we have chosen individual OnPrem implementations for each factory. Production cannot be stopped due to a server connection failure that would block machine data collection.

📊 Centralized Data Cloud solutions consolidate supply chain and production information into a single platform, offering real-time updates and data access for authorized users from any internet-connected device.

🔗 Integration and Automation Cloud systems connect various logistics and production services, automate tasks such as order processing, stock verification, and production monitoring, and integrate with ERP or CRM systems to provide full end-to-end transparency across the value chain.

✅ Benefits of Cloud Migration for Axes Software Clients

Cloud-hosted systems offer a series of advantages for our clients. They can achieve significant savings because they no longer need to manage their own servers to run and store the information entered into the databases connected to xTrack applications.

Cost reduction

Eliminating local physical servers leads to a significant reduction in operating costs. Expenses related to electricity consumption and maintaining optimal ambient temperature for equipment disappear. You also eliminate the cost of resilience-related equipment such as UPS units or external backup storage. In addition, you no longer pay for operating system licenses, database licenses, or the salaries of the team responsible for maintenance, support, security, backup, or monitoring.

Scalability

After migrating to the cloud, xTrack applications retain all their current functionalities but gain additional scalability, stability, and operational safety. Depending on client needs, hardware resources can be resized quickly and easily. New functionalities can be added to the applications, and the volume of automated processes or number of users can grow exponentially without affecting data processing speed, unlike physical servers with limited storage capacity.

Stability

The cloud environment ensures stable operations because applications running on this type of platform function without interruptions (there is no longer a server that can “go down”). The risk of data loss is almost zero, and data and operational security are significantly enhanced.

Unrestricted access

Users can access xTrack applications and cloud-stored data from any device (laptop, desktop, tablet, mobile phone, handheld terminal) without time or geographic restrictions. The only requirement for using cloud services is an internet connection.

🏭 MES in the Cloud – The Key to Modern Production Efficiency

The MES (Manufacturing Execution System) plays an important role in monitoring and controlling production processes in real time. Integrated into the cloud ecosystem, MES enables synchronization between production and logistics operations, offering full traceability, quality control, and operational efficiency.

✅ Advantages of a Cloud-Based MES

➡️ Scalability and flexibility: Quickly add new locations, production lines, or users without hardware investments. Ideal for growing companies.

➡️ Reduced operational costs: No local servers or dedicated IT teams. You pay only for what you use (OPEX).

➡️ Fast implementation: Simple installation and configuration. You can start with a pilot project and scale later.

➡️ Remote access and mobility: Real-time monitoring from anywhere. Easy integration with ERP, BI, IoT.

➡️ Automatic updates and advanced security: Cloud providers ensure backups and deliver the latest features without local intervention.

⚠️ Challenges and limitations

➡️ Internet dependency: Weak infrastructure can affect MES access.

➡️ Security and compliance: Regulated industries may require local data storage.

➡️ Integration with physical equipment: Communication with PLCs, SCADA, and sensors can be more complex in the cloud. Industrial gateways can help but add costs.

➡️ Limited control over infrastructure: You cannot intervene directly in the servers.

✅ Advantages of a Cloud-Based WMS

🟦 Scalability and flexibility: Quickly add new warehouses, locations, or users without infrastructure investments. Ideal for companies with seasonal operations.

🟦 Reduced operational costs: No local servers or dedicated IT teams. You pay only for the resources you use (OPEX model).

🟦 Fast implementation: Simple configuration and accelerated rollout. You can start with a pilot project and expand later.

🟦 Remote access and mobility: Operators can access the system from mobile terminals, tablets, or PCs in real time. Easy integration with ERP, TMS, BI.

🟦 Automatic updates and advanced security: Cloud providers ensure backups and deliver the latest features without local intervention.

⚠️ Challenges and limitations

🟦 Internet dependency: In locations with weak or unstable connectivity, WMS access may be affected.

🟦 Security and compliance: In regulated industries, storing data outside the country may raise concerns. Tip: Check the provider’s certifications (ISO, GDPR).

🟦 Integration with local equipment: Connecting to RFID readers, mobile terminals, or automation systems may require additional adaptations.

🟦 Limited control over infrastructure: You cannot intervene directly in servers or advanced configurations. You depend on the provider for uptime and support.

✅ Advantages of a Cloud-Based TMS

🔷 Scalability and flexibility: You can easily manage fluctuating transport volumes, new routes, or new logistics partners without investing in infrastructure.

🔷 Reduced operational costs: No local servers or dedicated IT teams. You pay only for the functionalities and volume you use.

🔷 Fast implementation: Simple configuration and accelerated rollout. You can start with a pilot project and scale later, as long as you follow standard workflows without customizations.

🔷 Remote access and real-time visibility: Monitor deliveries, routes, and order status from anywhere. Easy integration with ERP, WMS, and e-commerce platforms.

🔷 Automatic updates and advanced security: Cloud providers ensure advanced protection, backups, and access to the latest features without local intervention.

🔷 Integrations with tracking systems: These are commonly known as GPS systems, which are web-based and hosted in the cloud. Using a TMS in the cloud is the correct approach, and a SaaS payment model per vehicle enables a more accurate calculation of IT impact on cost per kilometer.

⚠️ Challenges and Limitations

🔷 Internet dependency: In areas with weak signal, TMS access may be affected, especially in mobile operations. This limitation is most visible in the driver-facing application, POD (Proof Of Delivery). Axes Software, of course, offers offline functionality for POD, with certain limitations.

🔷 Security and compliance: For international or regulated transport operations, storing data outside the country may raise concerns.

🔷 Integration with external systems: Connecting to GPS, telemetry, mobile apps, or tracking platforms may require additional adaptations.

🔷 Limited control over infrastructure: You cannot intervene directly in servers or advanced configurations. You depend on the provider for uptime and support.

✅ Advantages of a Cloud-Based YMS

✳️ Scalability and flexibility: Easily manage multiple logistics yards, seasonal flows, or variable traffic volumes without investing in local infrastructure.

✳️ Reduced operational costs: No dedicated servers or internal IT teams. You pay only for the resources you use (OPEX).

✳️ Carrier access: To reduce operational costs, more and more companies using YMS solutions require carriers to schedule their own appointments. The cloud offers the perfect solution for this approach.

✳️ Remote access and mobility: Real-time monitoring of vehicles, gates, and time slots from anywhere. Easy integration with WMS, TMS, video cameras, and RFID. This could be an argument for an OnPrem installation, but the evolution of equipment and technologies now allows Over Internet integration with such devices.

✳️ Automatic updates and advanced security: Cloud providers offer backups and the latest functionalities without local intervention.

⚠️ Challenges and Limitations

✳️ Internet dependency: In industrial areas with weak signal, YMS access may be affected.

✳️ Security and compliance: For yards with controlled access or strict regulations, storing data outside the country may be a challenge.

✳️ Integration with physical infrastructure: Connecting to automated gates, video cameras, barriers, or RFID systems may require additional equipment and complex configurations.

✳️ Limited control over infrastructure: You cannot intervene directly in servers or advanced configurations. You depend on the provider for uptime and support.

Conclusion

The challenges are not only technical – they are tied to the company’s vision, digital maturity, and ability to adapt. In Romania, companies evaluating enterprise applications (MES, WMS, TMS, YMS) must consider not only costs and security, but also scalability, integration with other applications, and long-term control.

👉 If you are looking for a solution that adapts to your operational needs, regardless of the model you choose, the Axes Software team can guide you step by step. Contact us for a personalized analysis and discover how you can turn digitalization into a real strategic advantage. Fill in the form below to get more information.