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SharePoint Online VS SharePoint On-Premises: which should you choose?

SharePoint comes into two versions: Online and On-premises.

What are the differences between them? How to choose the best one for your company?

Continue reading the article to discover which solution is the best fit for your company.

Microsoft SharePoint is a Microsoft collaboration tool that is primarily used in the workplace for content management, electronic document management, and knowledge sharing. SharePoint is a centralized and secure platform that allows workgroups to collaborate, manage data, and improve efficiency.

SharePoint is used to create intranets and digital workplace businesses because of its collaborative features.

SharePoint comes in two versions: SharePoint Online and SharePoint Server (On-premises). Although both can be beneficial depending on the company's specific goals, it's important to remember that:

  • Microsoft SharePoint Server (latest version 2019) is an out-of-date product that will no longer receive updates. Microsoft announced at Microsoft Ignite 2020 that a new SharePoint Server with a license subscription model will be released in mid-2021. However, no news of this statement has surfaced to date.
  • Instead, Microsoft SharePoint Online is a 100% SaaS proposal that is included in the Microsoft 365 subscription and represents the product's present and future.

If you're starting a new SharePoint project, the decision between the two versions should clearly favor SharePoint Online if you want the project to last longer in the medium to long term.

Now we'll look at the differences between the two options.

SharePoint Online VS SharePoint On Premise

What version of Sharepoint is best for your needs?

Microsoft Azure SQL Database

Data size

You can make your decision based on how much data you need to store. The data storage capacity of the on-premises solution is limitless. All you need to think about is the size of your SQL Server instance, and keep in mind that all assets in SharePoint On-Premises are serialized and saved as blob objects in the SQL Server database.
Because SharePoint Online is entirely cloud-based, it does not include an unlimited data storage option.

For each user licensed per company, Microsoft has set a limit of 1 TB + 10 GB. If you require additional storage, you can purchase it as an add-on to your Microsoft Office 365 subscription.

There is also a 25 TB limit on the amount of data that can be collected by SharePoint Online sites.

Always consult the Microsoft website at this address for more information.


Costs and licenses 

Costs must always be considered when choosing the right software to support work in the company, including direct licenses and ancillary costs.

If you're considering the SharePoint On-Premises solution, keep in mind that a SharePoint farm necessitates multiple server instances, each of which requires a separate license. In addition to these licenses, you'll need to purchase SQL Server, Windows Server, and, most importantly, the hardware required to support it all, given SharePoint's high hardware requirements.
Instead, you'll need to buy a separate CAL license for each user who will use the SharePoint intranet (Standard or Enterprise).

The price of SharePoint Online is determined by the number of users who will use the product. The subscription enables you to make SharePoint available in your organization quickly without worrying about maintenance. You can also use the global suite of collaboration products, mailboxes, and cloud archives with a Microsoft Office 365 license.

The Office 365 Business or Enterprise license includes SharePoint Online. It also comes with a dedicated license called SharePoint Online P1/P2 designed for users who do not require the mailbox.

Access to Microsoft Office web applications is available in both versions. The license type is the only thing that changes. The On-Premises version requires an exclusive license to view and edit documents with web apps.

On the other hand, the cloud version allows you to view and edit documents directly from the cloud without requiring additional licenses.

Updates from Microsoft

The company's IT department manages the intranet's on-premises version updates, which decides when to install and manage available updates. To continue receiving Microsoft support, you must always keep your work environment up to date.

Instead, Microsoft will handle the installation and distribution of work tool updates for the online version.

What is is the ready-to-use corporate intranet, designed to reduce costs and implementation times, thus creating a collaborative and modern digital work environment:

  • Initial price of 3,650 €/year for a complete intranet
  • 50+ applications, including advanced search, document management system, push notifications via Teams, personal profile, and FAQ pages
  • 100% integrated with SharePoint Online and Microsoft 365


What to consider when choosing between SharePoint Online and SharePoint On-Premises

If you're thinking about building your own corporate intranet with SharePoint but aren't sure whether to go with the cloud or On-Premises version, you should think about recent trends.

Microsoft has adopted the "cloud-first" strategy, as stated in the article's premise. This means that Microsoft implements new features first for online versions, then makes them available for local installations later. This could be an indication of Microsoft's future plans.

New and modern tools will initially be available only in the cloud, with on-site installations coming later. Furthermore, not all features will be available for the On-Premises solution: all integrations with other Office 365 functions will be unavailable locally.

Let's compare the two options side by side.

No servers, no hardware. Use of Microsoft Cloud data centres. Requires purchase of dedicated hardware.
Reduction of internal resources. Automatic updates carried out by Microsoft. The internal IT team must manage the servers, set up updates and patches.
Information stored in the cloud. Information stored on your local network.
It's part of your Office 365 plan; monthly expenses based on the number of users. The company must absorb the license costs for servers and users.
Information is maintained according to industry-specific security standards. The company is responsible for the security of the servers.
Based on Microsoft's built-in redundancy. No control over servers. It relies on proprietary customizable servers and hardware. Full control of the server and access services.
Running on a multi-tenant server. Single farm.
Microsoft manages the installation and distribution of updates and enhancements. Updates are installed and managed internally.
Limited customizations. Unlimited customizations.
Backups generated by Microsoft. The owner must create, test and manage backups of the dedicated data centre.
It can connect external users and can be easily expanded with a variety of Azure services. The infrastructure for connecting external users must be built and adjusted manually.
Microsoft takes care of the scalability of the service. Scalability is the responsibility of the service purchaser.
The tools and functions are developed and continuously updated by Microsoft. The new tools are only made available at a later date, and not all of them.

Office 365 e SharePoint Online aumentano l'efficienza della intranet aziendale

When to choose SharePoint Online?

For companies that want to build a scalable intranet, cloud service is the best option. Reduces complexity and saves money.

Make a sound decision with short-term consequences by opting for the online version, which saves time and money by avoiding the need to build the necessary infrastructure.

You can benefit from product advancements in the future if you agree to follow the publisher's update roadmap.

We chose to follow Microsoft's strategy with and do not support installations of our intranet on-premises environments.

Logo SharePoint Online

When to choose SharePoint On-Premises?

If you already have a dedicated infrastructure, work in an organization with high compliance standards, need high customization requirements and want to save money on licenses, On-Premises is the best option.

It's the perfect solution for businesses that need more storage than Microsoft provides or want more control over farm architecture.

If your intranet needs to be accessible only within your company's network, SharePoint On-Premises may be the best option.

It is critical for your company to choose a SharePoint version. In terms of basic functional coverage, On-Premises and Online solutions are still similar. Which one of the two versions will adapt to specific requirements is the deciding factor.

If you're not sure which version is best for your needs, consider creating a hybrid intranet to get the most out of both options.

Fill out the form to get our free guide with 100+ ideas for your SharePoint intranet

Giuseppe Marchi


Microsoft MVP for SharePoint and Microsoft 365 since 2010.

Giuseppe is the founder of and one of the leading experts in Italy in all matters related to Microsoft 365. For years, he has been assisting companies in creating their digital workplace environment on the Microsoft cloud, focusing on people's experience.