Which One to Choose?
When selecting a SharePoint deployment, organizations face a key decision: whether to use SharePoint Online, the cloud-based version part of Microsoft 365, or SharePoint On-Premises, the traditional version hosted on local servers. Each platform has its advantages and limitations, depending on business needs, budget, compliance, and IT capabilities.
Deployment and Infrastructure
- SharePoint Online is hosted entirely in Microsoft’s cloud environment. There is no need for customers to manage infrastructure, updates, or server maintenance. It is ready to use with high availability and Microsoft-backed SLAs.
- SharePoint On-Premises is installed on infrastructure you control. While traditionally this meant physical servers in your data center, it is now common to host SharePoint On-Premises in a cloud Infrastructure-as-a-Service (IaaS) environment such as AWS or Azure. However, in this scenario, you are still fully responsible for managing the virtual machines, Windows Server configuration, SQL Server, IIS, SharePoint patches, and backups.
Cost and Licensing
SharePoint Online follows a per-user subscription model, typically included in Microsoft 365 plans like E1, E3, or E5. This makes costs predictable and easier to scale based on the number of users. No hardware, licensing, or maintenance costs for servers are required.
SharePoint On-Premises involves multiple cost components:
- Server licenses for SharePoint and Windows Server
- SQL Server licenses
- Client Access Licenses (CALs) per user
- Ongoing costs for IT staff, infrastructure, patching, backups, and disaster recovery
This upfront capital expenditure model can be cost-effective at large scale but has higher administrative overhead.
Updates and Features
SharePoint Online receives frequent, automatic updates from Microsoft, delivering the latest features, security improvements, and integrations with Microsoft 365 tools.
However, this continuous evolution comes with limited control and potential disruptions. Microsoft can deprecate or remove features without long-term support windows.
For example:
- SharePoint Designer (SPD) 2010 workflows have been removed entirely from SharePoint Online.
- Existing workflows must be rebuilt from scratch in Power Automate, which is now the default tool for business process automation.
- Therefore, an SPD workflow expert must retrain on Power Automate to work on new projects and maintain compatibility.
- Additionally, classic SharePoint pages with web parts often cannot be upgraded directly to modern UI, as equivalent web parts may not exist. Recreating the same functionality typically requires custom SPFx development, which can be costly and time-consuming.
SharePoint On-Premises gives you full control over the upgrade cycle. You can keep legacy components like SPD workflows, InfoPath forms, and classic pages running as long as your infrastructure supports them—an advantage for organizations with heavily customized or regulated environments. But once you will need a Microsoft support you will have to upgrade your farm(s) to a supported SharePoint version, which can also break some of your customizations.
Customization and Control
- On-Premises allows deep customization, including full-trust solutions, server-side code, and more control over the environment.
- Online restricts customizations to client-side development (e.g., SPFx, Power Platform) to ensure platform stability and security.
Security and Compliance
- On-Premises is ideal for organizations needing complete data control or complying with strict regulations.
- Online meets a wide range of international compliance standards (GDPR, ISO, HIPAA) but stores data in Microsoft datacenters.
Scalability and Accessibility
- Online scales automatically and is accessible from anywhere with an internet connection.
- On-Premises scalability depends on your hardware, and remote access requires extra configuration.
Integration and Collaboration
- Online tightly integrates with the full Microsoft 365 ecosystem: Teams, OneDrive, Planner, Power BI, etc.
- On-Premises offers integration, but with more manual setup and limited cloud capabilities.
Internet, Intranet, or Extranet Use?
One key factor when choosing between SharePoint Online and SharePoint On-Premises is the type of access your platform is expected to support—intranet, extranet, or public internet.
- SharePoint Online is primarily designed for internal collaboration (intranet). It offers secure access to employees and licensed users within your Microsoft 365 tenant.
For external scenarios, your options are limited:- Power Pages: Allows building external-facing websites, but requires a separate licensing model.
- Microsoft Forms / Guest Access: Suitable for collecting information or sharing files in simple cases, but not for building full portals.
- SharePoint On-Premises, in contrast, provides full control over access modes:
- You can build and host intranet, extranet (partner/vendor portals), and even public-facing websites.
- With IIS and DNS management, you are free to create branded domains, anonymous access sites, and integrate with external identity providers.
This makes SharePoint On-Premises more versatile when your project goes beyond internal collaboration and requires wider or anonymous access.
Summary Table
| Category | SharePoint Online | SharePoint On-Premises |
|---|---|---|
| Deployment | Cloud-based, fully managed by Microsoft | Hosted on your servers or IaaS (e.g., AWS), full control over infrastructure |
| Cost | Per-user licensing via Microsoft 365 subscription | Upfront licensing, CALs, and infrastructure costs |
| Updates | Automatic and frequent; SPD 2010 workflows removed; requires migration to Power Automate; classic web parts not always available, SPFx may be needed | Manual updates; full control over legacy tools like SPD, InfoPath, and classic experiences |
| Customization | Limited to modern framework (SPFx); restricted access to backend or full-trust solutions | Supports full-trust code, server-side development, and greater flexibility |
| Compliance | Meets Microsoft 365 compliance standards; data hosted in Microsoft data centers | Full control over data residency, retention, and compliance policies |
| Scalability | Easily scalable with Microsoft 365 infrastructure | Scalability depends on hardware and IT resources |
| Connectivity | Seamless integration with Microsoft 365 apps (Teams, OneDrive, Planner, etc.) | Limited or manual integration; requires configuration or third-party connectors |
| Usage Scenarios | Primarily for intranet/collaboration; public websites not supported (use Power Pages or Forms for limited external use) | Suitable for intranet, extranet, and full public-facing internet sites; complete flexibility with IIS and custom domains |
Our conclusion
If you want to use SharePoint as simply as possible, with minimal maintenance and tight integration with Microsoft 365, then SharePoint Online is the best choice. It is ideal for businesses that value flexibility, mobility, and up-to-date features with little infrastructure overhead.
However, if your organization has strict security, compliance, or customization requirements, or needs fine-grained control over every aspect of the environment, then SharePoint On-Premises is more appropriate. It offers stability for legacy systems and custom solutions, and lets you manage updates on your terms.
Also, if your company has an existing Microsoft Enterprise Agreement and it’s cost-effective to maintain infrastructure (e.g., via cloud-hosted VMs), On-Premises can remain a viable and strategic long-term option.
If you plan to host a public website with anonymous acces then SharePoint On-Premises remains the most flexible option—supporting internet, intranet, and extranet use cases out of the box.
That said, not every project is suitable for SharePoint. If your use case involves complex relational data, highly transactional applications, or performance-sensitive systems, other platforms (e.g., SQL-based apps, Power Apps with Dataverse, or custom solutions) may offer better results. It’s essential to evaluate SharePoint’s capabilities against the specific goals of your project rather than assuming it’s always the right fit.
At FluentSP, we recommend conducting a reasonable and realistic planning phase before starting any SharePoint implementation. Carefully analyze your business goals, compliance requirements, customization needs, and internal capabilities to choose the most sustainable and scalable approach.