Cloud vs On-Prem Applications: Understanding Your Application Landscape
Learn the differences between cloud and on-prem applications, how to assess cloud adoption across your portfolio, and why application visibility is essential for modernization initiatives.
Many organizations can tell you how many applications they have. Far fewer can answer a seemingly simple question:
How much of our application portfolio is actually running in the cloud?
As digital transformation continues, cloud adoption has become a strategic priority. Yet many enterprise architects, portfolio managers and CIOs struggle to see how cloud and on-prem applications are actually distributed across their software landscape. Without that visibility, decisions about modernization, cloud migration, digital sovereignty and investment priorities become significantly harder.
Cloud vs on-prem applications: what is the difference?
Before assessing a portfolio, it helps to be precise about the two models:
| On-prem applications | Cloud applications | |
|---|---|---|
| Hosted | In your own data center or infrastructure | By a third-party provider |
| Accessed | Through your own network | Over the internet |
| Paid for | Licenses plus your own infrastructure | Usually a subscription fee |
| Managed by | Your organization: infrastructure, updates, backups and support | The vendor: infrastructure, updates, maintenance and security |
| Typical examples | Custom-built business applications, legacy ERP, self-hosted databases, file servers | Microsoft 365, Salesforce, ServiceNow, Workday, Atlassian Cloud |
Many landscapes also contain hybrid applications: an on-prem core with cloud components, or a cloud service that still depends on local systems.
Why cloud vs on-prem matters for Application Portfolio Management
Many organizations approach cloud migration as a technology initiative. In reality, it is just as much an Application Portfolio Management challenge. Knowing the cloud footprint of your portfolio answers questions such as:
- Which applications still depend on local infrastructure?
- Which business capabilities rely on legacy systems?
- Which applications are candidates for modernization?
- Where are the cloud migration opportunities?
- How exposed are we to specific cloud providers?
Without a clear inventory, these decisions are based on assumptions rather than facts.
Why many organizations don’t know
Most organizations maintain some form of application inventory, CMDB, asset repository or software catalog. But that data is often incomplete, outdated or inconsistent, and it rarely records how an application is deployed:
As a result, many organizations cannot measure cloud adoption across their application landscape. As we described in CMDB vs Application Portfolio Management, a CMDB tells you what exists, not how it is delivered or where it should go next.
The hidden risks of large on-prem portfolios
A significant on-prem portfolio is not necessarily a problem. But it brings risks worth understanding:
How to assess cloud adoption in 5 steps
A cloud adoption assessment does not start with technology. It starts with visibility:
- Build an application inventory
- Classify deployment models
- Group applications by business capability
- Assess modernization readiness
- Identify concentration risks
Step 1: Build an application inventory
Create a complete view of the applications used across the organization: commercial software, SaaS applications, custom-built systems, departmental solutions and, where possible, shadow IT. The duplicate applications guide describes where to find them.
Step 2: Classify deployment models
Label every application with one of four deployment models:
- Cloud
- On-premises
- Hybrid
- Unknown
Some of this follows from the product itself: software that is only offered as SaaS runs in the cloud by definition. For the rest, the people who run the application know best, and one application can have several instances, for example an on-premises installation next to a SaaS subscription.
This immediately shows the composition of your portfolio, and the size of the “unknown” group tells you how much work your data still needs.
Step 3: Group applications by business capability
See which business capabilities are supported by cloud applications, on-prem applications or hybrid solutions. This shows where modernization efforts are likely to have the greatest impact.
Step 4: Assess modernization readiness
Evaluate each application on its age, business criticality, vendor support status, technical complexity and cloud suitability. Not every application needs to move to the cloud: the goal is informed decisions, not cloud adoption for its own sake.
Step 5: Identify concentration risks
Understanding cloud adoption also means understanding cloud dependence. How many applications depend on a single cloud provider? Which business capabilities would be affected by a cloud outage? Where are concentration risks emerging? Our article on assessing vendor dependence goes deeper into this.
Example: a cloud snapshot by capability
Here is what steps 2 and 3 can reveal, in a fictional mid-sized organization with 44 applications:
| Capability | Cloud | On-premises | Hybrid | Unknown |
|---|---|---|---|---|
| Collaboration | 12 | 1 | 0 | 2 |
| Finance | 3 | 4 | 1 | 0 |
| HR | 5 | 0 | 0 | 1 |
| Production and logistics | 1 | 9 | 2 | 3 |
Cloud adoption and digital sovereignty
Cloud adoption is closely linked to digital sovereignty. As workloads move to cloud platforms, organizations often become more dependent on a small number of providers. More and more of them examine cloud provider concentration, geographic dependencies, lock-in risks and sovereignty considerations.
The objective is not to avoid cloud services. It is to understand the implications of strategic technology choices.
Cloud visibility is the foundation for these discussions.
From cloud inventory to portfolio intelligence
Knowing whether an application runs in the cloud or on-premises is only the first step. The real value comes from combining it with which business capabilities each application supports, which vendors are involved, which applications are aging, which systems are candidates for modernization and which dependencies create risk. Together, these turn a list of applications into a strategic view of your landscape.
Key takeaways
Frequently asked questions
What is the difference between cloud and on-prem applications?
Cloud applications are hosted and managed by external providers and accessed over the internet, while on-prem applications are hosted and managed within an organization’s own infrastructure.
How can I determine how many applications are still on-prem?
Start by creating a complete application inventory and classifying each application as cloud, on-premises, hybrid or unknown. Grouping the result by business capability shows where on-prem applications are concentrated.
Why is cloud visibility important?
Cloud visibility helps organizations understand modernization opportunities, technology risks, vendor dependencies and the progress of their digital transformation.
Does every application need to move to the cloud?
No. The goal is not maximum cloud adoption. The goal is making informed decisions based on business value, risk, cost and strategic objectives.
How does cloud analysis support Application Portfolio Management?
Cloud analysis adds context about deployment models, modernization opportunities, dependencies and technology risk to each application, which enables better portfolio decisions.
See your portfolio with full context
Book a live demo and we will enrich a sample of your own application data.
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