New software needs a place to run. Today there are three options: your own server, a rented server in a German hosting provider’s data centre, or the cloud of a large provider such as Microsoft, Amazon or Google.
The question usually comes up late in the conversation, when the software is already half decided. It belongs earlier, because the place determines who looks after it, who can reach it from outside, where your data is kept and what happens in an outage.
The three options
Your own server on site
A machine in your building, in the server room or in the cupboard next to the photocopier. You or your IT service provider look after everything: power, cooling, operating system, updates, backups, a replacement when something breaks. The data never leaves the building, and the path to the other systems on site - ERP, file storage, machines - is short.
A German hosting provider’s data centre
With providers such as Hetzner, IONOS or Strato you rent a server or part of one. The provider looks after power, network and hardware; the operating system, updates and backups usually remain with you or your service provider. The data is kept in Germany, and the software can be reached from anywhere.
The cloud of a large provider
Microsoft Azure, Amazon Web Services or Google Cloud do not rent out machines but services: a database, storage, an environment in which the software runs. The provider takes on far more of the operation, and the services grow with you. In return you are billed by usage, you choose the region for your data yourself, and the provider is headquartered outside Europe.
The comparison at a glance
| On site | German hosting provider | Large cloud | |
|---|---|---|---|
| Hardware | you | the hosting provider | the cloud provider |
| Operating system, updates, backups | you or your service provider | usually you or your service provider | partly the provider, partly you |
| Reachable from outside | only through secured access into the building | yes | yes |
| Path to the systems on site | direct | over a secured connection | over a secured connection |
| Where the data is kept | with you | in Germany | in the chosen region, with the provider |
| When hardware breaks | you procure a replacement | the hosting provider swaps it | the cloud provider, usually unnoticed |
Five questions that decide the place
Who looks after updates and backups?
Operating systems receive security updates, backups have to run and be checked, hard drives fail. Who does that in your business: an employee, your IT service provider, the hosting provider? With your own server the most common answer is “someone”, and that is not an answer. Settle it before launch - more on this in Software after launch.
Who needs access from outside?
Field staff with their phones, the fitter at the customer’s site, colleagues working from home, customers through a portal. As soon as someone outside the building works with the software, it has to be reachable. With a server on site that means opening your network to the outside, with everything that entails. With a hosting provider or in the cloud the software is already outside - there, the path back into the building is the part that needs securing. A customer portal almost always belongs outside.
What data is in it?
Customer data, personnel data, engineering drawings, recipes. Where this data may be kept and which contract with the provider goes with it needs checking - talk to your data protection officer before you commit.
Which systems on site does it need to talk to?
ERP, inventory system, the scales in the warehouse, the machines in production, the phone system. If the new software is to exchange data with these systems, proximity is an advantage. From outside you need a secured connection into the building and an interface that the system offers, where possible. If your ERP itself already runs with a hosting provider or in the cloud, the picture turns around.
What happens in an outage?
If the server on site fails, the software is down until a replacement arrives - who has one, and how quickly? If your internet line fails, the software at the hosting provider is unreachable, but the one on site still works. If the cloud provider fails, there is nothing you can do but wait. None of the three places is immune to outages; they just fail differently. What matters is that you know beforehand what happens then and who picks up the phone.
Mixed setups are normal
In practice it is rarely one of the three. The ERP runs on site, the customer portal with a hosting provider, the files in SharePoint. Or the software runs with a hosting provider, and a backup is also kept on site. Mixed setups are no sign of indecision but often the right answer: each part runs where it makes sense for that part.
The connection with AI
Anyone who wants to use AI language models with their own documents faces the same question once more. If the model runs with the provider, the texts go there. If it runs on site or with a German hosting provider, they stay where the rest of the data is kept. Your own server with suitable hardware can take on both: the software and the model. What that looks like in a business is covered in Running AI in-house.
Questions before you decide
- Who looks after your servers today, and do they have the time?
- Who works with the software outside the building?
- What data is in it, and what does your data protection officer say?
- Which systems on site does it need to exchange data with?
- What happens in an outage, and who takes care of it?
The place can be changed later, but not for free. Answer the questions before launch and you save yourself the move. We do not fix the place in advance but discuss it with you in the first conversation - our software is built to run in any of the three places.
