Exchange Online vs. Exchange On-Premises

Microsoft Exchange has undoubtedly been the messaging service of choice for enterprises around the world. Though Exchange On-Premises has received plenty of attention throughout the years, especially regarding how to build, operate, and maintain its environment, the gradual transition to the cloud has recently prompted dialogue around Exchange Online.

Considering that organizations largely depend on IT to determine whether their email services should be kept on-premises or in the cloud, it’s essential to begin addressing the future of your mail and calendaring server. In this blog post, we’ll distinguish features unique to Exchange Online vs. Exchange On-Premises and deliver the most prominent differences between the two.

Asking the right questions

Before we break down the distinctions between Exchange Online and Exchange On-Premises, we need to first confront the pain points that many organizations have about their email ecosystem.

Here are the most pressing questions that organizations are concerned with:

  • Can users work from any device at any time?
  • Will email serve as the primary means of communication?
  • What happens when the email server goes down?
  • How will users sync their contacts, calendar, meetings, and emails?

If you can relate to any of the questions listed above, then it’s safe to presume that your organization needs to address whether it should rely on Exchange Online or Exchange On-Premises. Even if these common pain points don’t necessarily align with your organization’s interests, examining the top differences between Exchange Online and Exchange On-Premises will help narrow down which version you should commit to.

Differences between Exchange Online and Exchange On-Premises

  1. Online Capability

Needless to say, Exchange Online takes advantage of online services and features that are unavailable to Exchange On-Premises. In addition to the machine learning services that automatically triage between different types of mail, Exchange Online boasts collaboration features such as Office 365 Groups, which are near impossible to deploy quickly on-premises.

For example, in comparison to the duration it takes to provision an Office 365 Group on Exchange Online, Exchange On-Premises would likely require several weeks’ worth of setup for users to enjoy features like team mailboxes.

  1. Economies of Scale

Exchange On-Premises struggles to replicate the sheer size and scale of Exchange Online’s mailbox. Though Exchange On-Premises takes advantage of mid-sized servers and JBOD disks within the Exchange Preferred Architecture, it requires a tremendous amount of scalability to achieve what Exchange Online permits, which is $4 for a 50GB mailbox.

Exchange On-Premises also requires components like load balancers, redundant data centers, and mailbox dispersion to lower risk. Though Exchange On-Premises can be as reliable as Exchange Online, the analysis between cost and risk can be a difficult balancing act—the less risk on-premises, the higher the cost per mailbox.

  1. Speed

Not only is Exchange Online impossible to compete against when considering the time it takes to provision user inboxes, it also updates its firmware at a speed that simply cannot be rivaled by Exchange On-Premises. In comparison to Microsoft’s on-premises update release schedule being four times a year, Exchange Online is capable of servicing updates daily.

Exchange On-Premises introduces features via service packs and Cumulative Updates, which vary depending on the version of Exchange. Additionally, both service packs and Cumulative Updates may also mandate other dependencies, such as .NET, to be updated.

On the other hand, Exchange Online absorbs these dependencies and introduces features at groundbreaking speeds. What Exchange Online may achieve in a matter of minutes or hours, Exchange On-Premises may take months or years to perform a wholesale update for enterprise versions of Exchange.

  1. Operational Efficiency

With Exchange Online, admins are not required to check backups, monitor application logs, or even rebalance Database Availability Groups after patching the server farm. With Exchange On-Premises, admins are required to perform status checks on all of the aforementioned tasks, in addition to building and maintaining a reliable service. Exchange On-Premises also requires an operational staff, which is an extra weight that does not equate to a more optimal performance.

  1. Flexibility

Though Exchange Online is generous in terms of how it provides mailboxes with up to 100GB of storage and unlimited archiving, it is far from flexible. Users can consume what is presented in the Exchange Online service description, but are not capable of expanding their options outside of building the features on their own.

However, Exchange On-Premises provides the ultimate flexibility of deployment, especially since IT can provision them within their budgetary constraints. These may include a multi-tenant deployment for hosted Exchange, customizing Outlook Web Access (OWA), or even a requirement to run code within the transport stack. With Exchange On-Premises, the ability to customize and deploy features is limited only by the organization’s resources and budget.


While there are plenty of differences between Exchange Online and Exchange On-Premises, deciding whether to deploy on-premises or in the cloud should always be determined by the organization’s need for requirements or features.

Since it’s difficult for organizations to sign off against must-have features, the final arbiter of how to deploy organization-wide mailboxes tend to point back to if mandatory requirements are met.

About the Author

Jennifer LuPiba

Jennifer LuPiba is the Chair of the Quest Software Customer Advisory Board, engaging with and capturing the voice of the customer in such areas as cybersecurity, disaster recovery, management and the impact of mergers and acquisitions on Microsoft 365, Azure Active Directory and on-premises Active Directory. She also writes thought leadership articles and blogs aimed at the c-suite to evangelize the importance of these areas to their overall business. She chairs The Experts Conference, a yearly event focused on pure Active Directory and Office 365 training at the 300 and 400 level for the boots-on-the-ground Microsoft admins and managers.

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