Exchange On-Premise vs. Exchange Online: A full comparison

Exchange On-premise vs Exchange Online A full comparison-01

While email is a cornerstone of business communication, how organizations manage it is evolving. New cloud-based solutions offer an alternative to traditional on-premises servers. This article dives into two popular options from Microsoft: Exchange On-premise vs Exchange Online. We’ll compare their features, costs, and ideal use cases to help you decide which best fits your business needs. 

3 ways to use Microsoft Exchange 

  1. Physical Exchange On-premise: This is the traditional on-premises deployment model everyone knows. You purchase and install Exchange Server software on your own physical hardware and your IT team is responsible for managing the server (including software updates, security patches, and maintenance). 
  2. Exchange Online (Microsoft Direct/CSP): This is a fully cloud-based service that you can purchase directly from Microsoft or from a CSP. You subscribe to a monthly or annual plan and access your email through Microsoft’s cloud infrastructure. There is no hardware or software to manage on your end, which makes this a highly scalable and easy to set up option. 
  3. Hybrid Exchange environment: This option allows you to maintain some mailboxes on your own Exchange Server while using Exchange Online for other features or user groups.

Some hybrid deployment options are:

        • Hybrid with public folders: Keep public folders on your Exchange On-premise while migrating mailboxes to Exchange Online.
        • Hybrid with archived mailboxes: Archive older mailboxes on your on-premises server for compliance or cost-saving reasons, while using Exchange Online for primary mailboxes.


Comparing Exchange Online and Exchange Server (on-premises) 

In this section we will discuss the differences between Exchange On-premises and Exchange Online in detail. If you are planning on migrating your physical servers to the cloud or to an updated version of Exchange Server, you will be able to identify the best of these two options for your business. 


Exchange Online prices are very flexible, since you pay for user-based licenses.

Exchange Server licenses, on the other hand, are Client Access (CAL) based and you will be responsible for establishing and maintaining your server and hardware. 

Features and upgrades 

With Exchange On-premise you will have to make software and hardware updates/upgrades manually.

Since Exchange Online is a subscription, whether you get it with Microsoft 365 or as a standalone offer, you will enjoy timely updates. 

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Exchange Online security features

If you purchase an Exchange Online subscription, you will have access to a robust security feature set. Here is a breakdown of some key features: 

  • Anti-spam and anti-malware: EOP (Exchange Online Protection) is the first line of defense, employing advanced filtering to catch spam emails and malware attachments. 
  • Anti-phishing: EOP safeguards against phishing attempts by analyzing emails for suspicious sender addresses, content, and malicious URLs.  
  • Data loss prevention (DLP): DLP helps organizations comply with regulations and protect sensitive information. You can define policies to identify and potentially block emails containing confidential data like credit card numbers or social security numbers. 
  • Encryption: You can leverage features like message encryption with rights management to control who can access and forward messages, or S/MIME for digitally signing and encrypting emails within your organization. 
  • Threat intelligence: Microsoft constantly analyzes global threat data to stay updated on emerging attack methods. This intelligence is integrated into EOP to proactively identify and filter out malicious emails even before they reach your inbox. 
  • Quarantine and reporting: Suspicious emails flagged by EOP are often placed in quarantine for review. Admins can review these emails and decide if they’re safe or malicious. Additionally, EOP offers comprehensive reporting tools to gain insights into email security threats and track their effectiveness in defending your organization. 
You can read more about Exchange Online’s security features here.

Exchange On-premise security features

Exchange Server also offers a robust set of security features, but with a different approach, relying more on your own IT team’s expertise. For example: 

  • Native Anti-Spam and Anti-Malware: Exchange Server includes built-in anti-spam and anti-malware capabilities, but they may not be as comprehensive as the constantly updated filters in Exchange Online Protection (EOP). You’ll need to be diligent about keeping these filters updated. 
  • Transport Layer Security (TLS) Enforcement: Exchange Server allows you to configure TLS encryption for both inbound and outbound email traffic. This encrypts data in transit, protecting it from being intercepted on unsecured networks. 
  • Permissions and Role-Based Access Control (RBAC): You can define granular permissions for user access to mailboxes and server functions. RBAC ensures only authorized users have access to specific features and data based on their role within the organization. 
  • Auditing and Logging: Exchange Server provides comprehensive logging capabilities. You can track user activity, mailbox access attempts, and configuration changes. This allows you to monitor for suspicious activity and identify potential security breaches. 
  • Third-Party Security Integration: Exchange Server offers an open platform for integrating third-party security solutions. This allows you to add additional layers of protection such as advanced anti-spam, anti-phishing, and data loss prevention (DLP) capabilities. 
You can read more about Exchange Server’s security best practices here.

Exchange Online storage

Depending on which subscription you choose for Exchange Online, you will get different storage capacity. For example, if you choose Microsoft 365 E1 or E3, your Exchange Online package will include a mailbox capacity of 100GB. 

Exchange Server storage

With Exchange Server you can define your mailbox quota by assigning the amount of hard disk storage you need for it. This is limited, of course, by the storage space available on your server. 


Exchange Online guarantees 99.9% availability.

On the other hand, availability with Exchange On-premise will depend on your infrastructure setup, server failover, and disaster recovery strategies. 

In summary:

Exchange On-premise

Exchange Online

Exchange Hybrid

Deployment Model

On-premises Hypervisor

Cloud-based Virtual Machines

Cloud Computing Virtualization Platform


IT team


Shared (IT team & Microsoft)


Limited (depends on hardware)

Highly scalable

Scalable (on-premises & cloud)


High (hardware, software, licensing)


Variable (on-premises & cloud costs)


Managed by IT team

Microsoft security infrastructure

Shared responsibility model

Data Location

On your premises

Microsoft data centers

Combination (on-premises & cloud)

Exchange Server to Exchange Online migration 

Although migrating from Exchange On-premises to Exchange Online might be challenging, it’s important to consider, since staying on-premises might bring compatibility issues in the future. However, we can’t ignore that it is an investment of time, money and effort. If your organization is not ready to move to Exchange Online, there are other options you can consider, such as: 

  • Migrate to a newer version of Exchange Server. 
  • Implement a hybrid Exchange environment. 

Read how CTVs Texas moved to a newer version of Exchange Server, while they get ready to fully move to Exchange Online. 

Choosing the right email solution for your business 

The choice between Exchange On-premise vs Exchange Online depends on your organization’s specific needs and priorities. Exchange Server offers greater control and customization but requires significant IT expertise and ongoing maintenance. Exchange Online provides a scalable, easy-to-manage solution with automatic updates and robust security features, but with less control over your data. 

Download our free Exchange Online Migration Checklist to guide you through each step, ensuring a smooth and successful transition.

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Lucy Camero

Team Venti Brand Manager

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