Dedicated vs. Cloud: Which Server Infrastructure is Right for Commerce?

In a 2006 blog post of just 73 words, Amazon announced Amazon Simple Storage Service (or S3), which they described as “storage for the internet.” Many experts cite this as the first example of rentable cloud infrastructure. Amazon’s promises were simple: instead of buying, installing, and maintaining a fleet of servers, their engineers would handle it for you over the cloud for a small fee. 

To some, this marked the beginning of the end for on-prem data centers. After companies like Microsoft, Google, and IBM began offering similar solutions, cloud server infrastructure seemed like an obvious choice. Pay for what you use, let someone else handle the day-to-day headache of ensuring things like uptime and security. Why wouldn’t you migrate to the cloud?

But as we’ve all learned over the last two decades, the choice between cloud versus dedicated server infrastructure is far from simple. Even when you decide that cloud infrastructure is right for your business, choosing the right platform for your business can be a nightmare for a variety of reasons. 

To help you start the discussion with your team, let’s review a few important talking points:

• Why server speed matters in ecommerce
• The benefits of cloud servers and on-prem servers
• The costs of cloud servers and on-prem servers
• How Shopify delivers the fastest server speed in commerce

Why server speed matters in ecommerce

Before we get into the debate between cloud versus dedicated server infrastructure, it’s important to review why we’re having this discussion at all. The short answer is that milliseconds (yes, milliseconds) really matter in ecommerce. While most sites feel fast to the average internet user, new research and data from Shopify shows that a half-second increase in site speed could increase conversion. 

Below-average site speed impacts businesses of all sizes in several ways. In a recent webinar, we heard from Chris Bergemann, CEO and founder of DemandPDX, a Shopify partner that works with many clients across several ecommerce platforms. Bergemann reported that his clients typically see three consequences of a slow site, including:

• Creating additional content is more difficult: When a website is a tick too slow, brands become wary of potentially bogging the site down even further by adding new images and updated copy.They’re also less likely to go after long-tail keywords for SEO.
• A negative customer experience: When your site appears to load slowly, users are less likely to convert—and more likely to report a bad customer experience.
• Users visit fewer pages: Slow homepages don’t make users want to stick around, which drives up your bounce rate and keeps potential customers from finding the products they want to buy.

Bounce rates are particularly sensitive to slow website speeds. Citing data from Google, SEMRush concluded that the probability of a bounce increases by 32% as page load time goes from one second to three seconds. If the page load time goes from one second to five seconds the probability of a bounce increases by a staggering 90%.

With this in mind, we might have made the decision between cloud versus dedicated server infrastructure even more difficult. To help you get unstuck, let’s take a closer look at some of the benefits of each option. 

What are the benefits of cloud servers?

Advocates of cloud computing have likely talked your ears off about the benefits of migrating. Here are just a few that tend to lead companies to choose cloud infrastructure over a more traditional on-prem solution.

Easier scalability and flexibility

Businesses often cite the flexibility of cloud computing as one of (if not the) biggest benefits over dedicated server infrastructure. Cloud infrastructure models allow you to increase or decrease resources and storage on an on-demand basis, without the burden of selecting, installing, and maintaining the right combination of physical servers and software. 

While cloud servers are far from cheap, they do have flexible pricing models that only require customers to pay for the services they use. Not only does this eliminate a lot of the guesswork behind building an on-prem solution, but it also frees up IT teams to work on business-changing projects.

More automated security and data loss prevention

Cloud servers often have various features and centralized management tools that promise to take the burden of ensuring compliance off of IT’s plate. Cloud infrastructure platforms also include data loss prevention functionality that can save engineers long trips to data centers to resolve complicated issues or attacks and recover data. 

Increased mobility

Thanks to the on-demand nature of cloud servers, brands and their customers enjoy increased resilience and availability when accessing a website. For brands, this means internal teams can access applications anytime from anywhere and quickly handle back end issues related to order management, fulfillment, and syncing sales data across multiple third-party applications. For your customers, fleets of cloud servers keep them close to your business with fast site speeds that increase the likelihood they’ll complete a purchase. 

What are the benefits of dedicated servers?

Although some of the biggest companies on the planet rely on cloud servers, there are still several reasons why others choose a dedicated on-prem solution. Let’s review just a few reasons why you might choose dedicated server infrastructure to support your ecommerce business.

Control over infrastructure and security

Cloud computing takes the burden of selecting, installing, and managing server infrastructure off of IT—but some organizations actually prefer to accept the burden of doing so. With dedicated server infrastructure, you must choose your own hardware, determine what types of data centers they live in, decide how they’re configured, and select exactly who in the organization can make changes to hardware or the network.

Companies that opt for on-prem solutions also enjoy the control they have over their security infrastructure and expenses. They may prioritize certain certifications over others based on international, national, and local data protection laws in their area. In some cases, this means they don’t require all of the security features included with most cloud-based solutions and can reduce their costs by taking things in-house. The costs of an on-prem solution can also be lower because hardware is a one-time purchase, making power and maintenance the only ongoing costs. 

Increased efficiency

Dedicated server infrastructure can offer several benefits that allow organizations to be more efficient. Most notably, organizations with on-prem systems cite lower latency and shorter feedback loops between infrastructure changes and end users. On the latency front, dedicated servers give you the freedom to use latency-reducing techniques such as Anycast, which uses decision-making algorithms to send a request to the nearest location. When customers report outages or slower-than-expected load times on your ecommerce website, your on-site teams can remedy the issue as soon as they’re notified. 

No internet access required

One of the biggest benefits of cloud computing is how accessible data is to anyone with an internet connection. On the flip side, dedicated servers allow organizations to access data stored on-site without any internet connectivity. While this requires a trip to a data center, proponents of on-prem solutions say that this reduced reliance on internet service actually increases productivity. 

Cloud vs. dedicated server costs

The decision between cloud versus dedicated servers should never come down to cost alone. That said, it is important to understand the nuances of what both options might cost your company. The costs of setting up either option will vary based on your business’s needs, but here are just a few things to consider when you’re comparing cloud vs. dedicated server costs. 

Cloud server costs

As we touched on earlier in this article, cloud infrastructure is equal parts powerful and cost-effective. Service providers will rent out as much cloud infrastructure as you need for a small monthly or yearly fee, and software companies use similar pricing models to sell companies the right number of licenses for the business. As an added bonus, you can usually change the amount of infrastructure you rent or the number of software licenses in your fleet whenever you need to do so. 

Unlike an on-prem solution, cloud infrastructure does not require you to replace hardware or pay for updated hardware. The costs of upgrading hardware and ensuring compliance with the most relevant security regulations are baked into the monthly fee you pay a provider to rent their cloud-based infrastructure. While a dedicated server gives you more freedom to choose your own hardware, every component of your data center will need to be upgraded every five to seven years, depending on data sharing laws that pass after your initial build. 

Your total cost of ownership for a cloud-based solution will depend on a number of factors. According to Digital Ocean, here are just a few that will impact your cloud server costs:

• Type of business: Regulated industries such as finance or healthcare may require additional features that help you stay compliant.
• Training expenses: While you don’t need to buy any hardware for a cloud server, you do need to ensure that your IT teams are experts on your tech stack.
• Application complexity: Some platforms may charge additional fees if an on-prem to cloud migration requires significant code modifications. 
• Risk management: Not all cloud server providers offer security features out of the box, which means you may need to implement additional security measures to protect your organization.
• Operational processes: Your fees may increase if important business processes require supplementary services, such as cloud automation and disaster recovery. 

Dedicated server costs

Throughout this article, we’ve discussed how on-prem servers require companies to buy, install, and maintain their own hardware. Whether you believe this is an advantage or disadvantage, the upfront costs of building dedicated server infrastructure is considerably higher than a cloud-based alternative. The ongoing costs of maintaining physical servers can be significant as well.

There are two contributing factors driving up dedicated server costs. For starters, hardware needs to be replaced every few years. According to Dell, the typical refresh cycle used to be five years. But as technology continues to evolve, they report that server refresh cycles should occur every three years. While these refresh cycles are necessary to keep your business in a position to meet ambitious goals, they’re also expensive. 

Maintaining your current fleet of servers can also be costly. While it’s impossible for us to estimate maintenance costs for every brand on the planet, some estimates suggest that it might cost a small business up to $1,000 per year just to maintain a single server. When you extrapolate that out across an enterprise-level fleet of servers, those costs multiply quickly. 

How Shopify delivers the fastest server speed in commerce

Until now, we’ve exclusively talked about the differences between cloud and dedicated server infrastructure. What we haven’t explored is how Shopify’s best-in-class infrastructure and fleet of cloud servers means that our customers get the fastest sites in commerce by default, ultimately ensuring they stay as close to their customers as possible. 

What makes Shopify unique is that all of our plans are fully hosted by our fleet of cloud servers, which some of the biggest brands on the planet rely on for consistent speed, security, and uptime. We recently analyzed public Google Core Web Vitals data for nearly 200,000 sites across a sampling of all revenue bands and all major commerce platforms. What we found is that the average Shopify site has a Time to First Byte (TTFB) or server speed of 0.51 seconds, compared to an average of 1.4 seconds on other platforms. The slowest platform clocked in at a whopping 1.99 seconds.

These findings are the byproduct of an organization-wide commitment at Shopify to keep our brands at the cutting edge of innovation. Shopify is an engineering-led company, with thousands of engineers on staff and $1.7 billion spent on research and development in 2023. Most recently, we made a huge investment to augment our already-strong cloud server availability by expanding our fleet of Google Cloud servers to locations across Europe. This makes Shopify sites render quickly around the world and keeps businesses closer to their customers. Just last year, we announced that Shopify storefronts got 35% faster thanks to several updates, including:

• Consolidated hosting: Static content no longer uses cdn.shopify.com and shares the same domain as your storefront. 
• Upgraded lazy loading techniques: Theme Sections and blocks can apply lazy loading techniques based on the location of the page. 

These investments, coupled with our ongoing commitment to improving our server infrastructure, also means that Shopify brands have markedly faster stores than brands on other ecommerce platforms. Here’s a breakdown of how Shopify sites stack up against the competition:

Shopify vs. BigCommerce

• 80% of BigCommerce stores are fast vs. 93% of Shopify stores.
• Shopify’s server speed is 1.9x faster on average than BigCommerce’s.
• Shopify stores are 1.4x faster on average than BigCommerce stores.

Shopify vs. Salesforce Commerce Cloud

• 65% of Salesforce Commerce Cloud stores are fast vs. 93% of Shopify stores.
• Shopify’s server speed is 2.2x faster on average than Salesforce Commerce Cloud’s
• Shopify stores are 1.5x faster on average than Salesforce Commerce Cloud stores.

Shopify vs. Adobe Commerce (Magento)

• 53% of Adobe Commerce stores are fast vs. 93% of Shopify stores.
• Shopify’s server speed is 3.4x faster on average than Adobe Commerce’s.
• Shopify stores are 2x faster on average than Adobe Commerce stores.

Shopify vs. WooCommerce

• 34% of WooCommerce stores are fast vs. 93% of Shopify stores.
• Shopify’s server speed is 3.9x faster on average than WooCommerce’s.
• Shopify stores are 2.4x faster on average than WooCommerce stores.

Shopify vs. custom-built stores

• Shopify’s server speed is 2.4x faster on average than custom-built stores’.
• Shopify stores are 1.7x faster on average than custom-built stores.

*According to data from Google’s Core Web Vitals (CWV), collected for a representative sample of sites on Shopify and its competitors. Specifically, the first and third data points for each named competitor look at First Contentful Paint, while the second data point looks at Time to First Byte. For the custom-built comparison, the first point looks at TTFB and the second point looks at FCP. To learn more, read the full report.

Shopify keeps you at the cutting edge of server infrastructure

The choice between cloud versus dedicated server infrastructure has historically been difficult, especially for enterprises that have the budget to build out their own on-prem solutions. But as Shopify continues to raise the bar for how fast stores should load, the choice has become a little simpler for some of the world’s largest brands. One recent example is Dermalogica, which increased their site speed by 44% after they switched to Shopify.

While the biggest benefit of cloud server infrastructure has always been the reduced burden on IT, Shopify gives companies of all sizes infrastructure specifically designed to deliver best-in-class ecommerce experiences. Migrating to Shopify gives you an almost immediate site speed boost—and sets you up to hit your most ambitious goals over the coming years.