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Chatbot on-premise vs chatbot on-cloud: What's best?

Engati Team
last edited on
September 11, 2023
8-9 mins

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chatbot on premise and cloud

More often than not, it is quite confusing for a business, which develops chatbots, to decide whether they want to build a chatbot on-premise or on-cloud. Each has its own pros and cons. But depending on business requirements you can make a smart choice.

Here are some factors to help you make a decision regarding the type of chatbot hosting that you are looking for.

Chatbot on-premise v/s chatbot on cloud


  • Cloud-based chatbotCloud-based solutions simplify the chatbot development process. They offer hassle-free integrations along with multiple channels. However, when businesses receive customer-specific customizations they may not have much flexibility on that front. Moreover, on the payment front you pay for as much as you use. The service comes with charges depending upon the usage.
  • On-premise chatbotWhen we compare this to an on-premise, the solution allows businesses to customize the workflow. Businesses can also integrate with any current working client applications into the workflow as per the requirement. The on-premise solution will help businesses have continuous in-house maintenance and support available. With this, there is less or next to no dependency on the vendor.


  • Cloud-based chatbot - When businesses deploy a chatbot using cloud computing , they deploy the resources in the cloud. There were different forms of cloud computing available. Like public cloud, private cloud, multi-cloud and hybrid cloud. Cloud-based chatbot hosts these resources on the premises of the service provider. So, enterprises can access these resources remotely. They can use these resources at any time from anywhere
  • On-premise chatbot - Comparatively, in an On-premise deployment, resources are deployed in-house. Enterprises can manage and maintain the resources in-house. They can deploy within enterprises IT infrastructure. The enterprise is solely responsible for maintaining the solution and all its related processes.

Control and security

  • Cloud-based chatbotTake care of privacy and security when using the cloud-based solution for a chatbot. Cloud vendors keep changing their policies often, sometimes businesses have to face some major issues. Many sensitive pieces of information are stored in the cloud as a form of data. So, businesses always have to be concerned about data ownership and privacy. Application token access, security keys, customer data, partner data, employee data; must have their privacy ensured. There were chances of data breaching.
  • On-premise chatbotWith on-premise solutions for the chatbot, businesses have better control over the entire system and the data. Companies having high concerns about their data and privacy, highly prefer on-premise chatbots. Highly regulated domains like Government sectors and Banking sectors have major barriers for the cloud solution they have extra privacy concerns and they can't afford a single breach in the data. There is no fear of confidential data getting leaked by a cloud provider in an on-premise solution.

Tip for you:When deploying your chatbot on-premise, decide thom to allow access and whom to restrict.


  • Cloud-based chatbotA cloud-based solution comes up with multiple plans depending on the usage and requirement. A cloud-based chatbot is priced under a monthly or annual subscription as per the usage. There is additional fees for the support, training, and updates. Depending on the enterprise's consumption the cost will vary.
  • On-premise chatbotOn-premise has the one-time investment cost which includes the server hardware, power consumption, space; others are the recurring fees for support, training, and updates. Further, it requires less operational cost after deployment. Eventually, it will bring down the overall cost of ownership.

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Do chatbots have to run on the cloud or on-premise?

That’s really a choice each enterprise has to make depending on if the platform they choose can provide both cloud and on-premise hosting. Some businesses use a hybrid model - taking advantage of the cloud version but are connecting to systems that are on-prem. What this means for potential customers is that if they have old legacy apps they simply can’t get rid of, with an API all the sudden those systems can be “modernized” to be conversational.

A number of chatbots are designed to operate expressly in a cloud environment. There are leading-edge products that you can still install on-premises. If an organization’s operating platforms are in-house, having the chatbot co-located may be a logical choice. An additional benefit of having the chatbot on-premises is that client conversations and transactions remain fully company confidential.


Implementation Staffing

Having an implementation team experienced in the configuration and training of chatbot and ML engines is quite important.

As reported by Forrester Research, “Talent is scarce: Conversational interfaces demand technical expertise, from back-end and front-end engineers to AI wizards, all of whom are hard to attract and retain. But that’s not all. Conversations demand a breadth of skills found more often in liberal arts establishments, not tech startups.”

Given the criticality of getting it right or the visibility of getting it wrong, from a customer-service satisfaction point of view, having an experienced chatbot implementation partner is of utmost importance. Perficient has formal partnerships with leading chatbot platform providers and consultants with the necessary skillset. We have a proven record of success with cloud-based chatbots and on-premises implementations.

If you opt for on-premise chatbot solutions, learn about the trends and capabilities in AI chatbots, options for integrating them into client service workflows, and how they can reduce expenses and increase revenue in the process.

First of all any chatbot is going to be the program that runs along with the NLP. It's the NLP that brings the knowledge to the chatbot. NLP lies in the hands of machine learning techniques.

There are few reasons why less businesses choose on-premise chatbots.

  • There is a need to build the entire infrastructure
  • Also, there is a need to continuously train the model

But using the cloud-based NLP chatbot may not provide data privacy and security. Also, the flexibility of including business logic is very less.

All together going to the on-premise or on cloud is based on the needs and the use case of the requirements.

In order to build an on-premise chatbot, you require 2 things- Knowledge base and technological building blocks.

  • Knowledge baseA rich knowledge base enables a chatbot to do more than just simply acting as a gateway to FAQs. It delivers seamless customer experience by providing instant resolutions to make interactions user-friendly
  • Artificial IntelligenceAI-powered Chatbots help in making customer service more efficient, productive and cost effective
  • Natural Language ProcessingChatbots powered with NLP recognize user intent by parsing their messages and understanding sentences to take actions

Any company can have an enterprise-grade chatbot built on a powerful platform and deployed as a solution to improve business process efficiency and ROI. But, the main challenge comes when you have to decide whether to choose on-premises or cloud. No doubt that cloud technology has become more popular in recent years. There are many reasons why one should go for on-premises chatbot deployment. You may want to look into the following.


Get better control over data

A chatbot handles almost all types of confidential business information such as employees’ social security numbers, customer contact details, accounting and invoices, supply chain management, logistics, and other business intelligence that represents significant value to outside parties. A benefit to deploying your chatbot on-premises means you have overall control on security measures used for physical access control. So, there will be no risk as the workstation isn’t connected outside the network to the cloud, and no fear of your confidential data getting leaked by a cloud provider.  

Also, if you want your IP back from cloud vendors that store data in proprietary formats it can be a prolonged and expensive affair, whereas you will have no such hassle with on-premises live chat and chatbot deployment.


Data security

A lot of companies purchase servers and infrastructure up-front to host their chatbot solutions on the cloud. These types of investments not only come with maintenance costs, but they also allow the cloud providers to have direct control over their dedicated server ark and security systems. This means that your data may not be secure in the cloud and may face cyber-attacks, security breaches, government intrusion, lack of standardization and more. One of the major security lapse instances is the Heartbleed bug.

On the other hand, chatbot hosted on-premises aren’t completely invulnerable, yet companies can at least decide whom to allow access and whom to restrict.


Decreases on-going costs

The direct cost is more with an on-premises chatbot, but the overall cost of ownership may end up lesser, compared to the costs you incur with on-going subscription and support services on the cloud. Another benefit of using an on-premises chatbot solution is that it knocks the direct costs out of the way. The only on-going costs are expenses like energy and IT maintenance. While choosing chatbot solutions for your business, focus on the total cost of ownership instead of holding over on the upfront costs.


Greater ability to customize

Cloud solutions are good at integrating with popular third-party applications and software, but they aren’t that good at providing you with the flexibility needed for your own customized solutions. You will not have to discard your useful applications tailored to your business, because an on-premises system offers a service that allows  customization options for working these apps into existing workflows.


Less dependency on the vendor

Cloud technology is often appreciated for its high flexibility, but your chatbot deployed on the cloud gets locked into multiple technology decisions that are solely made by the vendor. Any enterprise would build and deploy chatbot solutions keeping a long-term business plan in mind. And, if the vendor goes out of business, you will have nothing but a lot of struggle to do in order to implement a new chatbot solution in the cloud. Hence, on-premises chatbot won’t make you too dependent on the vendor, so you can alter diverse aspects of the system as and when needed.

To sum it up

Pros of the cloud-based solutions: We don’t have to wait for the installation and no waiting for the deployment. Cloud-based chatbot solutions are ready to work from the day we adopt these platforms. Updated software and compatible with the new releases.

Pros of the On-Premise solution: Customization plays an important role in an on-premise solution, you will not have to discard your useful applications tailored to your business instead you can integrate these apps into existing workflows. It comes with a one-time large investment and low operation cost maintained ahead.

Due to new methodologies and technologies that have emerged to revolutionize customer service through social networks and conversational agents available day and night thanks to the power and benefits of the cloud.
- Researchgate study on Cloud-based Conversational Agents.

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Whether you deploy your chatbot on-premise or on the cloud, a lot of factors need thorough consideration. Chatbot solutions really have all that to make your business operate efficiently and productively, saving a lot of costs.  

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