Difference between Exchange Server and Office 365: In House vs Cloud

Ashish Ratan Singh | Modified: April 16, 2017 | General, Office 365 | 5 Minutes Reading

In this blog, we will be studying about the difference between Exchange Server and Office 365. Businesses, whether small or medium, are certainly using a platform for the management of their data, internal communication, storage of their files, accessing word processing applications, sending of emails, and for multiple things. Many organizations are using on premise Exchange Server or cloud based Office 365 suite, for these purposes. However, both these platforms are not that much similar. So, what is main difference between the two? Is Exchange On-Premise good for big organizations? Let’s compare the two and find out the dissimilarities between the two.

Microsoft Office 365 (O365) suite is a cloud-based service appropriate for all small, medium, and large level of businesses. It helps in saving time, money and free up many resources as well. It offers so many services like MS Exchange Online (email client used is web based and is called Outlook 365/OWA), Microsoft Word, Excel, PowerPoint, Yammer, etc. Users can use any of these services by availability of the internet. There are different subscription plans available in Office 365; users can subscribe any of the plans as per their requirement.

Microsoft Exchange Server (a.k.a Exchange On-Premises/On-Site) is a desktop-based mail server and calendaring server. There are various versions of Exchange like 2007 (SP1, SP2, SP3), 2010 (SP1, SP2), 2013. In hosted Exchange service, server site is given on rent. In fact, users can get Exchange In house with Office 365 (Exchange Online) plan also. When users set up an Exchange account, emails are delivered and stored in Exchange On Premise/On Site mailbox.

Note: Visit these pages to know more about introduction to Exchange Online and introduction to Office 365.

Microsoft Exchange Server vs Office 365

In the above section, we have gone through a brief introduction about cloud-based Microsoft suite and desktop-based emailing server. Let us proceed further to know the difference between Exchange Server and Office 365:

  • In comparison to O365, hosted Exchange provides a smaller space. On one side, Office 365 offers 50GB size per user mailbox. This is usually a very large comparatively. Moreover, if the user subscribes Plan 2/E3 package of O365, then the user will get an email archive without any limits.
  • Administrator has the capability to set the limit on mailbox of Hosted Exchange. However, this limitation with size can be raised when required.
  • If we talk about on the security criteria then, MS Office 365 is more secure and safe as compared to local Exchange service.
  • In hosted Exchange, more features of security can be added by paying a certain amount.
  • Users who are accessing Exchange Server have the information about the location of their data, that where data has been saved. While in Office 365, it becomes very difficult for users to know the actual location of saved data.

Some More Features of Hosted Exchange Server (On-Premises)

Multiple version choice

According to this feature of Exchange Server, users can run hosted Exchange on any of its version. They can use the desired version (like 2007 (SP1, SP2, SP3), 2010 (SP1, SP2), 2013) as long as they want. However, if a user uses the older version they need to pay the higher costs.

Email Service

Exchange Server mainly provides service of emails with unlimited size of mailbox. Users can access it with the synchronization Outlook, webmail named Outlook on the web (OWA/Outlook Web App) or even with both. There are different packages available, which users can subscribe for. These include services like Archiving, Hosted SharePoint, Hosted Lync (Skype for Business), and many more.

Assistance in Migration

The provider of local Exchange Server may not charge anything for the process of migration. In addition, with the provider’s assistance any user can complete the process of transition to a newer or different environment.
Features of Office 365 (Exchange Online)

Runs on Latest Version

Microsoft Office 365 brings out new and unique features with every new release. Users of MS O365 need not to worry about the new updates and as all the updates will be automatically visible to the users.

Free to Upgrade

The most important thing is that there is no need to give or pay extra amount other then the fees of monthly subscription. Moreover, they need to pay only for the services, which they are using without any kind of extra charge.

Many Apps are Available

Office 365 service comes up with so many different applications apart from Exchange Online. It offers the shared platform, which consists of the applications such as Lync Online, Office Online suite, Sway, SharePoint Online, etc.

Microsoft Office 365 Runs a Business about Half the Cost of a Hosted Exchange Service

There are countless factors to choose the winner between Office 365 vs local Exchange Server, when we talk about any business whether it is a small, medium or big business. As the matter of fact, that MS O365 is reasonable in price, it leads so many organizations to go for this service. Ultimately, the priorities of a particular organization becomes the deciding factor whether to choose Exchange Server or Office 365.


After considering all the factors, which are required for the establishment of a successful business, we have discussed the main difference between Exchange Server and Office 365. After the comparison between the two, it can be concluded that Microsoft O365 seems to be better options if there is a requirement of multiple collaboration applications. However, for using on-premises services only for mailing and calendaring purposes, hosted Exchange Server would be preferred.