Cloud vs On-Prem Shop Software for Defense Work: An Honest Comparison

Under DFARS 252.204-7012, a cloud service that stores covered defense information has to meet the FedRAMP Moderate baseline or its equivalent. A December 2023 DoD CIO memo made 'equivalent' strict: an assessment by an accredited third party (a 3PAO), the full body of evidence available, and no open plan-of-action items. A SOC 2 report does not qualify.

That narrows the field quickly. Microsoft's GCC High, which many defense shops use for email and files, runs roughly $60–93 per user per month. ProShop's FedCloud offering runs on AWS GovCloud at $37,870 a year for 10 users, and as of our research ProShop said it was targeting 'FedRAMP Moderate Ready' in June 2026. Ask any vendor for its current status in writing. Fulcrum, which is cloud-only, publishes no ITAR, CMMC, or FedRAMP claims. Many general-purpose shop systems never mention FedRAMP at all, so treat silence as a 'no' until the vendor shows you evidence.

A box you own on your own network isn't an external cloud provider, so the FedRAMP equivalency question doesn't come up. That's the main reason defense shops look at on-prem. The trade-off is that the box is now inside your CUI scope, and you have to secure it like the rest of your environment: physical access, user accounts and MFA, encryption, patching, audit logs, and backups you can actually restore.

Watch vendor remote access closely. If the software vendor can reach into the box for support, that access can make the vendor an External Service Provider in your scope. Ask on-prem vendors exactly how remote support works, who performs it, and whether you approve each session.

Cloud is genuinely better for many shops. If your work is commercial and you don't receive CUI, the FedRAMP rule doesn't apply and a good cloud system saves you from owning hardware. Cloud is also simpler if you run more than one site, if nobody in the building wants responsibility for a server, or if your MSP already runs a GCC High enclave and your shop software vendor can show real equivalency evidence.

Cloud also wins on resilience for shops that can't keep a box physically secure and backed up. A server in an unlocked office with no tested backup is worse than a properly run cloud service. If that describes your shop and you can't fix it, choose cloud and pick a vendor whose evidence holds up.

On-prem makes sense when CUI or ITAR technical data is central to your work, when you'd rather not depend on any vendor's FedRAMP status, when internet in your building is unreliable, or when you want to own the system instead of renting it. It also keeps scope small: one box in a locked room, on your network, managed by you or your MSP.

Cost often favors on-prem for small defense shops too, because FedRAMP-grade cloud is priced well above ordinary SaaS. Over five years, ProShop FedCloud at $37,870 a year comes to $189,350 for 10 users, before any GCC High seats for email. Run your own numbers with the calculator at /tools/cloud-vs-on-prem-cost.

Traveler offers both, and we'll tell you which one fits. Traveler Cloud, planned at $109/month flat, has no FedRAMP Moderate authorization or equivalency assessment, so we don't recommend it for CUI. For defense work, the Shop Server runs the whole system on a box in your building: $4,250 one-time with an optional $59/month continuity plan, or the Shop Server Defense edition at $6,500 one-time with an optional $99/month continuity plan. The Defense edition is designed with a hardened FIPS-mode configuration, mirrored SSDs and a small UPS, an encrypted backup drive with customer-held keys, an 800-171 control mapping, and support from US persons only.

The Shop Server is pre-launch and planned to ship after Traveler Cloud. It's designed to keep CUI off third-party clouds and to support your 800-171 controls; it doesn't make a shop compliant by itself. You can reserve one with a free form at /shop-server, and /for/defense-subcontractors covers the wider defense-shop picture.