Cloud-Based VS On-Premises HSMs

Cloud-Based Certificate Management


The adoption of Public Key Infrastructure (PKI) has been going up steadily in enterprises across industry sectors and has been described in earlier articles1 . PKI mechanisms such as certificate-based authentication, encrypted communication, certificate management, code signing, and others all combine to ensure a secure enterprise. However, all the security benefits offered by PKI can come to naught if the private keys used for various purposes, are compromised. Therefore, the critical success factor (and biggest vulnerability) in PKI and any cryptography system is the safe storage and management of private keys. This is where a Hardware Security Module (HSM) comes in.

HSM Overview

An HSM is a specialized, dedicated, physical cryptographic device or ‘appliance’ designed and built for key lifecycle management – generation, storage, management and exchange of cryptographic keys. HSMs are also used for offloading of cryptographic functionality from application servers – examples being authentication, encryptiondecryption, and digital signing. HSMs offer certified mechanisms for physical and logical security, tamper resistance, intrusion prevention and detection, event logging, and secure APIs to access the HSM. HSMs allow for the segregation of the cryptographic tasks from application business logic, with unparalleled performance for any cryptographic function. For example, while software running on the best hardware might achieve a few thousand digital signatures per second, an HSM can achieve millions.

Traditionally, HSMs were set up “on-premise” or within the enterprise data center. The prevalence of cloud computing, especially over the last few years, has seen the emergence of “Cloud based HSMs” or “HSM as a Service”. Regardless of the type whether on-premise or cloud based, enterprises need to keep some of the following features in mind while selecting an HSM.


Any HSM needs to be certified to international security standards such as Common Criteria and FIPS (Federal Information Processing Standards). Certification provides the assurance that the design and build of the device meets certain basic criteria. While certification is necessary, it is not enough, and other criteria need to be considered while selecting an HSM.

User Interface (UI):

The UI for HSM administration is often command-line based. Some providers may have a centralized management portal with a graphical user interface (GUI) and dashboard, which can ease some of the administration tasks.


Any HSM should provide a number of cryptographic algorithms (both symmetric and asymmetric) that can be used for multiple functions such as authentication, encryption, decryption, signing, timestamping, and others. A related factor can be future readiness such as support for new technologies like quantum cryptography.


Once the HSM is deployed, ongoing maintenance and management tasks take up most of the administration work. Any automation features provided by the HSM vendor can be an advantage to reduce ongoing administration efforts and costs.

Earlier articles on PKI are available at https://www.encryptionconsulting.com/blog/

Key backup:

Backup of keys needs to be done to an environment that has similar security levels as provided by the HSM. Remote backup management and key replication are additional factors to be considered.


The HSM is not a standalone entity and needs to work in conjunction with other applications. An important feature to evaluate therefore is the integration capabilities. Over time, since the HSM will need to support multiple applications, out-of-the box and proven integration interfaces with multiple applications can be a significant advantage.

Total Cost of Ownership (TCO):

On-premise HSMs will have a higher upfront investment or Capital Expenditure (Capex) and possibly lower annual costs. Cloud HSMs will have much lower or no Capex but may have higher annual costs or Operational Expenditure (Opex). The decision factor therefore typically is the TCO over a period of time, say five years. The cost factors to compute TCO include hardware, tools needed, network and security infrastructure, data center, operational model, payment model, software licenses, support, service levels, training, compliance, and personnel (staffing) costs.

Random Number Generation:

It is important that the HSM vendor uses an approved or certified process for Random Number Generation, since this could be a critical factor from a regulatory and compliance perspective.

Once the basic features are evaluated, the next step is to decide whether to invest in an on-premise or cloud based HSM. Some of the scenarios that can help enterprises make this decision are indicated below.

On-premise HSM

HSMs originated decades ago as physical devices that were built grounds up especially for cryptographic operations and deployed on-premise. The hardware, firmware, operating system, network access and overall functionality of an HSM were all designed to ensure that the devices were tamper-resistant and intrusion proof.

An on-premise HSM is a good option for enterprises with one or more of the following scenarios:

  • Large organizations which require complete and isolated control over their key management mechanisms, and who have a clear business case for the high investments needed in an on-premise HSM.
  • Applications which require very low latency, where an HSM being in the same data center as the application can make a big difference.
  • Applications with intensive cryptographic operations and a need for high performance, where offloading the cryptographic functions from an application server to a local HSM can result in a significant performance improvement for the application.
  • Organizations which operate in countries with strict requirements on data localization, and where cloud providers may not have a local data center in that geographic location.
  • Organizations with predictable workloads, where it is unlikely that the business requirements and transaction volumes will exceed the capacity of the HSM in the near future.

Cloud based HSM

A recent research report from Flexera indicates that around 94% of organizations today leverage some form of cloud services. As workloads of all types move to the cloud, HSMs are no exception. The simplicity, flexibility and agility offered by Cloud based HSMs make them an attractive value proposition, especially when enterprises face one or more of the following scenarios:

  • Small and medium organizations who already use a lot of cloud services and the high investments for on-premise HSMs may not be feasible.
  • Organizations who want to test or pilot multiple HSM services with minimal upfront investments, before committing to a vendor.
  • Organizations where the workloads are less and application performance and latency requirements may not require a dedicated, on-premise HSM.
  • Organizations with highly variable workloads which might require elasticity i.e. scaling up and scaling down of the HSM infrastructure.
  • Organizations who prefer a predictable, operational expenditure (Opex) based financial model offered by the cloud rather than high upfront capital investments needed by an on-premise HSM.

There are two types of cloud based HSMs: public cloud based, and third party. Both types offer the HSM-as-a-Service model. Depending on the vendor, both types may also offer single tenant as well as multi-tenant solutions, and additional key management services apart from HSMs. The main difference between the two cloud based HSMs is vendor lock-in. Public cloud based HSMs are typically tied to that public cloud provider such as AWS or Azure and are therefore suitable for enterprises which leverage only one public cloud provider. Third party cloud based HSMs usually work across multiple public cloud providers and therefore are a good choice for enterprises which have multi-cloud scenarios2. Third party cloud HSMs, being specialized offerings, may also have more sophisticated features such as automation, scaling, back-ups, and better administration. In general, the choice of a cloud based HSM is closely linked with the enterprise cloud strategy.

Key Takeaways

The question “Which is a better option: an on-premise HSM or a cloud based HSM?” has no single answer. Enterprises will need to choose the best option depending on their use cases and business scenarios. One thing however remains clear: the benefits offered by Public Key Infrastructure (PKI) can be completely undermined if private keys are compromised. Protecting and managing those keys is therefore a critical requirement to ensure enterprise security. HSMs, whether on-premise or cloud based, are the best options today to fulfil that requirement.

A recent research report on cloud trends from Flexera indicates that more than 80% of organizations are moving to multi-cloud environments

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About the Author

President at Encryption Consulting LLC focusing on providing consulting to customers in the Applied Cryptography space.

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