A good example is a hospital which houses its own data center. Some services may be used online, but those services that require 24/7 access are maintained on campus. Unless you have redundant Internet connections, there is always a possibility you can lose your connection.
Additional costs are associated with housing a server; you need to pay for the hardware, keep backups of it, and hopefully have off-site redundancy in case of a fire/flood/etc. The advantages of owning a server in-house include minimal downtime, and better application performance and speed, depending on the type of applications you are using.
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