On‑Premises Data Gateway: Types, Components and Hybrid Scenarios

Introduction

The On‑Premises Data Gateway is a key component of the Microsoft Power Platform and Azure ecosystems. It is designed to allow organizations to keep their data within local infrastructures while securely and controllably using it in cloud services. This approach is crucial for hybrid scenarios where on‑premises systems coexist with cloud solutions.

The gateway is installed on an on‑premises server and establishes outbound connections to Azure Service Bus, through which cloud services can send requests to corporate data without opening inbound firewall ports. It combines security, governance and interoperability, creating an encrypted communication channel between internal systems and Microsoft’s cloud infrastructure.

Architecture and Main Components

The gateway architecture consists of three main components:

• On‑Premises Data Gateway Cloud Service: the Azure service that coordinates requests from the cloud and routes them to local gateway installations.
• Azure Service Bus: the intermediate messaging infrastructure that ensures reliable and secure data traffic. All connections are outbound from the corporate data center.
• Local Gateway: the software installed on internal servers that handles encryption, authentication, and communication with corporate data sources (SQL Server, Oracle, SAP, file systems, etc.).

In this architecture, credentials and data are encrypted and decrypted locally. The communication channel is secure and authenticated through Azure Active Directory. This model minimizes the risk of data exposure and simplifies security management.

Types of On‑Premises Data Gateway

Microsoft provides two implementation modes of the gateway, each designed for different needs:

1. On‑Premises Data Gateway (Standard)

This is the full version, shareable among multiple users and services. It allows creating a centralized access point to corporate data usable by Power Apps, Power Automate, Power BI and several Azure services such as Logic Apps or Azure Analysis Services.

It can be configured in high availability mode by installing multiple instances of the same gateway cluster to ensure operational continuity in case of node failure.

2. On‑Premises Data Gateway (Personal Mode)

This version is intended for individual users who need to connect Power BI to on‑premises data. It cannot be shared with other users or used with Power Apps or Power Automate. It is the ideal option for analysts working independently who need to schedule Power BI dataset refreshes.

Operation and Data Flow

The gateway’s data flow follows a key principle: no direct connection from the cloud to the local environment. When a cloud service (for example Power BI) requests data, the operation proceeds as follows:

1. The cloud service sends a request to the Gateway Cloud Service in Azure.
2. The Cloud Service forwards the request to the Service Bus, which acts as a secure transmission channel.
3. The local gateway instance, maintaining an active outbound connection to Azure, receives the request and forwards it to the source system (for example local SQL Server).
4. The data is retrieved and transmitted back through the same secure channel to the requesting cloud service.

and Cloud Service

This model drastically reduces the risk of exposing the internal network, as the gateway does not require inbound port openings. All communications are encrypted via SSL/TLS and authenticated with Azure AD.

Hybrid Scenarios and Use Cases

The On‑Premises Data Gateway is essential in many modern hybrid architectures. Some practical examples include:

• Power BI: connecting to local SQL Server databases to perform scheduled dataset refreshes or direct queries (DirectQuery).
• Power Apps: accessing corporate on‑premises data while keeping application logic in the cloud.
• Power Automate: automating processes that integrate local systems (ERP, on‑premises CRM) with cloud flows.
• Azure Logic Apps: orchestrating enterprise workflows that involve on‑premises sources and SaaS services.

Many organizations adopt the gateway as an integral part of their Azure and Power Platform integration strategy, ensuring operational continuity for legacy applications while gradually migrating to the cloud.

Security and Management

From a security perspective, the gateway architecture is based on rigorous principles:

• All connections are outbound‑only and fully encrypted end‑to‑end.
• Data source credentials are securely stored in Azure using Azure Key Vault.
• Requests are signed and authenticated via Azure Active Directory.
• The gateway can be centrally managed through the Power Platform Admin Center.

Microsoft also allows configuration of diagnostic reports and usage logs to monitor performance and connection attempts. In enterprise environments, gateways can be configured in clusters to ensure resilience and load balancing.

Deployment Best Practices

To maximize gateway reliability and security, it is recommended to follow some operational best practices:

• Install the gateway on a dedicated server with stable Internet access and internal data source connectivity.
• Configure at least two instances in a cluster to ensure high availability.
• Keep the software updated to the latest versions to guarantee compatibility and security.
• Use dedicated service accounts with the minimum required privileges for data access.
• Regularly monitor connection logs and performance metrics.

Following these recommendations, the gateway becomes a key element for secure and scalable integrations between cloud and on‑premises infrastructures.