There are a few tradeoffs between SharePoint Online and SharePoint 2013 on-premises. SharePoint Online is extremely...
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economical -- subscriptions don't cost that much and there's a lot of utility right at your fingertips -- but there's also more limited functionality than in the on-premises version of SharePoint 2013. There are issues with search functionality and with customization. However, Microsoft is gradually updating and improving SharePoint Online.
With its initial release, the main problem with SharePoint Online search was that the content search Web part was not available. That was a huge problem because a lot of other functionality derives from content search -- cross-site publishing, for example, and e-discovery functionality. But Microsft eventually deployed content search, and with it came cross-site publishing, and now they're deploying e-discovery.
With the added functionality that came along in 2014, SharePoint Online is looking more and more like a powerful standalone. It will continue to catch up to the on-premises version. For now, a hybrid model of SharePoint Online and on-premises makes a lot of sense for companies that already have an on-premises deployment. Companies can have core utility in an on-premises deployment, and then share information with a field workforce or customers using SharePoint Online. Any missing functionality in SharePoint Online isn't so crucial if you're using that model.
Microsoft made a good move in allowing for this hybrid model, but it doesn't make sense for companies that don't already have an on-premises deployment and want to save money by going to the cloud. In the next year, with the SharePoint Online product becoming more standalone, this won't be as much of a problem.
Will customization in SharePoint Online get easier?
With tenant-based SharePoint farms in the cloud, you have to share with a lot of other customers, which makes it difficult to customize. While SharePoint on-premises is like a big chunk of land where you can build a nice house and design things as you please, SharePoint Online is like moving into a block of condos -- you have very little say about the layout, and all you can do is decorate.
There's not a lot you can do about that, but customization moving forward is going to be easier than before. The sandbox model of development -- where you can write whatever code you want and if it runs badly, that's your problem -- will be replaced by the app model. Going forward, anything you deploy on a SharePoint site will be a Web part that conforms to Microsoft's general code execution rules. The custom code that we build in the future is going to be cleaner and more efficient than before. The end result is that it's going to be possible to write more stylized, more customized applications in SharePoint.
Learn more about the differences between SharePoint Online and on-premises development
Public Website feature discontinued in SharePoint Online
How SharePoint Online works with other Office 365 apps
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