Difference between in-place & Side by Side Upgrade of SQL server

In-place Upgrade

Depending on the size, resource available, criticality of the businesses, an in-place upgrade is done. Organizations those are short of resources to host multiple database environments. An in-place upgrade typically overwrites a previous installation of SQL Server with an installation of newer version. Technically speaking, a target instance of SQL Server is actually replaced with a new version of SQL Server. This facilitates the coping of data from old instance to new instance automatically as old data files are converted to new format during the upgrade. This upgrade method cannot be used to upgrade only a single database.

Advantages                                       Disadvantages
No additional hardware is required            Roll over is expensive and complex
Easier, simple and faster                        Object wise or part update not possible
Automated process                                Less granular control over upgrade process        
Easier, faster, less headache for small      Instance remains offline during part of upgrade
Systems                                              Not best practice for all components
Requires no additional hardware               Analysis Services cubes are recommended to be migrated
Applications remain pointing to old instance 

Side-by-Side Upgrade
Organizations having additional server resources perform a side-by-side upgrade / migration. Generally, a new instance is created on the same server or in a new physical server. Thus, allows old database instance to run parallel to the new installation allowing the old database still available and online for applications. This type of upgrade process allows for uninterrupted operation of the original database environment while new version can be installed and tested, thus reducing downtime for SQL Server. DBA's need to manually move databases to the new SQL Server installation and other supporting objects such as jobs, DTS, SSIS packages after a side-by-side installation.

Advantages                                                                           Disadvantages
Both old and new versions exist independently         Additional hardware is required
Roll back is quite simple                                            Manual data migration is needed
More controlled installation of components              Applications need to be directed to new instance.
Migration provides more granular control over the
upgrade process.
Having new and old instances side-by-side helps  
with testing & verification.                                
Legacy instance remains online during migration  
Flexibility to implement migration with failover

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