We are looking into the possibility of using JIRA on demand but want to ensure that our existing server instance would be able to be migrated.
Yes you can backup your JIRA server instance and restore in on JIRA Cloud.
Information on how to perform this migration is available at https://confluence.atlassian.com/display/ONDEMANDKB/Migrating+from+JIRA+Server+to+JIRA+Cloud
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