Dynamics 365 Business Central on the Cloud Versus On-Premises. Which Is Better?


Dynamics 365 Business Central on the Cloud Versus On-Premises. Which Is Better?

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Dynamics 365 Business Central is a business management solution – also known as Enterprise Resource Planning (ERP) – for small and mid-sized organizations.

It automates and streamlines business processes and helps people to manage their business, including finance, sales, shipping, manufacturing, services, project management, and so on.

Dynamics 365 Business Central is available in two ‘flavours’: a cloud version and an on-premises solution. Both flavours offer a lot of the same core functionalities. But there are some critical considerations to keep in mind when deciding whether to purchase Business Central on the cloud or on-premises. To help you find the best fit for your organization, we have summarized the key differences between the two types in this article.

Costs & Setup of Business Central

Business Central on the cloud:

  • Business Central is offered in a subscription-based model. You can pay on a monthly or annual basis.
  • Business Central is hosted at the Microsoft Azure location near you. You will not require hardware such as servers in-house or installation of the software.
  • Maintenance expenses will be lower, as updates are scheduled automatically and managed by Microsoft or Microsoft partners.

Business Central on-premises:

  • On-premises Business Central has a perpetual license, where you pay a one-time fee to own the software.
  • It requires investment in hardware and space, as you will need servers to host the solution.
  • You might also require in-house IT resources to help maintain and upgrade the software.

The 6 Hidden Cost Areas of Running Business Central On-Premises

The costs of ‘cybersecurity & data protection’ are not mentioned in this overview. Azure is architected with ‘security-by-design’ in the solution itself. With on-premises deployment, in most cases, it is bolted on and not integral part of the solution.

Overall, your total cost of ownership is much lower with the cloud version of Business Central. In comparison, the on-premises version has a higher initial set-up cost and ongoing future expenses for maintenance.

Ownership, Recovery, and Upgrades

Business Central on the cloud:

  • Data is stored on the Microsoft Azure datacenters, and you access your Business Central instance through a web browser.
  • All standard software updates are automated, which will allow you to always have the latest version available.
  • Multiple backups are executed for you, and Microsoft offers a 99.9% uptime guarantee.
  • Business Central Cloud conforms to certain standards in security and compliance. From a service perspective, Business Central lives up to the strict requirements in several ISO and industry-specific certifications at no extra costs.

Business Central on-premises:

  • Data is stored on your on-premises servers, and you have full access to all the data stored. You access the software locally via individual workstation web browsers.
  • Software updates are not automatic. You will need to install, test, and deploy updates with the help of your in-house team or Dynamics partner.
  • Your IT team will need to maintain backups and have a disaster recovery plan in place.
  • Your IT Team will need to conform to certain standards in security and compliance to live up to the strict requirements of the required ISO and industry-specific certifications.

With the on-premises version of Business Central, you have greater control and ownership of your business data, as the software is deployed on your on-premises servers. However, this also means that you need to have sufficient IT resources in-house to install product updates and maintain your software and hardware.

Customization, Mobility, and Scalability

Business Central on the cloud:

  • The cloud version of Business Central is not as customizable compared to on-premises. Most customizations are implemented through so-called extensions.
  • You can access Business Central in the cloud from any location, on any device, if you have an internet connection.
  • It is easily scalable as you can add more users for an additional fee at any point in time within minutes.

Business Central on-premises:

  • It is a lot easier to customize the on-premises version of Business Central, and it supports extensions and core object changes. Some larger Business Central Add-ons are not yet available as extensions.
  • You do not need an internet connection to access this version of Business Central as it is hosted locally if you are in the building. With the new way of working this point has become less relevant.
  • It is less easy to scale up quickly with on-premises Business Central as you require additional investment in hardware or systems.

The cloud version of Business Central is suitable for businesses who need to scale up very easily and quickly. You only pay additional fees to increase the number of end-users, and you do not need to invest in additional hardware. On-premises Business Central, on the other hand, has the advantage when it comes to customization, as you can both modify the base code to make the software fit your needs or use extensions. You do need to have the appropriate in-house skilled people to make these amendments.

Integrations and Add-Ons

Business Central on the cloud:

  • You can easily extend the functionality of your software by installing apps through Microsoft AppSource or a skilled Dynamics partner.
  • Business Central in the cloud supports seamless integration with other Microsoft products such as the Power Platform.
  • Power BI is fully integrated, and free Power BI basic licenses are available .
  • You can easily integrate Microsoft Teams.

Business Central on-premises:

  • You cannot use AppSource to install apps with the on-premises version of Business Central and is only possible via a skilled Dynamics partner.
  • You can integrate with the other Microsoft solutions like the Power Platform, but it will require a data gateway.
  • Teams is limited integratable with on-premises Business Central at this moment.
  • Some Features that are available in Business Central cloud, but not in on-premises deployments.

The cloud-based Business Central has a considerable advantage when it comes to integrations and functionality as it is easier to extend its capabilities than the on-premises version.

Dynamics 365 Cloud Key Features

Today, nearly 90% of new Dynamics 365 customers opt for an in-cloud deployment. Microsoft Dynamics 365 in-cloud deployment ensures numerous capabilities for modern businesses, including information security and flexibility – to increase the users count or to integrate more applications at any time.

  • Quick and seamless implementation without incurring additional hardware expense or hire in-house IT resources.
  • Minimizes overhead spending required to maintain a dedicated private server.
  • Facilitates consistent product developments along with assured weekly updates.
  • Releases new features twice a year.
  • Zero new license costs and no recurring license renewal expenses with a predictable monthly subscription.
  • Five layers of information security and data protection.
  • Seamless disaster recovery services, including EU standards and ISO 27001 compliance.
  • Efficiently works on the Microsoft Office 365 platform through a smart integration of SharePoint, Skype Messaging, Hosted Exchange, and many more.
  • Intelligently executes integrated web portals, Microsoft Social Engagement, and voice of the customer surveys.
  • Embedded Artificial Intelligence (AI) capabilities.
  • Supports applications and tools built on the universal Power platform.

Dynamics 365 On-Premises Key Features

  • Retain full ownership of business information.
  • Additional investments to be made in existing hardware and IT infrastructure.
  • Efficiently manage and control the updates related to applications.
  • Ensure flexibility to employ internal IT professionals or outsource external IT support to manage installed applications.
  • Generate business focused intelligent reports, including SQL Server Reporting Services (SSRS).
  • Minimize and control online / cloud data storage expenses.
  • Work seamlessly even with basic internet connection.

Cloud vs. On-Premises Business Central: Which is Right for You Organization?

While we recommend the cloud version of Dynamics 365 Business Central, there are situations when your company requires more control over your data or requires customization than what the cloud offers, and that is where the on-premises version would work better.

To make an informed decision on the right option for you, understanding the differences is crucial. Ultimately, choosing whether you deploy your ERP solution as on-premises or in the cloud depends on your business needs/ambition and how much you are willing to invest when implementing or upgrading your ERP system.

As Dynamics 365 partner and Inner Circle member, we are here to help you make the right choice. Contact us for further assistance.

September 26, 2022

Arjan de Jong - Global Marketing Director

Results-oriented marketing executive with a diverse background in driving marketing initiatives for technology companies. I have developed a comprehensive skill set in marketing strategy, brand management, lead generation, and digital marketing. My experience includes managing cross-functional teams, optimizing (online) customer experiences, and building strong brand identities.


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