Know the difference – Microsoft D365 Business Central on-cloud vs on-premise

Know the difference – Microsoft D365 Business Central on-cloud vs on-premise

Know the difference – Microsoft D365 Business Central on-cloud vs on-premise Santosh

Many times, it is known that partners were asked by the customers, what solutions are right for them. As a partner, it becomes important to educate the customer regarding the similarities and differences between the solutions. Let’s understand Microsoft Dynamics 365 Business Central on-cloud and on-premise. They are similar but not identical. At a glance, the product functionality of both Business Central on-cloud and on-premise are almost the same be it Financial Management, Sales and Service Management, Project Management, Supply Chain Management, operation management, Reporting, and Analytics.

There is a lot of the Difference between Business central on the cloud and premise and most of them are on the infrastructure side. The other differences are based on how they are available to the customer and how a partner would support those? Customers are eager to know

which one to choose?

what would be the best-suited solution for them?

what would be they giving up?

why they should be considering the one compared to the other one?

Microsoft Dynamics 365 Business Central: on-cloud vs on-premise


This is the first area where customers automatically feel the differences in the cost associated with each of them. This cost is related to acquiring and maintain their access to the product. The on-cloud model is subscription-based while the on-premise model can be acquired by the customers on a perpetual basis. Customers could also go for the on-premise subscription model. The subscription pricing for on-cloud and on-premise is not the same.

When a customer chooses an on-cloud model the subscription price includes hosting, SQL, Power Apps, and Power Flow (Automate). While on-premise the subscription model does not include hosting, SQL, or Power Platform tools. In 2020 Wave 2 releases, Microsoft has specified the storage capacity that comes with the on-cloud deployment. Customers would get 1 production environment with 3 sandbox environment (Database) with 80 GB storage capacity. If a customer needs more than 1 Production environment, they need to purchase it. On the other hand, the on-premise license allows 1 production database with no limit on Dev/Test databases and if a customer needs more than 1 production database, it would require them to get an entirely separate license for Business Central.


When using a cloud service, Clients will typically pay on a monthly or annual basis on requirements that are set by the hosting provider. If clients want to host on-premises, they are requiring to have IT infrastructure in place, clients will have to purchase a server to host their systems, as well as the required other infrastructure to keep the server going. This hardware can add up and become an expensive initial investment for businesses, and this is before the clients purchase their ERP solution.

However, one thing the clients need to consider is that after they have been running their Business Central system for some years, there will eventually be a break-even point. This is where the initial cost of the on-premises server and running of it will become lower than the continuous monthly costs of hosting in the cloud. A typical break-even point will happen after several years, but there is a high possibility that once the clients reach the break-even point, their servers will be becoming obsolete and they would require new hardware to keep their systems up to date with technology.

Storage and Data Access

The Data storage in Microsoft Dynamics 365 Business Central on-cloud model is stored in a secured Microsoft Data Centre. The customer/user can access the data only through the application program interface (API) or report connectors. The Microsoft Dynamics 365 Business Central on-premises model is deployed on private servers which ensures absolute control and management of huge information stored on the servers. Thus, having full access to the data.


For businesses, security is a huge concern. For some businesses, this means they want their data stored on-premises, ensuring they know exactly where it is stored or for businesses in some specific industries, there is compliance that requires them to store it locally. When clients choose on-cloud, the server is in Microsoft data center somewhere around the world which clients could access through internet-connected devices. Many businesses have concerns about the security of cloud systems. However, as cloud technology advances, many sophisticated security methods encrypt the client’s data and use firewalls to ensure maximum security. One thing to consider is that the businesses are responsible for the security of their on-premises server.

Upgrades and updates

The upgrades and updates in on-cloud Business Central are always on the latest version. They also can schedule their updates which could defer up to 1 month and users are notified if any extensions are incomplete and are required for the upgrades. While on-premises, upgrades, and updates happen on-demand of the customers choosing. When it comes to maintenance, In on-cloud Deployment – Microsoft takes undertakes the responsibility of maintenance. Users don’t have to worry about their systems as any maintenance to the system is included within the monthly cost to the partner. When clients choose the on-premise model, they host systems locally, Its the client’s responsibility to maintain the systems.

Support Life Cycle policy

On-cloud, customers are always on a supported version of Business Central, and as the new version releases, they are automatically upgraded within a specific window of time. On-premise customers have 2 types of policies. The Fixed lifecycle policy applies to the customer with Business Central 14X (build 29537 and later). This means that the customers are on supported lifecycle policy till October 10, 2023, and the customer needs to maintain the enhancement plan. Customer who moves to 2019 Wave 2 onwards, which is Business Central 15X onwards falls under Modern license policy. The customers get in the totality of 18 months supported life i.e. for 6 months after the Business Central version customer is on is the active version (Includes features, Bug fixtures, regulatory fixes) and for 12+ months after the next version releases (Includes Bug fixtures and regulatory fixes).


On-cloud deployment is also very scalable. The Clients pay for the amount of space they require and if they need more space then they could do it at the click of a button with an addition to their monthly cost. With on-premises deployments, Clients are responsible for updating systems and this can be much more technical and complicated than using a cloud service. The hardware’s capabilities are restricted with on-premises deployments. Another factor to consider as we mentioned earlier is that technology is advancing at a very fast rate, meaning any servers the clients’ purchase is likely to become obsolete after use for several years.

Dhyey Consulting Services

At Dhyey Consulting Services Pvt. Ltd., we have implemented Microsoft Dynamics 365 Business Central on-cloud and/or on-premise on behalf of Microsoft Partners around the globe. We understand your client’s requirements and helps to understand what the best-suited option for them is. At Dhyey Consulting Services we have created a Centre of Excellence. We Act as an extended arm to Microsoft Partners and provide them with our Centre of Excellence-as-a-service. With deep industry experience and knowledge, we have the expertise required to advise our partners on the entire lifecycle of your business from implementation to support services to add-on development and integration. We aim to partner in your business growth by offers flexible engagement practices and encourages innovation for Microsoft partners.

We believe there is no right or wrong way to host the ERP solution, it completely depends on the clients’ business requirements and what sort of investments they want to make when deploying or upgrading to a new ERP system.

To know more about our Centre of Excellence email us at