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On-premise Or Cloud? What To Consider When Choosing How To Deploy Business Central


If you’ve decided that Microsoft Dynamics 365 Business Central is the ERP software that you want for your business, there’s still one more decision to make about the implementation.

That is, should you deploy Business Central on the cloud, or as an on-premise solution for your business?


Read About The Respective Pros And Cons Of Hosting Your ERP Software On The Cloud Or On-Premise Here.


Although it offers the same core functionalities either way, Business Central does have some differences depending on whether it’s deployed on the cloud or on-premise.

Therefore, when trying to decide whether to deploy Business Central as a cloud ERP or as an on-premise solution, you should consider how well each option fits your business needs accordingly.

In this blog post, we’ll compare some of the differences between cloud and on-premise deployments of Business Central, and advise on which option would be more suitable for your business based on your needs.


Take A Look At Our Definitive Cheat Sheet To The Microsoft Dynamics 365 Product Line, And Find Out How Business Central Fits Within Microsoft's Suite Of Business Solutions.


Costs And Budgets


Business Central in the Cloud

Business Central On-premise

Licensing Model

Subscription model based on monthly fees.

Perpetual license – one-time payment to own the ERP software in perpetuity.

Hardware Requirements

Not necessary – Business Central is hosted on Microsoft Azure.

Requires investment in server hardware and space on company premises.

Maintenance Expenses

None – all maintenance is carried out by Microsoft or partners.

May involve large expenses associated with maintaining, upgrading or adding servers.


The first thing that’s most likely to be on your mind when considering between a cloud or on-premise implementation of Business Central, is how much either option will cost you.

In this regard, the on-premise version has the higher initial costs of both options, as you’d need to pay for both the server hardware to host your ERP software, as well as the one-time fee for a perpetual license for Business Central.

This means you’d need to account for high capital expenditures (CAPEX) with an on-premise Business Central software, in addition to further expenses for maintaining your server hardware in the future.

On the other hand, deploying Business Central on the cloud allows you to avoid the high CAPEX that the on-premise option requires, as you won’t need the server hardware.

All you’d need to pay is the monthly or annual subscription license fee, which means you can budget for Business Central as an ongoing operational expenditure (OPEX).

While it’s possible that you might end up paying more for the cloud-hosted version of Business Central in the long term (compared to the on-premise option), the subscription fees are probably much easier for your budget to absorb on a regular basis.


Ownership And Control Over Business Central


Business Central in the Cloud

Business Central On-premise

Data Storage

Business data is stored on Microsoft Azure servers.

Business data is stored on on-premise servers, giving you complete ownership and control.

Data Access

Access to data only possible through application programme interfaces (APIs)

Full access to all data stored on-premise.

Product Updates

Automatic updates ensure that you always have the latest features.

Updates require manual installation on a regular basis.

Backups And Disaster Recovery

Microsoft guarantees 99.9% uptime and multiple backups.

Relies on in-house IT resources to maintain backups.


Control and ownership over your business data is generally the most common reason why businesses like yours would prefer an on-premise deployment of Business Central over cloud hosting.

In that regard, you’ll certainly get complete ownership and control over your data when Business Central is deployed on your on-premise server hardware, in contrast to a cloud deployment where your data is hosted on Microsoft Azure servers.

It also means you can always count on having full access to your business data stored on on-premise servers, whereas you could only get access to your data through APIs if you were to deploy Business Central on the cloud.

That said, having complete control and ownership of your on-premise Business Central also means your in-house IT function is also responsible for manually installing product updates whenever Microsoft releases them.

This means there will be periods when your business is running on an outdated version of Business Central, until your IT function gets around to acquiring and installing these updates.

On the other hand, a cloud-hosted Business Central automatically downloads and installs the same updates whenever they’re released by Microsoft, ensuring it always remains up-to-date.


Keep Track Of The Newest Features That Come With The Latest Updates For Business Central Here.


Opting for an on-premise deployment of Business Central also means your disaster recovery plans will be reliant on your in-house IT function as well, as they would be solely responsible for making backups of your business data.

With a cloud-based Business Central, Microsoft guarantees 99.9% uptime on the dedicated SQL Azure servers that hosts your database, and also provides up to four live copies of your database to ensure you can access your data even if one or more copies goes offline.

Therefore, if uptime is more important than full control over your data for your business needs, a cloud implementation of Business Central would be more suitable for your business.


Flexibility Of Use


Business Central in the Cloud

Business Central On-premise


Not as flexible and adaptable as on-premise version. All customisations must be implemented through Extensions.

Very flexible and can be tailored to business needs. Supports Extensions as well as core object changes


Requires connectivity to the Internet.

Does not require Internet connectivity to work.


Easily scalable – only requires subscription fees for additional users.

Requires additional investment in server hardware or systems


If the nature of your business demands that your ERP software be heavily customised to best fit your needs, then an on-premise implementation of Business Central would be more suitable for you.

That’s because cloud-based Business Central can only be customised through Extensions – plug-ins that can effect customisations on the ERP software without changing the base code.

On the other hand, you can customise an on-premise Business Central through both extensions and modifications to the base code as well, making it a much more flexible option for your specific business needs.

As an additional bonus, implementing Business Central on-premises means that your business will not be reliant on Internet connectivity for the ERP software to work – ensuring uptime even during times of disruptions to the Internet connection of your business.

However, if you’re planning to grow your business significantly in the short-term, that would make cloud-based Business Central much more suitable for your needs compared to the on-premise version.

That’s because cloud-based Business Central is very easily scalable – you’d only need to pay additional subscription fees to increase the number of end users for the ERP software, and scale it up in line with the growth of your business.

With the on-premise version, you’d have to invest in additional servers and/or software licenses to scale it up the same way, impacting your budget even further.


Integration With Cloud Apps and Add-ons


Business Central in the Cloud

Business Central On-premise


You can access and install apps for Business Central through AppSource

AppSource is not available, so you cannot install apps

Power Platform Applications

Supports integration with Power Platform applications (Power BI, Power Apps, Power Automate, and Power Virtual Agents)

Requires a data gateway to connect Power Platform apps with data on Business Central on-premises.

Microsoft Teams

Can integrate with Microsoft Teams with the 2020 Release Wave 2 update.

Not available for Business Central on-premises.


One of the biggest strengths that cloud-based Business Central has over the on-premise version is the greater ease with which its capabilities can be extended with integrations.

For example, Business Central fully supports integration with Microsoft’s Power Platform applications when implemented on the cloud. The same can only be achieved for the on-premises version through the additional step of using a data gateway.

In addition, the cloud-based version of Business Central can access Microsoft AppSource, allowing you to find and install apps to extend the functionalities of your ERP software – something that’s not possible with the on-premise version, as it cannot access AppSource.

And more recently, cloud-based Business Central has been updated to enable integration with Microsoft Teams, further extending its capabilities. This, too, is not available for the on-premise version of the ERP software at present.


Here's How Microsoft Teams Can Enhance Collaboration Within Your Workforce.


Therefore, if you’re planning to extend the capabilities that Business Central can provide for your business, a cloud deployment would be much more preferable for your needs than the on-premise option.


The Choice Of Cloud Or On-premise Business Central Depends On Your Needs

With this direct comparison of cloud-based vs. on-premise implementation of Microsoft Dynamics 365 Business Central, we hope it has helped you come to a decision on which option to go with.

As the 2019 Dynamics 365 Unified Operations Partner of the Year and a PSG-approved vendor for Business Central, AFON can assist you with either a cloud or on-premise implementation. 

The choice of a cloud or on-premise implementation is also just one of the benefits you'll get with Business Central. If you'd like to know more about the other features and capabilities that Microsoft's ERP software for SMEs can offer you, click the image below to learn more.

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