Dominik Mayer Product & Technology
Basel,
Selection
Microsoft Dynamics 365 Business Central: Cloud vs. on-premises
Microsoft Dynamics 365 Business Central is a comprehensive enterprise resource planning (ERP) solution built for small and mid-sized companies (SMEs). It helps companies manage business processes such as finance, sales, purchasing, and inventory efficiently, all on one platform.
Business Central offers a user-friendly interface and can be tailored to the specific needs of Swiss companies. It supports local requirements such as Swiss value-added tax (VAT) and meets strict data protection requirements. Whether a company is growing or its requirements are changing, the system adapts without unnecessary complexity.
There are two ways to run Business Central: as software as a service (SaaS) or as a local installation (on-premises). Each option has pros and cons. Which is the better fit for your company depends on what you need over the long term: ease of use and automatic updates, or full control over your data.
Highlights
- Cloud relies on Azure security; on-premises requires your own security measures
- Cloud integrates Microsoft products easily; on-premises allows deeper customization
- Cloud goes live faster; on-premises takes more time
- Cloud receives automatic updates; on-premises requires manual upgrades
- Decision criteria include company size, IT resources, and customization needs
Dominik Mayer Product & Technology
Basel,
The options
What deployment options are available?
With the cloud version, Microsoft hosts everything. You access the software through a browser, without handling the technical side yourself, and pay a monthly or annual fee. Microsoft takes care of updates, maintenance, and security, so you can focus fully on your business.
You install the on-premises version on your own servers. Once purchased, the software is yours. You are responsible for updates, security, and maintenance. This option gives you full control, but it requires more IT resources.
Weighing the trade-offs
What are the pros and cons of cloud and on-premises solutions?
Cloud solution
Pros
- Anywhere access and mobility: You can access the software from anywhere, whether on a PC, tablet, or smartphone, as long as you have an internet connection.
- Scalability and flexibility: User numbers and resources can be adjusted quickly as your business requirements change.
- Automatic updates: You stay up to date. You receive the latest features and security updates automatically, without any action on your part.
- Lower upfront costs: No investment in expensive server hardware or IT infrastructure is required.
- Lower IT overhead: Microsoft handles maintenance, updates, and security measures, which eases the load on your IT team.
- Seamless integration: It connects smoothly with other Microsoft products such as Office 365 or the Power Platform.
- Strong security standards: Microsoft invests heavily in security and in protecting your data.
Cons
- Limited customization options: For highly specialized business requirements, the cloud solution may offer less flexibility than a local installation.
- Dependence on the internet: A stable internet connection is required to access the system.
- Data control: Data is stored on Microsoft servers, which may raise concerns for some companies.
- Long-term costs: Monthly or annual subscription fees can increase total costs over time.
Business Central on-premises
Pros
- Full control and customization: You have complete control over your data and infrastructure, and you can tailor the software precisely to your needs.
- Data security: Because data is stored locally, you retain more direct control over security.
- No dependence on the internet: Access to the system does not depend on an internet connection, which is ideal if you operate in an area with unstable internet.
- Possible long-term cost savings: After the one-time license purchase, there are no recurring fees.
Cons
- High upfront investment: Purchasing server hardware, software licenses, and IT infrastructure can be expensive.
- Maintenance and updates: You need either internal IT staff or external support to maintain and update the system.
- Limited scalability: Expanding the system means buying additional hardware, which can be time-consuming and costly.
- Limited access: Access is often restricted to the local network, which reduces flexibility.
- Integration challenges: Connecting cloud services such as Office 365 can require additional configuration and effort.
What matters most
Decision factors for choosing cloud or on-premises for Business Central
Below, we take a closer look at a few of these factors.
How secure is Business Central?
Business Central in the cloud is hosted on Microsoft Azure, a platform known for its strong security standards. Security features include data encryption, strict access controls, and regular backups. Companies also benefit from compliance with international standards such as GDPR and ISO 27001, which supports a high level of data security and compliance. Microsoft continuously invests in improving security so that new threats can be addressed promptly.
With the on-premises option, responsibility for security rests entirely with the company. This means that you need to implement and regularly update your own security measures such as firewalls, antivirus software, and strict access controls. The challenge is keeping pace with evolving threats, which requires additional effort and IT resources. While you have full control over your data, the complexity of security measures can grow quickly.
How do performance and availability compare?
Microsoft guarantees high availability for Business Central in the cloud. Azure data centers are covered by service level agreements (SLAs) designed to ensure very low downtime. In practice, this means that you can rely on stable performance, provided your internet connection is reliable. System performance depends heavily on connection quality. A slow or unstable internet connection can degrade the user experience, while a fast connection supports smooth day-to-day work.
The performance of the on-premises version depends entirely on your company’s own IT infrastructure. The choice and maintenance of server hardware play a critical role in system speed and availability. Poor hardware or inadequate maintenance can lead to performance issues and outages. Responsibility for ensuring system availability and creating regular backups also rests with the company.
What customization and integration options are available?
The cloud version of Business Central offers extensive customization and integration options through extensions and apps available on Microsoft AppSource. These extensions let you adapt the system’s capabilities to specific business requirements. There are limits, however, when it comes to changing the software’s code. One advantage of the cloud solution is seamless integration with other Microsoft services such as Office 365 or the Power Platform, which makes day-to-day processes more efficient.
The on-premises version gives you greater freedom to change the code and develop tailored solutions. That flexibility often requires specialized developer resources, which can add cost and complexity. Integrating cloud services such as Office 365 or Azure can be more challenging with a local installation because additional configuration is required.
How much effort does implementation take?
Implementing the cloud version is usually faster, because many default settings are already in place and the infrastructure is managed automatically. Actual implementation time depends on factors such as data migration, the required customizations, and employee training. In many cases, the cloud solution can be ready for use within a few weeks.
On-premises implementation usually takes longer. In addition to installing the software, servers need to be set up and configured. There is also the work involved in any customizations and in integrating with existing systems. Successful implementation requires substantial IT resources and careful project management. Implementation can take significantly longer than with the cloud version.
How future-proof is the solution?
The cloud version of Business Central benefits from automatic updates, so you always have access to the latest features and technologies. Microsoft continuously invests in the development of its cloud services and keeps Business Central current with new innovations. Another advantage of the cloud is scalability: as demand grows, resources and user counts can be expanded without major changes to the infrastructure.
The on-premises version is more challenging when it comes to staying future-ready. Responsibility for regular updates and meeting the latest security standards rests with the company. You may also need to upgrade hardware in the future or even migrate to a new software version to keep pace with current technology. That requires long-term planning and investment.
Which decision criteria matter?
- Business requirements and company size: Consider how complex your business processes are, how many users need the system, and how your company might grow over the next few years. Smaller companies with few users and simple processes may benefit from the cloud, while larger companies with specific requirements may prefer a tailored on-premises option.
- Budget: Compare upfront investment and ongoing costs. The cloud offers lower upfront costs and predictable monthly fees, while on-premises can mean higher upfront costs but lower ongoing expenses over the long term.
- IT infrastructure and resources: Does your company have a strong internal IT department that can maintain an on-premises solution? If not, the cloud solution, where Microsoft handles technical administration, may be the better choice.
- Security requirements: Consider how much control you need over your data and what security requirements you have. While the cloud offers strong security measures, some companies prefer the full control over their data that an on-premises solution provides.
- Customization needs: If your company has specialized business processes that require custom software changes, check whether the cloud solution offers enough flexibility or whether the on-premises version is the better choice because it offers more extensive customization options.
- Integration requirements: Consider whether the system needs to integrate with existing solutions, cloud services, or other Microsoft products. The cloud option often offers simpler integration, especially with other Microsoft cloud products such as Office 365.
- Future growth and scalability: Consider how well the solution can grow with your company. The cloud offers greater flexibility here because it can be scaled quickly as your needs grow, while on-premises solutions often require hardware upgrades and additional investment.
The bottom line
Cloud or on-premises: Which solution is right for your company?
Cloud and on-premises offer different advantages depending on your company’s needs. The cloud stands out for easy scalability, automatic updates, and lower upfront costs, while the on-premises option offers more control and customization, but requires higher upfront investment and more maintenance work.
The best choice depends on your specific business requirements. Factors such as budget, IT resources, customization needs, and future growth should be weighed carefully so you can find the right solution for your company.
Deliver successfully
Nexova Dynamics, your partner for successful ERP projects
Delivering an ERP project successfully takes more than the right software. You also need a reliable partner who supports you at every step. At Nexova Dynamics, we take a flexible, phased approach that involves your employees from the start and is tailored to your specific needs. This way, your new ERP system not only works reliably but is also accepted and used by your team.
Whether you want to implement a new ERP system or optimize existing systems, we help you minimize risks, avoid typical mistakes, and find a solution that supports your business over the long term. Our experienced team stays with you from planning through go-live and helps you complete your project on time, on budget, and most importantly, successfully.
Want to learn more about Microsoft Business Central implementation? Contact Nexova Dynamics for a no-obligation consultation, and let’s lay the foundation for your success together.
