“What is the difference between Microsoft Business Central Cloud vs On-Premises hosting?”

“What is the best Business Central hosting option for my business?”

As trusted Microsoft Dynamics Implementation Partners, these queries make a crucial part of our consulting exercises.  So, we have curated this article that helps you understand the:

  • The difference between cloud and on-premises hosting options for Microsoft Business Central.
  • After that, which is the right hosting choice for your custom business requirements?

Let’s get started!


Dynamics 365 Business Central Cloud vs On Premises Hosting

Microsoft Business Central is popularly known as a full-fledged cloud ERP. And is evidently one of the best cloud ERPs in the market. However, it offers businesses a much-needed choice between on premises and cloud hosting.

Moreover, both hosting plans bring almost the same functionalities to the table.

On the other hand, there are several crucial factors, for example, Cost, Customization, Flexibility, Security, etc., that a business owner must consider when opting for the right hosting plan.

On Premise vs Cloud

Therefore, let’s understand these factors in sequence. And comprehend the difference between Business Central on premises vs cloud hosting:


1) The Set-up and Hosting Cost

Business Central Cloud:

  • You can opt for Microsoft cloud hosting when you choose the Subscription model. Therefore, here you pay a monthly subscription fee per user.
  • Furthermore, your Business Central ERP software is hosted on Microsoft Azure, and you do not need to invest in an in-house server setup.
  • After that, your software maintenance cost is lower compared to on premises setup. Moreover, your Microsoft Business Central partner will manage this maintenance.

Business Central On Premises:

  • You choose between the subscription and perpetual models for the on premises hosting plan. As a result, you can choose to pay per month (Subscription) or a one-time licensing fee (Perpetual).
  • After that, you need to invest in in-house servers and infrastructure to host the Microsoft Business Central solution.
  • In short, your maintenance cost is generally higher owing to in-house servers. And your Microsoft Business Central Partner will have to invest substantial effort in deploying the updates and software maintenance.

Analyzing the Cost Options:

  • Meanwhile, you need to bear the server setup cost and a higher maintenance cost for the on-premises hosting.
  • However, let’s check the other cloud vs. on-premises factors before we draw a conclusion!

2) Access, Upgrades, and Backup

On Premise vs Cloud

Business Central Cloud:

  • Since your data is hosted on Microsoft Azure, you can access Business Central through web API (a web browser).
  • Both major and minor Business Central update are automatically deployed. And you get access to the latest version of the software.
  • Microsoft promises a 99.9% uptime guarantee, and they maintain multiple data backups for you.

Business Central On Premises:

  • Since your data is hosted on premises, you have full access to the software. You can use it locally on your systems.
  • There are no automatic updates. Moreover, your Microsoft Dynamics partner will have to install, test, and deploy updates for you.
  • Above all, your team must ensure that they manage backups and recover the data in case of a data crash.

Analyzing The Access & Recovery Options:

  • Here, the on premises hosting setup offers you authoritative access to your solution. And your system works efficiently even with the most basic internet connectivity.
  • However, you need an in-house team or a dedicated maintenance partner for handling updates and backups.
  • Here, businesses that wish to store highly-crucial business data and require local access can opt for on premises setup. But they need to bear the high maintenance and data backup costs.
  • Meanwhile, small and mid-size businesses can preferably host on the cloud. Microsoft offers robust security and offers a 99.9% uptime guarantee.

Wish to understand the best Business Central Hosting and Licensing options without burning a hole in your pockets?

3) Customization and Scalability Factor

Business Central Cloud:

  • The cloud-hosted Business Central application offers limited customization. However, your Business Central implementation partner can build custom extensions to be added to your software.
  • In short, The cloud hosting setup allows you to scale easily and add new users for a per-user monthly subscription fee.

Business Central On Premises:

  • The on premises hosting setup offers you a higher level of customization capabilities. Therefore, your Microsoft Dynamics 365 Partner can make core object changes or even add custom extensions.
  • The on premises setup may limit your scalability as you might need to invest in the server storage as you scale.

Analyzing the Customization & Scalability Options:

  • The on-premise hosting solution is preferable for businesses that need advanced customization. Here, your implementation partner can change the base code or add custom extensions.
  • Meanwhile, the on-cloud setup also offers a decent level of customization using custom extensions. However, one cannot make changes in the base code.
  • But the cloud hosting setup doesn’t require server setup investment when a business is scaling rapidly.  So, if you are comparing Business Central cloud vs. on-premises options, you must consider the scalability cost parameter.

4) Crucial Integrations

On Premise vs Cloud

Business Central Cloud:

  • An important difference between Microsoft Dynamics vs Netsuite is that Business Central offers you free access to Microsoft AppSource to install Business Central extensions. As a result, your software functionality will grow.
  • Above all, the cloud-hosted version of Microsoft Business Central integrates seamlessly with the Power Platform.
  • After that, you can leverage integrated Power BI and a free basic Power BI license with Microsoft cloud hosting.
  • A Certified Microsoft Dynamics Partner can integrate Microsoft Teams with a cloud-hosted Business Central solution.

Business Central On Premises:

  • The on premises version of Business Central does not allow you to access Microsoft AppSource. However, you can make customizations in the main code itself.
  • The on premises version integrates seamlessly with the Power Platform, but you need a data gateway.
  • Power BI integration is not available for the on premises version.
  • Currently, the on premises version doesn’t support integration with Microsoft Teams.

Analyzing the Compatibility & Integrations:

  • Here the Microsoft cloud hosting setup allows you access to seamless integrations and add-ons. Meanwhile, the on premises setup offers limited compatibility with some common integrations.

Make selling, purchasing, financing, and management easier with custom Business Central solutions. 

Microsoft Dynamics 365 Business Central on Cloud Vs On Premises Comparison Table

Factor Business Central Cloud Hosting (Microsoft’s SaaS) Business Central On Premises  
License Model Subscription Model.Options of Perpetual and Subscription Model.
Setup Cost Hosting cost included in subscription fee (for SaaS).High setup cost of in-house servers.
Maintenance Cost Lower maintenance cost.Higher maintenance cost due to in-house servers.
Access Access Business Central through web API. Requires decent internet speed.Full access to the locally stored Business Central data even with basic internet connectivity.
Updates  Automatic Updates for public cloud setup.Your Business Central maintenance partner tests and deploys the updates for you.
Backup & Recovery Microsoft guarantees 99.9% uptime and reliable backup.You or your maintenance partner has to take regular backups for disaster recovery.
Customization Limited customization. But, one can add custom extensions.Advanced customization through core object changes and custom extensions.
Scalability Easily scalable.Scalability requires a new server setup.
Microsoft AppSource Grow functionality by adding new extensions from AppSource.No Access to Microsoft AppSource.
Power Platform Easy integration with the Power Platform.Need a data gateway to integrate with the Power Platform.
Power BI and Microsoft Teams Seamless integration with Power BI and Microsoft Teams.Not yet compatible with Power BI and Microsoft Teams.

Besides these Public Cloud (SaaS) and On premises hosting options, you have a choice of Private Cloud or Managed Cloud Hosting Services.

Benefits of Private Cloud or Managed Business Central Cloud Services:

  • You get a choice between subscription and perpetual hosting options.
  • Costs are lower than on premises setup.
  • The Cloud Partner manages the recovery and backup responsibilities
  • You can expect automatic major and minor updates (similar to Microsoft’s SaaS)
  • The partner ensures 99.9% uptime and offers rapid response time. 
  • You enjoy robust cloud and network security and higher scalability.

Some recommended private cloud hosting options are Microsoft Azure, Amazon AWS, Google’s Cloud, etc.


Business Central Cloud vs On Premises Hosting: What Should I Choose?

Both cloud and on premises hosting models have their own list of perks and limitations. And it significantly depends upon your business-specific requirements and infrastructure.

Cloud hosting serves you better scalability, integrations, and automatic updates, all at a much more affordable price. And so, it might be the best choice for small and mid-market businesses.

Meanwhile, businesses that require code-level customization with full local access can choose on-premises hosting. They must be ready to invest in the in-house servers.

Moreover, we as Microsoft Dynamics 365 Consultant, can suggest a Hybrid Setup (Cloud + On Premises) after assessing your infrastructure and requirements.

So, wish to consult the most profitable Business Central hosting solution for your business?