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It doesn’t have to be hard to make the right decision: Dynamics 365 Finance and Supply Chain Management On-Premises vs Cloud

Monday, March 28, 2022
Reading time: 6 minutes

We are always working with our Microsoft Dynamics 365 Finance and Supply Chain Management (formerly known as F&O) partners to help them scale up their businesses and develop versatile experiences with solutions that are either on-premises or cloud-based.

In this blog, we will share our insights and what we’ve learned about having the best parts of both worlds, so our Partners can be confident in choosing the right solution for their business.

We’re going to cover the following topics:

The Key Advantages and Disadvantages of On-Premises vs Cloud

To decide which software solution is best suited for your organization and your users’ needs, it is essential to first consider which factors are most important to your organization to weigh the pros and cons of each option.









A list of full comparisons can be found here: Comparison of cloud and on-premises features – Finance & Operations | Dynamics 365 | Microsoft Docs.

ERP-Only or Integrations with other Cloud Products?

Besides taking into consideration the key benefits of on-premises and cloud solutions, it is also important to take into account all the other products or software that will be used together with Dynamics 365 Finance and Supply Chain Management.

If the other products or software are Web/Cloud applications, it will be much easier to integrate them into Dynamics 365 Finance and Supply Chain Management. The cost savings and increased stability of the system would be another advantage to choosing the cloud path.

If the other products or software are on-premises applications or legacy applications, cloud integration might be more difficult to perform. It usually requires an extra cost to build secure connections and communication channels with the cloud ERP. In that case, choosing an on-premises path seems more advantageous.


Once you assess the main advantages and disadvantages, the next most important question is undoubtedly the price.

The cloud can offer a lot of benefits, features, and endless computing, but the cost associated with it might not be acceptable for your organization (especially if some of the features are not mandatory – that’s why listing them out is very important). It is also recommended to build a cost/expense model of running Dynamics 365 Finance and Supply Chain Management on-premises vs in the cloud. To make that happen, you’ll need to consider the following components:

  • Software – You’ll need to understand what kind of software (ERP only or including extra components) you want to run. Then, you’ll need to decide what infrastructure would be sufficient to host that software. In cloud deployments, most of the Dynamics offerings are SaaS, which means that this cost is under the licensing node. However, you might want to run other cloud services, such as Azure cloud storage or integration services that have computation costs. These need to be included in the model. To calculate other Azure services costs, use the Azure price calculator. For on-premises solutions, refer to the system requirements for each on-premises component and analyze the infrastructure costs in the local markets. Dynamics 365 Finance and Supply Chain Management requirements are listed here.

Note: Additional costs should be estimated not only for acquiring the infrastructure but also the setup, initial configuration, security installation. If there is a third party or partner involved in the setup, they will perform the initial configuration with a fixed fee.

  • Licensing – Refer to the Licensing Guide or your local or indirect CSP provider for the different types of licenses that you will need for your software. Also, have a rough estimate of the count on each license type. In this step you only need a rough estimate as the final licensing exercise will be done later, once the on-prem vs cloud decision is made. On-premises licenses should also include licenses for any software or operating systems that will be used.
  • Maintenance and IT training – Depending on your IT team’s skills, the difficulty of this task will vary. IT owners of on-premises solutions are usually more comfortable with on-premises software maintenance and can usually estimate the costs accurately. The only unknown is that Microsoft always promotes cloud-first, and most IT-related troubleshooting manuals and systems are documented for cloud technologies. On-premises documentation (especially for Dynamics 365 Finance and Supply Chain Management) is limited to community answers and engagements. Building a user manual for on-premises maintenance tasks (such as SQL DB maintenance, Certificate rotating, troubleshooting, etc.) is mandatory for each IT team. In the cloud, there is less maintenance required, and there are more user-friendly tools to perform the classic actions, making maintenance will much simpler. Also, Microsoft official documentation is found for all the most common IT maintenance tasks.

Key Takeaways

Once you evaluate the pros and cons of both on-premises and cloud solutions and compare the price/value of each option, you should get a clearer picture that will allow you to decide which choice will be best for your organization. However, it’s also important to consider the long-term view and think about the system’s scalability, especially if it’s expected that the business will grow at a rapid pace. In that case, a cloud solution may be a better fit, as they are more adaptable for changing environments. Additionally, every organization should think about the opportunity costs associated with both paths. Microsoft has a clear roadmap for the growth of Dynamics 365 and other software. The business might benefit more in the future once new features/product expansions are released. Features are always released first for the cloud, and this should be taken into consideration by the organization. For non-Dynamics environments, this might be less crucial compared to Dynamics environments and fast-growing organizations.

Being Catalyst certified, our team at Companial can assess the business value and can help you define a clear strategy on how to move forward, as well as determine the best choice for your business. If you need to move to the next phase of your digital journey, we’re here to help. Contact us and we’ll make these changes together.

Also, if you struggle to keep up with Microsoft licensing, incentives, programs, or technology changes, join Companial and get licensing support, as distributing Microsoft CSP license-based services is the natural next step for us. When you have our team of cloud experts by your side, you’ll have the confidence you need to go-to-market with your Microsoft Dynamics business faster.

Ignas Stockus