Microsoft Dynamics 365 Business Central Cloud vs On Premise: Which deployment is right for you?

Microsoft Dynamics 365 Business Central is a powerful all-in-one business management solution tailored for small and mid-sized organizations​. When adopting Business Central, companies face a decision on whether to deploy Business Central on the cloud or on-premise​. Both options offer the same core functionality but differ in cost, scalability, security, maintenance, updates, integrations, and accessibility.

In this blog post, we’ll provide a comparison of Business Central Cloud vs. On-Premise highlighting key differences (cost, scalability, security, maintenance, updates, integrations, accessibility).

Microsoft Dynamics 365 Business Central is an all-in-one enterprise resource planning (ERP) solution that helps businesses streamline operations, manage financials, optimize supply chains, and improve customer relationships. Designed for small to mid-sized businesses, it offers a scalable, cloud-based platform with built-in intelligence to drive efficiency and growth.

With Business Central, companies can automate key processes such as accounting, inventory management, project tracking, and reporting, all within a single system. It integrates seamlessly with Microsoft 365 (formerly Office 365), Power BI, and other Dynamics 365 applications, providing a connected business environment.

Business Central offers two deployment options: Cloud and On-Premise. The choice depends on factors like IT infrastructure, scalability needs, and security preferences.

Business Central can be deployed on the cloud, hosted on Microsoft’s Azure. In this model, Microsoft hosts and manages the infrastructure, and users access the software via the internet. A major benefit of cloud deployment is that Microsoft handles system administration tasks like updates, backups, and security patches automatically, ensuring you’re always on the latest version without manual upgrades​. Business Central Cloud provides flexibility and accessibility, allowing users to work from anywhere with an internet connection, which is ideal for distributed teams or remote work environments​. However, because the data and application are in the cloud, companies must be comfortable with their data being stored off-premises, in exchange for Microsoft’s robust security and compliance measures.

Benefits of Business Central Cloud:

• Quicker setup & always up-to-date: No hardware setup required, and Microsoft keeps the system up-to-date with new features and security patches.
• Easy scalability: Easily add or remove users and adjust capacity without investing in new infrastructure.
• Anywhere access & mobility: Work from any location with internet access, supporting remote teams and mobile users.
• Reduced IT burden: Because Microsoft handles infrastructure, security patching, and backups, your IT staff can focus on other strategic tasks instead of routine ERP maintenance​.
• Strong security & compliance: Data is encrypted and secured within Microsoft’s Azure infrastructure, meeting global compliance standards.
• AI capabilities with Copilot: Unlike on-prem solutions, Business Central Cloud integrates advanced AI features with Copilot, providing real-time suggestions, predictive analytics, and workflow automation to support smarter business processes.

Business Central On-Premise is the legacy deployment model where the Business Central software and database are installed on your own servers or data center infrastructure, managed by your organization​. This option gives businesses maximum control because your data stays on your own servers, and your IT team has full access to configure and customize the environment as needed. On-Premise deployment can be advantageous for companies with strict data security policies or regulatory requirements that mandate local data storage​. However, your IT staff is responsible for all maintenance tasks such as installing updates, applying security patches, scaling hardware for performance, and handling backups and disaster recovery plans​. Additionally, on-premise deployments involve higher initial setup costs and ongoing expenses for hardware maintenance and support​.

Benefits of Business Central On-Premise:

• Complete control over data & systems: With on-premise deployment, your data is stored on your own servers, under your control. This is ideal for businesses that prioritize data sovereignty or have strict compliance rules about data location.
• Greater customization flexibility: On-premise installations allow you to alter the system at a very granular level. It is possible, in some instances, to modify the base code. However, this is not recommended as it could interfere with future upgrades.

To summarize the differences between Business Central Cloud and On-Premise, the table below highlights key factors side-by-side:

The choice between Business Central Cloud vs. On-Premise depends on your business priorities. Both options offer strong ERP capabilities, but the right fit depends on cost, IT resources, scalability, and compliance needs.

• You want to minimize server and maintenance costs.
• Your company lacks a large IT team or infrastructure – you’d rather let Microsoft handle the technical heavy lifting of maintenance, updates, and security​.
• You prefer quick scalability for growth, seasonal demand, or multi-region expansion.
• You require remote access for teams working from multiple locations or on the go.
• You prefer automatic updates, AI-driven enhancements, and built-in cloud integrations.
• Your industry does not have strict regulations that force data on-premise, or Microsoft’s cloud certifications meet your compliance needs.

• You require complete control over your data due to regulatory, compliance, or corporate policy reasons.
• Your business processes demand heavy customization or integration that goes beyond what the cloud environment allows.
• You have a capable IT department (or partner) and existing server infrastructure. 
• Control over uptime is a priority and you have the means to achieve high availability.

By evaluating factors like industry regulations, company size, growth plans, and IT capabilities, you can determine which deployment aligns best with your business strategy. If you’re still unsure, it can be helpful to discuss with a Microsoft Dynamics 365 partner or consultant who has experience with both models and can provide guidance based on your situation.

When selecting between Business Central Cloud and On-Premise, working with the right partner can make a significant difference in ensuring a smooth implementation and long-term success. Rand Group specializes in delivering Business Central solutions tailored to each business’s unique needs, whether in the cloud or on-premise.

Rand Group’s services for Business Central:

• Implementation & customization: Rand Group provides full implementation services, from initial setup to tailoring the system with custom configurations and extensions. Our team ensures that Business Central aligns with industry-specific needs and business processes.
• Cloud & on-premise deployment support: Whether businesses opt for a cloud-based or on-premise deployment, Rand Group assists in evaluating the best approach and executing a seamless transition.
• Integration services: Rand Group specializes in integrating Business Central with third-party applications, CRM systems, Power Platform solutions, and legacy on-premise software to create a unified technology stack.
• Optimization & process automation: Helping businesses enhance efficiency, Rand Group identifies opportunities for process automation, workflow improvements, and data analytics, leveraging tools like Power BI and AI-driven insights.
• Ongoing support & managed services: Rand Group provides continuous support, maintenance, and system monitoring to ensure optimal performance, security, and compliance. Their team offers proactive monitoring, troubleshooting, and user training to maximize system adoption.

By partnering with Rand Group, businesses gain expert guidance and hands-on support, whether migrating to Business Central Cloud, upgrading an on-premise system, or optimizing an existing implementation. Rand Group’s proven methodologies and industry knowledge ensure that organizations achieve their ERP goals while minimizing risk and downtime.

Both Business Central Cloud and On-Premise are deployment options for Microsoft’s versatile ERP system. The right choice depends on your business’s needs and priorities. The cloud version of Business Central offers convenience, scalability, and reduced management overhead, making it very appealing for organizations seeking agility, lower maintenance, and anywhere access. On the other hand, the on-premise version offers greater control, customization, and data ownership, which can be crucial for businesses with strict compliance requirements or highly specialized processes.

Still unsure which deployment is right for you? Schedule a consultation with Rand Group to explore the best Business Central solution for your business.