Cloud vs. On-Premises: Which is right for your business?
ERP systems like Microsoft Dynamics 365 Business Central are now much more than just IT infrastructure. They are strategic enablers for efficiency, compliance, and transformation. But the central question remains: Cloud or On-Premises – Where is the future of your ERP solution?
With this overview, we provide guidance – based on facts, practical, and with an eye towards medium-sized companies in the DACH region.
The cloud: Standardized, scalable, ready for tomorrow
The cloud version of Business Central is hosted in German data centers and meets the highest compliance standards (e.g., GDPR, ISO/BSI/SOC). It frees up internal IT resources while providing access to modern technologies – from automatic updates to AI-powered features.
Advantages of the cloud solution:
- Automatic Updates & Feature Releases – new features are immediately available, often exclusively in the cloud
- Planable cost structure – monthly license models instead of high one-time investments
- High security & availability – Data protection, backups, and fail-safe operations are the responsibility of Microsoft.
- Fast scaling – e.g. via Azure services, without hardware investments
- Access from anywhere – ideal for mobile teams and hybrid work models
Typical challenges:
- No direct database access – Integration is done via web services (OData, Power Platform, etc.)
- Internet addiction – No access when the internet is down
- Adaptation effort – Revision of existing data-based interface solutions on cloud storage solutions, e.g. Azure File Storage
On-Premises: Proven, individual, time-consuming
Many companies value on-premise solutions because of the complete control over data, systems, and processes. But this very control comes with responsibility – for operation, maintenance, and security.
Advantages of the on-premises variant:
- Full data ownership & system access – including SQL server, file system and individual integrations
- Comfortable environment – especially for long-time NAV/BC users with existing infrastructure
Typical challenges:
- High administrative effort – Updates, backups and security must be actively managed
- High initial costs – License, hardware, admin overhead + ongoing maintenance costs (e.g., 20 %)
- Limited scaling – additional users or locations require the infrastructure to be adapted by the IT department
Technical differences – relevant in detail
| Technical aspect | Cloud | On-Premises |
|---|---|---|
| Updates | Automatically, without extra effort | Manual, partner-assisted, high effort |
| Test environments | 3 Sandboxes included | Must be provided by the customer |
| Integration | Only via web services (OData, Power Platform, etc.) | Full access (e.g., via SSIS, own components) |
| SQL access | Only indirectly (web services) | Direct access to tables and views |
| Development projects | Useable indefinitely, with no additional costs | Paid per object type (e.g., Page, Codeunit) |
SWOT summary of the cloud
Strengths:
✔ Automatic updates, modern features, no need for a dedicated server
✔ Access from anywhere, ideal for distributed teams
✔ Less admin work, high standards in security & compliance
Weaknesses:
✖ Dependence on the provider & internet connection
✖ Limited customization, no file system/SQL access
Chances:
➕ AI features, automation, reduced IT complexity
➕ Integration with Power BI, Power Apps & Co.
Risks:
⚠ No access when the system fails
⚠ Migration effort with NAV older versions (e.g. BC 14 → BC 27 in 3 steps)
Conclusion: Technology follows the strategy – not vice versa
Both models have their merits. What matters is not what is technically possible – but what fits your company's reality.
The cloud is not automatically better. But it is often more economical, secure, and future-proof—especially when combined with Microsoft’s innovation cycles. At the same time, on-premises remains relevant for highly specialized scenarios.
👉 Important: Anyone still relying on on-premises solutions should act now. Because Microsoft is currently promoting the switch to the cloud. Bridge to the Cloud 2-Action – with 40 % discounts and dual-use rights by the end of 2025. To be followed by 2026 Bridge to the Cloud 3 with a reduced scope.