Dynamics 365 Cloud or On-premise? Know which is better for your business

Data security is paramount. But what about control? When implementing a CRM solution, the biggest early decision you make is choosing the right deployment option for your business, i.e., Cloud or on-premise. Nearly 90% of new Dynamics 365 customers opt for the cloud. But is the cloud right for you? Dynamics 365  offers deployment flexibility, catering to both cloud-first businesses and those seeking on-premise control. This blog post explores the advantages and disadvantages of each approach, helping you navigate this crucial crossroads and select the Dynamics 365 cloud or on-premise solution that aligns perfectly with your business needs. 

What is the difference between Cloud and On-premise?

Cloud deployment for increased agility and scalability: Cloud deployment for  Dynamics 365  leverages the power of remote servers managed by a cloud provider like Microsoft Azure. This approach offers streamlines your operations by freeing your IT team from infrastructure management and software updates.  Cloud-based Dynamics 365 also boasts superior scalability, effortlessly adapting to your business growth without upfront hardware investments.  Furthermore, your team can access Dynamics 365 data and functionality from any internet-connected device to foster remote work and collaboration. Another benefit is reduced IT overhead, as cloud deployment eliminates the need for on-premise hardware and associated maintenance costs. Cloud providers prioritize data security with automatic backups and robust disaster recovery plans, minimizing downtime and data loss risks. 

On-Premise Deployment for maintaining control and customization: On-premise deployment offers high control for businesses seeking to tailor Dynamics 365 to their specific needs.  Customization flexibility allows for in-depth adjustments to workflows and processes. Data physically resides on your servers, potentially increasing your comfort level with security measures. However, this control comes with responsibility.  On-premise deployment requires a dedicated IT team to handle hardware maintenance, software updates, and ongoing system administration.  Scaling up can also be complex and expensive, as additional hardware investments are necessary to accommodate growth.  Finally, accessibility might be limited to your physical location or require VPN connections for remote work. 

According to Forrester Research, companies that moved from on-premise to cloud have experienced a 7% TCO reduction and a 63% ROI, clearly making the cloud a viable option. But how secure is the cloud? Isn’t the cloud expensive compared to on-premise? What about the annual maintenance? How much should a business shed money to manage and maintain the IT infrastructure? There are more questions, and we’ve got some of them answered below. 

Pricing – The differentiating factor between on-premise and cloud is cost. Despite offering ample benefits, the edge for the cloud is higher in the long term. 

When you choose a cloud service, you will typically be billed monthly or annually. But with on-premise, the initial investments are high. Given that you do not have any existing IT infrastructure in place, you will have to purchase a server to host your systems. The hardware, power backups, air conditioning, and space occupancy become overhead costs even before you get started with your on-premise deployment. 

However, after several years of using systems on-premise, you will arrive at a break-even point where your initial cost of the on-premise serves and running of it will become lower than the monthly rentals you pay to a hosting provider for the cloud. By the time your on-premise systems reach a break-even point, the chances of systems becoming obsolete are high. So, you need another big investment to upgrade your hardware systems to keep your systems up and running. That’s true. So, if you are told that having an on-premise locally hosted system is a one-time investment, you know where the hidden costs are coming from and how painstaking it is to maintain and upgrade your hardware systems.

Security – It is one of the major concerns for businesses of all sizes. With the news of data breaches, cyber-attacks, and data scandals, businesses have become very particular about the security of their information. 

Some businesses want their data to be stored on-premise, as it gives them an assurance of where their data is stored. Industries like healthcare require data to be stored locally for compliance reasons. This gives them free-hand access to data whenever they need it. 

But when you deploy on the cloud, your data is stored in a data center somewhere around the world, giving you access to information through internet-connected devices. It is completely safe, as Microsoft Dynamics 365 provides features like a multi-factor authentication service to ensure the security of your business data. All client connections and external data servers are fully encrypted. 

Maintenance

When you opt for the cloud, the maintenance is taken care of by your vendor. The price associated with maintenance is included as part of your monthly/annual package. But when you host your systems locally on-premise, the onus is on you to maintain the systems which will add up to overhead costs. But again, depending on business need and taking the compliance factor into consideration, businesses are skeptical about what difference it takes to be on-premise/cloud.

Here’s the comparison table that highlights the key capabilities, enabling you to understand both cloud and on-premise to decide which one suits your business requirements.