Business Central Cloud vs On-Premises: A Total Cost of Ownership Comparison
When companies move to Dynamics 365 Business Central, especially from Dynamics NAV, one of the first strategic questions is where it should run: in Microsoft’s cloud (Business Central online) or on your own servers (on-premises). Licence prices are easy to compare, but the real difference lies in the total cost of ownership (TCO), risk and future flexibility. Here is a structured comparison for leadership teams.
Key takeaways for leaders
- Business Central online includes hosting, backups, security patches and two major updates a year in the subscription.
- On-premises gives you more technical control, but you pay for servers, SQL Server, IT administration and upgrade projects.
- Copilot, AI agents and many new features are available only, or first, in the online version.
- For most small and medium-sized companies, the cloud has a lower 5-year TCO and lower risk.
- On-premises still makes sense in special cases, such as unreliable internet connections or strict requirements to keep data on site.
What You Pay For: Cloud
- Subscription: per user per month, including the software, hosting in Microsoft Azure, backups and updates.
- Implementation and extensions, as in any ERP project.
- Support and continuous improvement from your partner.
What you don’t pay for: servers, SQL Server licences, backup infrastructure, disaster recovery, operating system patches and version upgrade projects.
What You Pay For: On-Premises
- Licences: Business Central on-premises licences plus annual maintenance.
- Infrastructure: servers or private cloud, Windows Server and SQL Server licences, storage, backup and disaster recovery.
- IT administration: patching, monitoring, security and performance tuning.
- Upgrades: moving to a new version is a project you plan and pay for, which is why many on-premises customers fall several versions behind.
Beyond Cost: Risk and Capability
Security: Microsoft invests billions in data centre security, and Business Central online runs in the Azure geography you choose, so UK customers can keep their data in Microsoft’s UK data centres. Few mid-sized companies can match that level of protection on their own.
Innovation: Copilot, AI agents, the MCP server, Power Platform integration and many Microsoft 365 integrations require, or work best with, Business Central online. Staying on-premises increasingly means missing out.
Business continuity: online environments include automatic backups and point-in-time restore, without your own disaster recovery setup.
Scalability: adding users, companies or sandbox environments takes minutes, not a hardware purchase.
When On-Premises Still Makes Sense
- Sites with unreliable or no internet connection, such as some production plants or remote locations.
- Specific regulatory or contractual requirements to keep data on your own premises.
- Heavy, latency-sensitive integrations with local equipment that cannot be redesigned.
Even then, a hybrid approach or a hosted private cloud may be worth evaluating.
A Simple 5-Year TCO Exercise
To compare options, model five years of cost: licences or subscription, infrastructure, IT staff time, upgrades, downtime risk and the cost of missing features. In our experience, most small and medium-sized companies find Business Central online cheaper over five years, mainly because of avoided upgrade projects and infrastructure, and significantly lower in risk. Use our pricing calculator as a starting point.
Frequently Asked Questions
Is Business Central online more expensive than on-premises?
The monthly subscription can look higher than on-premises licence costs, but once servers, SQL Server, IT administration and upgrade projects are included, Business Central online usually has a lower 5-year total cost of ownership.
Where is Business Central online data stored?
Business Central online runs in Microsoft Azure data centres. UK customers can keep their data in Microsoft’s UK data centres.
Can we move from on-premises to the cloud later?
Yes. Microsoft provides cloud migration tools to move data from Business Central on-premises, and from Dynamics NAV, to Business Central online.
For most companies, the question is not whether to move to the cloud, but how to do it in a way that protects the business and maximises value.
Would you like an independent TCO comparison for your situation? Contact us or book a call with one of our experts.
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