What is the difference between Dynamics 365 Cloud and On-Premise?

Cloud and on-premise are the two main deployment options for Dynamics 365. However, over the last few years, Microsoft has adopted a ‘cloud-first’ approach to Dynamics 365 implementations. Depending on your business needs, each of these deployment methods will provide various benefits and downfalls. To make an informed decision on the right option for you, understanding the differences is crucial. Therefore, below we have explored and highlighted the key features of each approach…

Dynamics 365 On-Premise

If Dynamics 365 is hosted on-premise, it means the business purchases the software licenses and the database is stored on their server. This keeps all business data in-house and provides full control of how and where the information is stored. However, this does mean the business is solely responsible for the upkeep and maintenance of the hardware.

Why would you choose On-Premise?

The on-premise deployment option is available for those organisations who may need to have control over their own server and information. This means that for those who have already invested significantly in their infrastructure and hardware, will be able to utilise these investments to run their software. Additionally, you possess full control of your data which ensures you can configure it to meet your organisations specific regulatory or compliance needs. With this method of deployment there does come a range of responsibilities, including maintenance and management; Maintaining the infrastructure, configure recovery solutions, set up and maintain sandbox/testing environments, manage and schedule operating system updates.

On-premise benefits and disadvantages:


  • Greater control over your data
  • Increased ability to comply with required legislation
  • Works with a basic internet connection


  • Infrastructure is expensive to maintain
  • Initial set up cost is greater
  • Updates need to be managed and carried out internally
  • No access to cloud-based services and features such as Power BIPower AppsPower Automate, Web Portals, etc

Dynamics 365 Cloud (Online)

D365 online is a software-as-a-service (SaaS) application, hosted in the cloud. The data is protected by Microsoft’s secure servers, the solution can be deployed remotely, and no hardware is required. Additionally, D365 online is far more flexible in comparison to on-premise, as users can be scaled up/down easily, as well as having the ability to integrate with other applications simultaneously.

Why would you choose Cloud deployment?

The online deployment option offers a huge range of benefits from remote access, a 99.9% uptime guarantee and the ability to leverage additional cloud-based features such as the Power Platform. Unlike on-premise deployment where updates must be managed by the business, software updates (two major releases twice a year known as ‘waves’ and regular feature updates) are rolled out centrally and ensures your users are accessing the very latest version of the technology. Overall, less effort is required to maintain D365 online but there are still some areas to consider, which are detailed below.

Cloud benefits and disadvantages:


  • Remote access – work from anywhere
  • No infrastructure to maintain
  • Easily scalable to suit your needs
  • Improved security and reliability
  • Microsoft guarantee 99.9% uptime
  • Hassle-free upgrades
  • Tight integration with the Microsoft eco-system
  • Leverage the Microsoft Power Platform


  • Recurring licencing costs which increase over time
  • Updates are automatic, meaning that testing needs to be managed and performed
  • Less control over your data (in comparison to on-premise) as it is hosted by Microsoft

Want to learn more about Microsoft Dynamics 365?

To learn more about Microsoft Dynamics 365, take a look at our webpage which provides further details around the benefits, various business applications, related products and FAQs.

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If you would like more information, please get in touch by emailing us at info@pragmatiq.co.uk or calling us on 01908 038110. Alternatively, fill out the form below and a member of our team will be in touch shortly.