Business Central Cloud vs On Premise | Difference
As a business owner who may be informed on the deployment of ERP, you have realized that the Business Central cloud vs on-premises choice can determine the cost, agility, and sustainability.
According to Microsoft, more than 45,000 companies are using Dynamics 365 Business Central worldwide and leverage its integrated finance, operations, sales, and analytics capabilities. Comparing Business Central on-premises and cloud, the essential functionality is very similar, yet deployment, maintenance, models of costs, and innovation timelines vary completely.
In Canada, where data sovereignty, compliance, and scalability are often crucial, making the right choice will support, not hinder, your ERP development. This article will help you choose a model to grow your Canadian business by comparing what each offers.
To understand this difference, let us first understand Business Central's on-premises version.
What is Business Central On-Premises?
In the case of on-premises ERP, your firm is hosting the Business Central software and database on the servers, which are within its own IT infrastructure (onsite or your own data center).
On this model, your IT team will be in total control of the data storage, security, maintenance, and updates. You buy perpetual licenses or subscription licenses and will do the system backups and patches as well as system upgrades.
Some of the main Business Central On-Premises features are:
- Installed and operated on the physical or virtual servers of your company.
- Your data is stored onsite or in your personal data center.
- Complete administrative configuration, database, and custom code control.
- Upgrades that were done manually to accommodate new versions.
Best for: Organizations with full control preferences over their ERP environment and data or with the requirement to adhere to strong industry or government data-hosting regulations in Canada.
Now that you know what “on-premises” means, let’s understand the cloud version.
Business Central Cloud (SaaS)
The SaaS (Software as a Service) version, which is also referred to as Business Central Cloud, is hosted and managed by Microsoft on the Azure cloud system.
With Dynamics 365 Business Central Cloud, organizations can access their ERP application through a web browser or mobile application, and no local servers are installed. Additionally, Microsoft automatically manages infrastructure, security, updates, backups, and uptime, ensuring businesses always have the latest version of Business Central.
Business Central Cloud has the following key features:
- Hosted by Microsoft on Azure with global availability
- Available at any time and place via a browser or mobile application
- Auto updates and introduction of new features
- Pricing model on subscription (per use per month)
- Seamless integration with Microsoft 365, Power BI, and Teams
- Quick growth of businesses with a wide geographic scope
Best for: Canadian businesses that need a cost-efficient, scalable, maintenance-free ERP system with embedded current technologies like AI, analytics, and automation. It provides 24 hours of perpetual innovation with no downtime or manual upgrading.
Comparison of Business Central On-Premises vs Cloud
| Feature | Business Central On-Premises | Business Central Cloud (SaaS) |
|---|---|---|
| Deployment & hosting | On your own servers or private data center | Microsoft Azure, fully managed |
| Ongoing maintenance | Your IT team handles patches, backups, upgrades | Microsoft handles maintenance, updates |
| Upgrade cycle | Manual, scheduled by your team | Automatic, Microsoft-driven |
| Scalability | Requires buying or adding hardware | Easy to scale (add users, storage) |
| Customization or flexibility | Full access: code modifications, deep integrations | Extensions only (upgrade-safe), limited core changes |
| Data control or sovereignty | You retain full control over all data | Data stored in Azure; regional data center considerations |
| Accessibility | Local network or via VPN or remote desktop | Browser or mobile app access from anywhere |
| Feature innovation or AI | Delayed; manual adoption of new modules | Rapid access to AI, analytics, new tools |
| Disaster recovery or redundancy | Your responsibility | Built into Azure infrastructure |
| Security & compliance | You are responsible for firewall, patching, audits | Microsoft provides enterprise-grade security and compliance |
| Ideal for | Organizations with strict data policies, complex custom needs | Growth companies, remote work, wanting minimal IT burden |
Now that we have given the core differences between Dynamics 365 Cloud and On-Premises, a question then arises: why are many organizations around Canada transitioning to the cloud?
Why Shift to a Cloud ERP Solution?
According to Microsoft’s 2025 ERP adoption report, over 70% of new Business Central implementation are now cloud-based. This is due to a straightforward reason: businesses seek speed, scalability, and reduced IT administration burdens. Cloud ERP is not just a deployment choice anymore; it is a growth, agility, and innovation strategy in business.
Now, we can take a closer look at the key reasons for moving to the cloud version of Dynamics 365 Business Central and understand why it is the best choice for modern Canadian companies.
Reduced operational overhead: There are no servers to maintain, and the IT resources are reduced.
Predictable expenses: The subscription model makes budgeting easy.
Quick deployment: You can have a quicker deployment without hardware configuration.
In-built upgrades and innovation: Get the new features in real-time with AI and analytics improvements.
Improved accessibility: Working anywhere plays a key role in the distributed or remote work models.
Scalability and elasticity: Size up or scale down your footprint within a short time without having to invest significant capital.
Innovation readiness: Cloud makes you up-to-date without major upgrade investments, essential in rapidly changing markets.
Note: Cloud ERP is providing greater agility, risk reduction, and decreased IT overhead, particularly in SMEs in Toronto and other parts of the provinces in Canada.
Although the advantage of cloud ERP is impressive, there are still businesses that require the ability to control the data or have special customization requirements. And that is where the Business Central hybrid model comes in, which consists of the flexibility of the cloud and control of on-premises.
Business Central Hybrid
A hybrid deployment is a combination of cloud and on-premises elements. As an example, you can store core modules in the cloud and maintain sensitive (e.g., payroll, regulatory data) data on local servers. Alternatively, some legacy integrations or local services may be operating on your network.
This will provide you with the scaling capability of the cloud (can expand and contract on demand), but it will still enable you to have control where it’s needed. Through gradual migration of modules to the cloud, you can reduce the risk to your business. Furthermore, hybrid is particularly attractive when there are compliance, latency, or legacy constraints, but you still want to enjoy the benefits of the cloud.
Now you have all three choices on the table (on-premises, cloud, and hybrid), which one do you select for your business? Let’s weigh the pros and cons and decide.
Also Read: Business Central Pricing
What to Choose?
Choosing “cloud or on-premises or hybrid” depends on your business priorities, constraints, and strategy.
Below are some key points that will help you decide.
1. Regulatory and Data Residency Requirements: Canadian regulations legally require the storage of data within the country. In case your compliance regulations require on-site control, on-premises (or hybrid) can be necessary.
2. IT Budget and Resources: Do you have qualified IT personnel to maintain servers, manage backups, upgrade, etc.? Otherwise, there are cloud solutions available that can reduce this workload.
3. Complexity of Customization: On-premises gives you all the control in case you have extensive customizations (particularly in case of introducing changes to the legacy code). However, Business Central now provides an incentive towards extension-based models even in on-premises mode, and direct object modifications can be a problem with future upgrades.
4. Desired Innovation Pace: In need of AI swiftly, analytics, or built-in Copilot possibilities, the cloud deployment means you are not late.
5. Scalability Requirements: When you are going to grow (in terms of user numbers and geographic reach), the cloud can be scaled more easily.
6. Business Continuity & Disaster Recovery: Cloud inherently comprises geo-redundancy. Cloud has greater in-built resilience in case downtime or disaster recovery is important.
7. Connectivity & Performance: When your operations need very low latency or have poor internet connectivity, the on-premises solution can be beneficial.
Note: Evaluate your work requirements, compliance limits, and digital transformation ambitions and select the deployment model that fits your growth model.
Conclusion
When it comes to Business Central cloud vs on-premises, neither is necessarily right or wrong. However, cloud deployment is also becoming more beneficial in terms of cost predictability, scalability, innovation, and reduced IT burden. On-premises remains useful in situations where total control, data sovereignty, or utter customization is essential.
For a Canadian company (be it in Toronto, Vancouver, or any place), this move must be compelled by that which fits your growth expectations, legal obligations, and ability to serve. Besides, hybrid models enable you to fill the gap and come slow.
Dynamics Square has years of experience implementing Business Central in Canada, both on-premises and cloud-based. We help:
- Trace your compliance and data residence requirements.
- Plan migrations (from legacy systems or on-prem to cloud or hybrid)
- Implement best-practice customizations with extension models.
- Provide end-to-end services, training, and managed services.
If you’re evaluating Microsoft Dynamics 365 Business Central cloud vs on-premises for your Canadian business, we’d be glad to help you choose and implement the right approach.
Contact us and discover how we can help you implement or migrate Business Central Cloud seamlessly.
People Also Ask:
Which is better, on-premises or cloud?
Most organizations should find Business Central Cloud most effective due to its automatic updates, reduced IT expenses, and remote access capabilities. It is best suited when companies desire scalability and innovativeness. In contrast, Business Central On-Premises can be more suitable, though, in the case of companies that require tight data control, customization, or offline access.
What is the difference between Dynamics Cloud and on-premises?
The Dynamics 365 Cloud version is based on the global cloud infrastructure of Microsoft, which provides real-time access, artificial intelligence, and automatic updates. Business Central on-premises versions involve the use of local servers and IT control but offer more control and customization of data.
Can Business Central be on-premises?
Yes, Microsoft Dynamics 365 Business Central can be implemented on the premises. This is most applicable when the company desires to have its ERP on the ground and have control over its data and security. Nevertheless, Microsoft also moves towards a cloud-first strategy, updating and being more scalable in the version of Business Central Cloud.
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Himank Kochar is a technical content writer at Dynamics Square. With a passion for writing and technology, he focuses on creating clear and informative blogs for readers. He enjoys breaking down complex topics into simple, easy-to-understand ideas. He believes in writing content that adds real value and helps readers make informed decisions.
