Microsoft Dynamics 365 Online VS. On-Premises – Why Change?

By Paul Bartram, Pre-sales Consultant, Pythagoras

In today’s fast changing technological world, we are constantly learning. However, we all fear change. It is easy for people to feel that they have little control over their lives when experiencing lots of change, and subconsciously people live in the past, unwilling to move, to adapt, to progress.

This post is not about the extra features Microsoft has included in their online version of Dynamics 365, but about the business reasons why you should choose one over the other, taking into consideration existing investments and how budget is received/spent.

Let us take a few companies, all the same (i.e. building type, staff, cash outflow etc.) except:

  • Company A (on-premise)

    Three years ago they invested vast amount of capital (CAPEX) in its own datacentre which required floor space, servers, storage, power supplies, offsite backups, network infrastructure, and software licences. They have put in place the staff to maintain the upgrades/patches/fixes, manage security and performance tuning.

  • Company B (on-premise)

    Three years ago, they invested a small amount of capital (CAPEX) on various desktop tools, such as word processing and spreadsheets.  They store their data locally on their own machines and copy data to a central single file server.

  • Company C (online)

    Three years ago, they changed to the cloud, paying operational subscription fees (OPEX).  Staff have low/medium specification, desktops and laptops; their data is stored locally and synchronised to the cloud over a reasonable internet connection.

On the surface, it would seem very difficult to persuade Company A to forget about its major investment and move to the cloud. In contrast, it would appear easy to convince Company B to move. Equally, Company C has committed to cloud for only as long as they want to use it, and once they have paid, they have no further financial commitment. However, Company C pays a premium for that flexibility and scalability.  In business administration speak there is value in that flexibility, for which a premium is paid. Conversely, it would look unlikely that you would get Company C to move back to on-premise.

A decisive aspect about the OPEX appeal of Cloud computing is based on understanding the role of capital expenditure within businesses. Organisations are restricted by public markets on the amount of capital expenditure they can make; businesses usually want to direct their investment toward revenue-generating activities. This is why many organisations favour leasing real estate rather than procuring; they do not want to tie-up precious capital in assets.

The best approach would be to identify decision and risk criteria for determining whether a given application is better hosted internally or moved to a cloud environment. Try to allocate a cost to managing the following over a four-to-five year period to determine the value of each:

  • Budget (capital expense/Subscription fees)

  • Security

  • Maintenance

  • Upgrades/Patches/Fixes

  • Performance tuning

  • Integrations

  • Network/Internet Connection

  • Database

  • Downtime

  • Servers

  • Backup

  • UPS

Countless businesses see IT as tying up valuable capital, and look to lessen its cost. It is why IT reports to the CFO. With perceptions like that, it is easy to appreciate why any initiative that promises to decrease capital investment and to operational expenditure would be extremely attractive to accountants.

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