D365FO Cloud vs On Premises

Most people probably think of D365FO as a strictly cloud based solution.  However, there is also an On Premises version that is available.  As AX 2012 has died a slow death, it seems as if interest in the OnPrem version has gained traction.

Rather than pitch some sales information you might hear from a partner or from Microsoft, let’s talk about these options and which option is actually better.

Barrier to Entry

The two products have completely different entry paths.  These paths break down into ease of access and cost.  This is not going to be a detailed cost analysis with licenses for all scenarios or users, but instead a high-level look at how it works. Let’s start with cost and then look at how easy it is to deploy these environments in order for users to access them.

Cloud - Entry

D365FO in the cloud is simply controlled by licenses for the D365FO product.  With those licenses assigned to your tenant, you will get the LCS implementation project, a Sandbox, and a Production (upon completion of the steps to get a production environment). Customers don’t need to purchase a separate license for the technology stack that the environment runs on.  In this sense, the cloud entry is simple, and cost is dependent on the number of licenses.

OnPrem - Entry

The on-premises version of D365FO is much more complex and has a larger price tag associated with it.  While it is true, applying the D365FO license to your tenant will get you a LCS implementation project, you don’t really get anything else.  OnPrem means the customer is footing the bill for all the infrastructure, and that includes all the software licenses needed (review the software here: Microsoft Dynamics 365 Finance + Operations (on-premises) supported software - Finance & Operations | Dynamics 365 | Microsoft Learn).  This means there is a lot of extra cost with these environments.  Also note the number of VMs used for each environment: UAT is a minimum of 9 VMs and a production environment is 12 VMs. 

So, getting up and running an OnPrem environment is going to cost you, A LOT.

Cloud – Deployment

D365FO in the cloud is all based on licensing.  Want multiple environments for testing? Purchase more licenses and those environment slots appear in your LCS project. From there, walk through a little checklist and watch it deploy.  A new environment (without customizations or customer data) will normally be deployed in ½ hour or so.

OnPrem - Deployment

The OnPrem product will not be a simple click to deploy in the true meaning.  Sure, once all the hard work is done, clicking deploy environment and pasting the values into LCS isn’t that difficult, but that’s not the hard part.  Getting to that point and having that actual deployment succeed is the hard part. I have not met a customer or partner that had a deployment work on the first try. The 24-step installation instructions are difficult for any customer or partner (Set up and deploy on-premises environments (Application 10.0.32 and later) - Finance & Operations | Dynamics 365 | Microsoft Learn).  It’s not an easy application.  The system uses infrastructure that many customers just are not familiar with.  Finding a qualified partner? It feels impossible.  Most partners that say they know OnPrem are probably just opening support case after support case to push these through.  These installs and deployments have too many pieces and each piece is dependent on another; one mistake and the entire deployment will fail.  That’s not dramatic either, this deployment is not for the faint of heart.

What this means, is that an OnPrem deployment requires a skilled team: the technology crosses AD, ADFS, SQL, SSRS, SSIS, Service Fabric, certificates, high-availability setups, and more.  It’s a complex process and you won’t be up and running in a day.  Realistically, your first deployment will take two weeks or more.

Performance

Now, let’s talk about the performance of these 2 products.  This again is a high-level discussion and not into the nitty gritty details.  Broad are applied here, so yes, there are exceptions and nuances that are not being discussed. This is focused solely on production environments.

Cloud – Performance

D365FO in the cloud is all Microsoft’s infrastructure.  This means all the performance of the application is owned and managed by Microsoft.  You want to tune a query? You need Microsoft or a code promotion.  You want more AOSs? You need Microsoft (FYI, they won’t give you them).  As an ERP system, D365 and AX 2012 are extremely chatty.  Almost all calls are singular and that means thousands of calls: between AOS and DB, between AOS and Azure Blob, between interactive and non-interactive AOSs; the nodes are talking to each other.  Microsoft knows this and has implemented many automated processes to try and monitor and tune in real time.  However, the effectiveness of the effort is questionable.  Expect performance issues in the cloud.  How bad? That’s too general and what one customer complains about another might not.  But expect users of the system to notice.  Now, this doesn’t mean 24/7 it’s an issue, far from it.  The point is that it is an issue regardless of the frequency for you and it’s out of your control.  Microsoft owns the keys to the kingdom here. 

Also note, you are responsible for trying to make your customizations work well and be tuned, and if they have a problem in your environment caused by your customization, expect Microsoft to do very little.  Sure, it might be a simple fix or something that could be changed quickly in SQL while a permanent fix is created, but don’t expect Microsoft to do that.  Sometimes you get lucky, just don’t count on it.

OnPrem – Performance

The on-premises product is yours to manage.  All performance is up to your team.  Hardware sizing has minimum specifications that Microsoft recommends, but you can put as much as you want, whether or not it’s needed.  This means that the OnPrem product can potentially be much better performing.  If you have a killer SQL DBA who knows how to tune, they can make this product fly.  If you want another AOS? Add one.  You want to add more memory? Go for it.  This is your system so the limitations are defined by you. In terms of performance, this means OnPrem will perform as well as you can make it.

Supportability

For supportability, what I really mean is what is required to keep the product going and what happens when you have a problem.  Obviously, the cloud product is maintained by Microsoft and the OnPrem is maintained by the customer/partner.  However, there is more to it than that, especially in terms of help obtained from Microsoft.

Cloud – Support

D365FO in the cloud is all about staying updated.  Microsoft has a set of updates that need to be taken each year and quality updates that also must be applied.  This is really important because it makes the ecosystem much easier for Microsoft to manage and helps customers have the latest fixes.  Does it work flawlessly? No.  As an ERP, the software is huge and sometimes these updates make it difficult to manage.  Maintaining support for the system means that customers need to have a rhythm for code testing and promotions.  This is made easier through automated testing with RSAT, opting into preview programs to have the latest code to test against, and using good and established ISVs that have their code working with Microsoft’s latest code.  Failure to do these things makes life in the cloud difficult.  Customers need to be willing to establish this flow and process and then the frequent updates of the cloud become just part of the overall flow of code.

There is also the notion of receiving support from Microsoft if an issue is encountered. Since the product is in Microsoft’s Azure and is Microsoft managed, that means the telemetry, the resources, and access to maintaining the system is within Microsoft.  This is both a good and bad thing.  For one, it means customers need far less of an infrastructure team, but it also means quick fixes aren’t as quick.  While Microsoft tries to provide some additional tools to help here, like zero-downtime custom code packages, the solutions are slow and might not fit all scenarios.  However, the cloud also offers access to support for critical scenarios via Report a production outage - Finance & Operations | Dynamics 365 | Microsoft Learn.  This allows high visibility and engagement for super critical production outage scenarios.

OnPrem – Support

For OnPrem, you are alone.  Microsoft does not update your environment but does require it to be updated to supportable versions.  This means your rhythm of promotions is up to you, but if you have an issue Microsoft might reject supporting you depending on your version.  Without that forced nature of the cloud, customers need to be disciplined in their approach to stay up-to-date. 

However, remember, this is not just maintaining D365FO updates.  Customers need to update all the supporting software to maintain a secure environment.  It is quite possible that a Windows update could impact your OnPrem environment, so it is critical to have established a pattern of testing in lower environments and a mechanism to rollback.  This means support for the OnPrem product is a much larger footprint than the ERP itself.  Any outage required on servers or software that D365FO has dependencies on, means an outage for D365FO.  So, customers might cheer to not receive the latest fixes from Microsoft forced on them, they accept a greater responsibility supporting their system.

The last part of support here is when Microsoft support is actually needed.  The expectation for customers and partners needs to be that Microsoft support does NOT know the OnPrem product.  It is kind of a second-class citizen in the D365 family and expect any OnPrem issue to take days to resolve.  Part of it is Microsoft support and the other part is because the product crosses numerous technologies.  Sometimes a customer might need Active Directory help, sometime SQL Server support, and other times it could be Service Fabric.  This could be all in terms of a single case. There is no production down LCS support.  There is no easy button. There are numerous points of failure.  Remember the dependencies that need to be maintained? One group policy change that was not well thought out and your entire OnPrem environment is down. Chasing that down through support is not going to be easy because Microsoft does not test every possible GP policy out there. Expect very slow support and resolution on issues.  Part of that is the nature of on premises software and part of it is the complexity of the D365FO OnPrem solution itself.  If you want fast turnaround from Microsoft, you won’t have it. 

Overall

In the battle of D365FO cloud vs OnPrem, in most circumstances the clear winner is the cloud.  The OnPrem product requires a large team and talented team to maintain, a large entry price tag, and does not have a strong support network from partners or Microsoft. For customers that think the moves from AX 2012 to D365FO OnPrem is going to be easy, the short answer is, “It won’t.” The product is vastly different, and the technology stack is foreign to AX 2012; as talented as your AX 2012 team is, the set of skills of OnPrem is just too different.  

Go to the cloud.