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When choosing between the upgrade to Microsoft Dynamics 365 Business Central SaaS and On-Premises, cost is often a deciding factor.  At first, the initial costs of the upgrade to Dynamics 365 Business Central SaaS seem more expensive than On-Premises. But when considering all upgrade costs that flood in year-over-year, it becomes clear that the alternatives are not cheaper in the long run. On top of the cost of the upgrade itself, it is also important to consider licenses and software running costs that accumulate after the upgrade.

In this blog post, I briefly overview the overall costs of upgrading to Dynamics 365 Business Central SaaS vs. On-Premises based on the demo 1ClickFactory prices, with the aim to show the whole picture. This will answer the question of whether the upgrade to Dynamics 365 Business Central SaaS or On-Premises is more expensive in the long run. If you are interested in finding out more details on upgrade cost comparison, download the 1ClickFactory whitepaper here.

Software running costs are higher for Microsoft Dynamics 365 Business Central on-premises solutions

With the Microsoft Dynamics 365 Business Central SaaS solution, the monthly subscription fee is almost always going to cost more than paying the ongoing license fees for the On-Premises solution. On the other hand, the monthly subscription fee for the SaaS solution covers all the expenses of hosting and maintenance of servers.

For Dynamics 365 Business Central On-Premises solutions, the licensing costs are smaller. But unlike SaaS, an On-Premises solution has a lot of hidden costs that don’t show up straight away. Customizations and implementation, hardware, IT personnel, maintenance, and training all carry added costs. Overall, customers end up paying significantly more with an On-Premises solution compared to Microsoft Dynamics 365 Business Central SaaS.

Software Running Costs are Higher for Microsoft Dynamics 365 Business Central On-Premises Solutions

Over time, migrating data to SaaS becomes a less expensive upgrade option compared to on-premises

When upgrading data only (in other words having a Clean Start without any customizations), at first the Clean Start to SaaS costs are from 20% to 40% higher than the Clean Start to On-Premises. But once upgraded, in the long run, the Clean Start to SaaS upgraded solution becomes much cheaper than the Clean Start to On-Premises.

Migrating Data to SaaS Becomes a Less Expensive Upgrade Option Compared to On-Premises

This is because the data migration to SaaS requires more effort than On-Premises, and therefore the costs are higher. But once data is migrated to SaaS, the future upgrade cycle is continuous, free of charge, and effortless for solutions without any customizations. On the other hand, with the On-Premises solution, all future data migrations to newer versions are fully priced.

When calculating the demo Clean Start costs that will be required in three years’ time, Clean Start to On-Premises becomes 32% more expensive than the Clean Start to SaaS.

In addition, the Clean Start costs should be considered together with the overall software running costs, which are significantly higher for an On-Premises solution compared to Dynamics 365 Business Central SaaS.

Over time, upgrading with customizations to Dynamics 365 Business Central SaaS becomes the less expensive upgrade option compared to on-premises

In addition to a data migration that initially requires more effort and costs more to move to Microsoft Dynamics 365 Business Central SaaS than it does to On-Premises, the transitioning of the customizations to a SaaS Extension (redesigning the code) also costs more at the start. The On-Premises solution upgrade with customizations is cheaper at the beginning but as a result the full Extension is not required and a Hybrid solution can be used. In a Hybrid solution, some of the customizations are moved to the Extension, and the remaining customizations that cannot be moved out at the time of upgrade, are left in the Base App.

When comparing the demo upgrade costs to Dynamics 365 Business Central SaaS vs. On-Premises, at first, upgrading with customizations to SaaS is 40% to 150% more expensive than the upgrade to On-Premises with the Hybrid solution. However, in 6 years' time, the upgrade to On-Premises becomes 20% more expensive than the upgrade to SaaS.

Once the customized solution is on SaaS, Dynamics Partners only have to invest in a monthly Extension maintenance fee to ensure the solution’s compatibility with the newest version of Dynamics 365 Business Central. 3 years of 1ClickFactory Extension Maintenance costs for SaaS are 120%* less expensive than the Dynamics 365 Business Central On-Premises solution upgrade costs that would be required over 3 years. Therefore, considering the upgrade costs required for On-Premises solutions in the long run, upgrading with customizations to SaaS is the least expensive upgrade option.

The total upgrade costs should always be considered together with the overall software running costs after the upgrade, which are significantly higher for Microsoft Dynamics 365 Business Central On-Premises solutions compared to Microsoft Dynamics 365 Business Central SaaS.

Upgrading with Customizations to Dynamics 365 Business Central SaaS Becomes the Less Expensive Upgrade Option Compared to On-Premises

Estimate the upgrade costs to SaaS vs. on-premises for your solution

To find out exact upgrade costs for your solution and to compare different upgrade options, use 1ClickFactory’s Upgrade Analyzer, a free online service. 

To access the Upgrade Analyzer and receive a fixed price proposal, sign in to the 1ClickFactory website, create a project and upload your solution’s .FOB or AL file. The solution analysis will be ready in 5 business days. On the Upgrade Analyzer, you will be able to see fixed price upgrade options for your solution, configure upgrade components to check the impact on the project scope and price and choose the best upgrade path for your solution.

To find out more about the cost difference between upgrading to Microsoft Dynamics 365 Business Central SaaS vs. On-Premises, download this 1ClickFactory whitepaper!

If you have any questions, don‘t hesitate to contact us at service@1clickfactory.com