For Microsoft Dynamics NAV and Dynamics 365 Business Central customers making a choice between an upgrade to Business Central on-premises and SaaS, a study of the long-term costs (at least 3 to 6 years) is essential to make an informed decision. It is important to understand the upfront fees and the hidden costs that accumulate over a longer period. The costs to consider include solution upgrade costs as well as the software running costs after the upgrade.
In the case of the Business Central SaaS solution, the monthly subscription fee is the biggest expense albeit amongst the most competitive in-market. It is almost always going to cost more than paying the ongoing license fees for the on-premises solution. However, in the monthly subscription fee for the SaaS solution, all the expenses of hosting and maintenance of servers are covered by the supplier. There are no hidden costs: No personnel costs for server maintenance, no investment to be made in hardware, etc. The only remaining expenses, identical to those of an on-premises installation, are user training and the time required to set up and operate the solution. In addition, there is an extension maintenance subscription fee for the customised solutions, however CloudFactory don't charge this.
Unlike SaaS, a Business Central on-premises solution has a lot of hidden costs that don’t show up straight away. Customisations 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 Business Central SaaS.
When upgrading from Dynamics NAV, there are two technical upgrade options and they can apply to both SaaS and on-premises upgrades:
• Upgrade data only and do not include any customizations, in other words have a Clean Start. If needed, you can develop customisations from scratch after the upgrade.
• Upgrade data and selected customisations to Dynamics 365 Business Central SaaS or to on-premises.
Let’s briefly review the overall costs of upgrading to Business Central SaaS vs. on-premises based on estimates and used for guidance only, with the aim to project a potential "whole picture" and answer the question of whether the upgrade to SaaS or on-premises is more expensive in the long run.
A Clean Start upgrade option is best for non-customised or slightly customised newer solutions, or very outdated solutions with no direct upgrade path where a large percentage of customizations are not used or have been replaced by standard functionality.
At first, the Clean Start upgrade to SaaS costs is from 20% to 40% higher than the Clean Start upgrade to on-premises. But once upgraded, in the long run, the Clean Start to SaaS upgraded solution becomes less expensive than the Clean Start to on-premises. Let’s look into Clean Start costs in more depth.
To summarise, in the long run, the Clean Start to SaaS option is cheaper than the Clean Start to on-premises option. When calculating the 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. The upgrade costs should be considered together with the overall software running costs after the upgrade, which are significantly higher for an on-premises solution compared to Business Central SaaS. Therefore, if you choose the Clean Start to SaaS option, you will cut the future upgrade and software running costs and benefit from an always up-to-date solution directly managed by Microsoft.
The upgrade to SaaS option is recommended for small and medium-sized solutions that want to keep their customisations and have few constraints for moving to Business Central SaaS. When upgrading customised solution to Business Central SaaS, it is necessary to transition all customized code into an extension.
For the upgrade to on-premises, it is not necessary to transition all customised code into an extension, and the other options are available, such as:
• A Modified Base App, where all customizations are left in the Base App.
• Or a Hybrid Solution, where some of the customisations are moved to the extension, and the remaining, that are not possible to move out at the time, are left in the Base App.
When comparing the upgrade costs, the upgrade to SaaS is 40% to 150% more expensive than the upgrade to on-premises for the hybrid solution. This is because data migration to SaaS and the transition to a SaaS extension (redesigning the code) costs more. However, it is important to consider that the latter costs are a one-off payment. Once the solution is on SaaS, the regular Business Central release cycle will allow you to benefit from new features and an always up-to-date, secure, and compliant solution. Dynamics partners will have to invest in monthly extension maintenance afterwards to ensure their solution’s compatibility with the newest Business Central version. It has been found that extension maintenance costs for our clients are 120% less expensive than comparable Dynamics 365 Business Central on-premises solution upgrade costs that would be required over 3 years.
When comparing upgrade costs between Business Central SaaS and on-premises, in 6 years' time, the upgrade to on-premises becomes 20% more expensive than the upgrade to SaaS. Within that time, the costs of the upgrade to on-premises continue to increase, whereas the upgrade to SaaS costs includes stable monthly extension maintenance fees. The total upgrade costs should always be considered together with the overall software running costs after the upgrade, which are significantly higher for Business Central on-premises solutions compared to Business Central SaaS.
Below are the key points summarised from the upgrade costs comparison.
• Software running costs for Microsoft Dynamics 365 Business Central on-premises solutions are significantly higher than those for the SaaS.
• At first, the Clean Start to SaaS (migrate data only) costs are 20% to 40% higher than the Clean Start to on-premises.
• In 3 years’ time, the Clean Start to on-premises becomes 32% more expensive than the Clean Start to SaaS.
• On average, the costs for upgrading to SaaS (upgrading data and selected customisations) are 40% to 150% higher than upgrading to on-premises having a hybrid solution.
• In 6 years, the total cost for the upgrade to on-premises having a hybrid solution become 20% more expensive than the total cost of upgrading to SaaS.
For more information in Dynamics 365 Business Central please reach out to the CloudFactory.co consulting team.
Cloud Factory is an ERP specialist, helping you implement ERP systems such as MYOB Advanced, SAP Business One, Microsoft Dynamics 365, Microsoft Dynamics 365 Business Central, Wiise, PowerPlatform and Korber K.Motion Warehouse Edge.