For Microsoft Dynamics 365 NAV and Microsoft Dynamics 365 GP customers deciding to upgrade to Dynamics 365 Business Central a consideration for the long-term costs (at least 3 to 6 years) is essential to make an informed decision.
It is important to consider the upfront fees and the hidden costs that accumulate over a longer period along with the costs of platform upgrade costs as well as running costs after an upgrade.
In the case of Dynamics 365 Business Central it is the monthly subscription fee that is possibly the stand-out expense item albeit amongst the most competitive in-market. It is almost always going to cost more than paying capital license fees for on-premises solution. However, in the monthly subscription fee all expenses of hosting and maintenance of servers, (including redundancy, hardware operating systems and SQL Server databases) are included by Microsoft. There are no hidden or personnel costs for server maintenance, no investment to be made in hardware, Operating systems and Databases 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 a maintenance subscription fee for the customised solutions, however CloudFactory don't charge this.
Unlike Microsoft Dynamics 365 Business Central an 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 365 NAV or Dynamics 365 GP, there are two technical upgrade options:
• Upgrade data only and do not include any customisations, 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
Let’s briefly review the overall costs of upgrading to Dynamics 365 Business Central 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 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A Clean Start upgrade option is best for non-customised or slightly customised newer solutions, or very outdated solutions with no direct upgrade path where a large percentage of customisations are not used or have been replaced by standard functionality.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 NAV or Microsoft Dynamics 365 GP on-premises solutions are significantly higher than those for Microsoft Dynamics 365 Business Central.
• At first, the Clean Start to Dynamics 365 Business Central (migrate data only) costs are 20% to 40% higher than the Clean Start to on-premises, based on new license costs.
• In 3 years’ time, the Clean Start to on-premises becomes 32% more expensive than the Clean Start to Dynamics 365 Business Central.
• On average, the costs for upgrading to Dynamics 365 Business Central (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 Dynamics 365 Business Central.
Whether the modifications that were put into the system X years ago still apply must be considered - but the argument would be to start with a clean slate and take the vanila capability of Dynamics 365 Business Central if it is absolutely possible. Standard is best!
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.