What this guide covers
When upgrading from NAV to Business Central, cloud (BC Online) vs on-premise is one of the first decisions you'll face. This guide explains what each option actually means, compares them feature by feature, identifies the specific scenarios where on-premise makes sense, and gives you a clear decision framework for your business.
When businesses upgrading from Dynamics NAV reach the point of planning their move to Business Central, one of the first decisions they face is deployment: cloud or on-premise? It is a question that feels more complex than it is, partly because it involves unfamiliar terminology and partly because the answer depends on circumstances that vary between businesses.
What the Two Options Actually Are
Business Central Online is Microsoft's SaaS (Software as a Service) cloud deployment. Business Central runs on Microsoft's Azure infrastructure, managed and maintained entirely by Microsoft. You access it through a web browser or the Business Central desktop app. Microsoft handles updates, security, backups, and infrastructure. You pay a per-user monthly subscription.
Business Central On-Premises is a version of the same software installed on servers that you own or lease, hosted either in your own data centre or in a private hosting environment. You (or your IT team or hosting provider) are responsible for the infrastructure, updates, backups, and security patching. You pay a perpetual licence fee plus annual enhancement fees, or in some configurations a subscription fee.
Cloud vs On-Premise: Feature Comparison
| Feature | BC Online (Cloud) | BC On-Premises |
|---|---|---|
| Microsoft Copilot & AI agents | ✓ Full feature set | ✗ Not available |
| Automatic platform updates | ✓ 2x/year, managed by Microsoft | ✗ Manual, client-managed |
| Power BI integration | ✓ Native, real-time | ~ Limited |
| Power Automate / Power Apps | ✓ Full integration | ~ Reduced capability |
| Shopify & M365 connectors | ✓ Native | ~ Partial |
| Infrastructure responsibility | ✓ Microsoft (Azure) | ✗ You / IT team |
| Data residency control | ~ UK Azure DCs available | ✓ Full control |
| Update schedule control | ~ Window, not timing | ✓ Full control |
The Default Recommendation: Business Central Online
For the majority of UK businesses upgrading from Dynamics NAV, Business Central Online is the right choice. Microsoft has invested heavily in making the cloud product the flagship offering, and the gap between cloud and on-premise capability has widened significantly in recent years.
The features that Business Central is best known for — Copilot AI capabilities, Power BI integration, Power Automate workflows, Teams collaboration, Shopify connectivity — are all delivered to Business Central Online first and in their most complete form. On-premise deployments receive a subset of these capabilities, and some are simply not available outside the cloud.
What Business Central Online Gives You That On-Premise Does Not
Microsoft Copilot Features
The AI-powered capabilities embedded in Business Central — including the Payables Agent that processes incoming invoices automatically, cash flow forecasting, late payment prediction, and the agent designer for building custom automation — are cloud-only features. They depend on Microsoft's Azure AI infrastructure. If AI-driven finance automation is part of your rationale for upgrading, on-premise Business Central does not deliver it.
Automatic Updates
Business Central Online receives Microsoft's biannual major updates automatically. Microsoft tests these updates and manages the deployment. On-premise customers must manage updates themselves, which reintroduces the upgrade overhead that NAV businesses are typically trying to escape.
Power Platform Integration
The deep integration between Business Central Online and Power BI, Power Automate, and Power Apps is substantially richer in the cloud deployment. Building real-time Power BI dashboards on live Business Central data works most cleanly when Business Central is running in the cloud alongside the rest of Microsoft 365.
When On-Premise Business Central Makes Sense
On-premise Business Central is the right choice for a specific set of circumstances, not for the majority of businesses.
- Data sovereignty requirements. Certain regulated businesses face data residency requirements that restrict where data can be processed and stored. Microsoft Azure does offer UK data centre hosting for BC Online, which resolves data residency concerns for most businesses — but some regulatory frameworks require on-premise specifically.
- Highly customised environments requiring controlled update management. For environments with unusually complex or extensive customisations, controlling the update schedule can be important. On-premise gives you complete control over when updates are applied.
- Legacy integration dependencies. Some businesses have integrations with legacy systems that use older communication protocols incompatible with cloud-to-cloud connectivity. These situations are increasingly rare but do exist.
- Existing hardware infrastructure investment. If a business has recently made significant investment in server infrastructure with useful remaining life, the economics of on-premise may make short-term sense. This is a transitional consideration rather than a long-term strategic position.
Cost Comparison: Cloud vs On-Premise
The Business Central Online pricing model is a predictable per-user monthly subscription. On-premise Business Central involves a larger upfront licence cost, ongoing annual enhancement fees, plus infrastructure costs — server hardware or hosting, operating system licences, SQL Server licences, backup systems, and IT resource to manage all of it.
For most UK SMEs, the total cost of ownership for Business Central Online over a three-to-five year period is comparable to or lower than on-premise, once all infrastructure and maintenance costs are factored in. The cloud model also converts capital expenditure on hardware into operational expenditure, which is preferable for many businesses from a cash flow perspective.
Making the Decision for Your Business
Start with Business Central Online as the default. Then ask whether any of the specific on-premise scenarios apply: do you have regulatory data residency requirements that cloud cannot meet? Do you have integration dependencies incompatible with cloud connectivity? Do you have a compelling economic case based on existing infrastructure? If none of these apply — and for the majority of UK SMEs, none do — Business Central Online is the right choice.
NetMonkeys has delivered both Business Central Online and on-premise implementations across a range of industries, including manufacturing, construction, and distribution. We can advise on your specific situation without pushing you towards a particular outcome for commercial reasons. You can also read our guide on choosing the right Business Central implementation partner to understand what to look for in the partner who will deliver your migration.
We'll review your specific circumstances and give you an honest recommendation, not a sales pitch.
