Microsoft Brings Clarity to Dynamics 365 Finance and Operations (AX) On-Premise Deployment Option

With the introduction in Q1 2016 of the new Microsoft Dynamics AX, known now as Dynamics 365 for Finance and Operations, Microsoft’s flagship ERP system was re-built on and for the Microsoft Azure cloud platform. This move to the cloud has brought many questions from existing on-premise clients and prospective new clients that are interested in maintaining an on-premise deployment of the application. Microsoft previously committed to delivering an on-premise option by the end of calendar year 2017, but hadn’t provided a lot of details around how they would deliver this model. These details are now becoming a little clearer, and will be discussed in this blog.

For starters, it is important to note that the upcoming on-premise solution will not be a pure, self-contained on-premise deployment like we’ve seen in the past. It will be a hybrid deployment, with components delivered both in the cloud and on-premise, designed to work together and complement each other. Microsoft believes that this approach will provide the best of both worlds – the control of an on-premise deployment, with the benefits of a cloud deployment for things like disaster recovery and advanced intelligence capabilities. So for organizations that are waiting for a pure, 100% on-premise solution, there doesn’t appear to be an answer coming any time soon.

This hybrid deployment model of Dynamics 365 Finance and Operations will actually start with a cloud component that is deployed on Azure. The application will be deployed in the cloud first, which is what will provide the enterprise view, built-in disaster recovery, and the use of Cortana intelligence suite for machine learning and advanced intelligence use cases. In addition to this cloud component, the customer would then also implement a component of Dynamics 365 Finance and Operations in their on-premise data center. This on-premise component is currently being called “My Workspace”, but may be renamed as this gets closer to launch. Below graphic gives a visual of this architecture:

Dynamics 365 Finance and Operations(AX) On-Premise Architecture

So you can see that this approach is really a hybrid scenario with components both on-premise and in the cloud, which work in concert with each other.

An important design consideration for Microsoft in this scenario is the ability for the on-premise components to run on the customer’s hardware. The previous vision for on-premise deployments was to leverage the “Azure Stack” which had very specific (and high-end) hardware requirements with limited vendor choice. With the new deployment approach moving away from Azure Stack, this requirement has been removed. So customers that have already invested in an IT infrastructure to support their ERP application and who prefer to leverage that investment, they will now have that ability. Someone will simply have to install Windows Server on the on-premise hardware, along with a Lifecycle Services (LCS) agent which will pull the container of code down from LCS to the local hardware. (More on the role of LCS in this scenario to come below.)

To get more into detail, the way this hybrid deployment will work is that each “Company” in Dynamics 365 Finance and Operations can be defined to live entirely in the cloud, or to primarily be an on-premise company. This distributed environment will all be invisible to the end user - users will simply connect to Dynamics 365 Finance and Operations, and the data will be replicated up into the cloud into the enterprise view. The on-premise components will be designed to run offline, so if the connection to the cloud components breaks, they can continue to run locally, and then the on-premise and cloud components will synchronize when the connection is re-established.

Specific examples that Microsoft gave where this type of hybrid configuration could be desirable were:

  • Retailers that need a local store server on-premise so that they can continue to process orders if the Internet is down.
  • Manufacturing companies that have multiple plants, and may want to maximize system performance at some or all of their plants by having users connect to local hardware
  • Distribution companies that may want the control of having their warehousing operations on-premise in their distribution centers
  • Operations in countries or locations where Internet latency is a major problem
  • Operations in countries that have data sovereignty laws where data must originate in-country as opposed to in a foreign country datacenter or in the cloud

In all of these cases, you can run Dynamics 365 Finance and Operations on hardware that is local to that entity. The transactions will happen on the local hardware, and then replicate to cloud. And this can be a 1:Many configuration as well, where an organization has a larger number of decentralized on-premise deployments around the world, all replicating to the enterprise view in the cloud.

Another really nice element of this hybrid scenario is the ability to manage and control the entire environment through Lifecycle Services (LCS). That means you can take advantage of the built-in telemetry and other components that assist with performance diagnostics and other management tools. LCS will be used to deploy the enterprise components in the cloud and to configure the architecture for the on-premise pieces. LCS will then containerize the bits of code that need to be pushed down to the on-premise servers. And an LCS agent will be waiting on the local hardware to pull the container of code down and deploy it on the local servers. Just that simple!

From a timing standpoint, Microsoft is introducing these capabilities in a sequenced manner in order to address some of the specific use case scenarios that are required for this. There are some scenarios that will require special handling where there’s more involved than simple replication, such as processes like inventory reservations. The general timing guidelines are as follows, which are all subject to change:

  • Retail scenario – available today (2016)
  • Manufacturing and warehousing scenarios – targeted for H1, CY2017
  • Support for other ERP scenarios – TBD

Licensing details for this model are expected to be available at some point in early 2017.

For more information on Microsoft’s view on this you can also refer to this blog: https://community.dynamics.com/b/msftdynamicsblog/archive/2016/11/01/best-of-both-worlds-on-premises-and-cloud

If you have questions, you can always feel free to reach out directly to us as well, at This email address is being protected from spambots. You need JavaScript enabled to view it..

About the Author

Andy Yeomans

Andy Yeomans

Andy Yeomans is Director of Business Development for SAGlobal, where his role is to help project-driven organizations evaluate and select ERP software systems to better manage their finances, projects, clients, and resources. Andy was instrumental in developing the organization's Microsoft Dynamics AX industry solutions and practice area for the AE & Environmental industry. Andy has over 17 years of ERP experience and has helped dozens of AE & Environmental firms evaluate, select, and implement ERP software systems for their business.

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