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What you need to know: Cloud vs. hybrid vs. local business data

By Jens Kristiansen, Consulting Manager, Arbela Technologies

When Dynamics 365 for Operations was released in February 2016 (called AX7 back then), many customers and partners were startled over the face of an ERP system only available in the cloud. This change from Microsoft would require big changes in people’s mindset. Although the move to the cloud is the right step to make (and quite exciting too, if I may add) there are ERP users who are skeptical and nervous about the feeling of losing control of their data by putting it in the cloud. Fortunately, the concerns were received well and actions have been taken, creating possibilities for all customers to select the deployment option that fits their needs –- offering not two, but three possible deployment scenarios.   

  • Cloud
  • Cloud and edge
  • Local business data

The cloud is the flagship of the Dynamics 365 for Operations deployment offerings. This subscription based SAAS offering allows fully automated deployments, updates and code promotions managed by Microsoft through the use of Lifecycle Services (LCS), subsequently reducing the cost for hardware, installation, maintenance, and implementation. All data is stored within Microsoft managed data centers and data responsibility lies on Microsoft. The cloud is fully integrated with the Office 365 platform and other cloud offerings in terms of Machine Learning, PowerApps, Power BI, Flow, etc. 

Cloud and edge (Hybrid)
The cloud and edge deployment scenario, also mentioned as the "hybrid," will allow the you to run your business processes and transactions in a combination of cloud and local environments. Also called edges (based on sites), where data is stored local or on a hosted data center and not in the Microsoft managed data centers. Each one of these environments are referred to as "My Workplace." Where the "hybrid" comes in, is that there will be a data replication process to Microsoft managed data centers, where a single view of data across all environments is provided. This is called "My Workplaces," making it possible to take advantage of all the Microsoft cloud services, such as automatic updates, Power BI, Customer and Cognitive services, PowerApps, Flow, etc.  The cloud and edge option is currently available for POS systems, with full availability scheduled in the second half of 2017.

Local business data (On-Premise)
As some companies might not be ready to store data in the cloud because of regulations, policies, geographical cloud adoption, recent hardware investments, or for other reasons, Microsoft will be providing a deployment scenario where no business data will be stored in the cloud. This is referred to as "local business data" or on-premise. Where the cloud and edge option enables data synchronization, this feature is simply turned off in the local business data solution. All servers and databases will run within your or your partner’s data centers. The applications lifecycle is still managed in LCS, designing business processes and monitoring the environment’s system health. The local business data is currently available as a private preview with a planned general availability during the summer of 2017.   

Making the right decision – Am I stuck after making a choice?
So which way to go and what to choose? That can be a tough question. But what you should know is that it is always possible to move from one scenario to another -- at least if you want to start off from a local business data perspective and then later turn on data synchronization to be able to take full advantage of the Microsoft cloud offerings.

LIst of Features not Included in the On-Premise (Local Business Data) Version:

For a full list see the official Microsoft documentation here



Task recorder

Task recorder libraries in Lifecycle Services (LCS) are not supported. Task recordings can be loaded from or saved to the local file system.

Support pane

The Support pane (Help & Support > Support) is not yet available. integration integration is not yet available for on-premises deployments. For example, the ability to pin a tile or a report from your subscription to a workspace is not available.

Microsoft Office integration

SharePoint on-premises support is not available yet. SharePoint online is supported.
Skype for Business on-premises support is not available yet. Skype for Business online is supported.

Analytical workspaces

Analytical workspaces are not yet available for on-premises deployments.

Private preview of Generic Tax Engine (GTE)

The private preview of Generic Tax Engine (GTE) functions relies on LCS access and LCS GTE preview project. Therefore, it is not available for on-premises deployments.

Electronic reporting (ER) integration with LCS

The ER integration with LCS is not supported. ER configurations can't be downloaded directly from LCS to Finance and Operations.

ER integration with SharePoint

Integration with SharePoint is not supported. SharePoint server can't be configured as a destination for electronic documents generated by using ER.

Dynamics 365 for Finance and Operations - Warehousing mobile app

This app is not supported for use with on-premises deployments.

Ability to export entities to your own database (BYOD)

This feature is currently not implemented.

Author Power BI reports using OData

Authoring Power BI reports with OData using Power BI desktop or Excel PowerQuery tools is not supported.


No Retail features are available for use in on-premises deployments at this time.

Purchase requisitions: Punch-out from external catalogs

It is not possible to check out a shopping cart from an external catalog to a purchase requisition.

Trace Parser and PerfTimer

These tools are not working or have limited functionality for this release. These features will be implemented in a future release.

SSRS scale out

Currently SQL Server Reporting Services (SSRS) does not support scaling out. This feature will be added in an upcoming release.


Currently no telemetry is transferred into the cloud. In a future update we will start transferring telemetry data into the cloud.

Mobile apps

At this time, mobile apps are not supported. Mobile app support will be added in an upcoming release.