Will Microsoft Dynamics 365 for Operations be available in the on-premises version?

During the first quarter of 2016, a new version of the flagship ERP class product by Microsoft appeared – Microsoft Dynamics AX, together with its new name – Microsoft Dynamics 365 for Operations (former AX 7), which however was available only on the Microsoft Azure cloud platform.

This move by Microsoft gave rise to many questions and doubts, not only among partners but mainly among customers who are interested both in the implementation and updating to the new version of the system, using own servers on the customer’s premises (the on-premises model).

Microsoft originally declared that such possibility would be available at the beginning of 2017, without stating any technical details and how such option would be delivered. In July this year, the Azure Stack technology appeared (in the Beta version) which is the equivalent of the implementation in the on-premises model.

Azure Stack as a private cloud

The Azure Stack service is a hybrid cloud platform which allows the delivery of the Azure technology services on the basis of local resources. In other words, Azure Stack may be described as a private cloud – software installed in the local datacentre, offering part of services of the public Azure platform. Azure Stack is therefore not an on-premises solution, known previously e.g. during implementations of Dynamics AX 2012, where the client has the possibility of installing and fully configuring the SQL servers, the application AX and other components, without the need to implement the external hybrid platform managing virtual machines. However, Azure Stack has the best features from the Azure platform – environment management, flexibility and scalability. Regardless of the selection of the computing power of the machine, the servers are located in Europe – Ireland, Germany and the UK.

It should be added that so far there is no finished production version of Azure Stack. Only the Technical Preview version is available (second version) in the POC (Proof of Concept) phase, used to acquaint any interested persons with features and the model of the solution. Microsoft at the same time stipulates that the current version of Azure Stack POC should not be implemented in the production environment. Taking this fact into account, at the moment the only option for implementation of Dynamics 365 for Operations is the use of the public Azure cloud.

Is the classic on-premises possible?

One of the questions most frequently asked by IT departments (CIO) of partners and clients is whether it is possible at all to implement Dynamics 365 for Operations in the classic on-premises version, known for the Dynamics AX 2012 version.

Microsoft answers this question among other things during the October AXUG Summit ’16 conference, however information about the possibility of implementing the system without the need to implement Azure Stack has appeared. Most modules – system components – will be available on-premises, however part of them will remain on the Microsoft Azure Cloud side.

 The infrastructure will look as follows:


It is apparent that such approach is really a hybrid solution, including components contained in the cloud and on-premises, which is described by Microsoft as Workspace Deployment of mutually cooperating components. What constitutes the greatest difference in relation to the Azure Stack solution is the possibility of implementing components directly on local resources, without using additional software. The client therefore has the possibility of installing locally the Windows servers on local resources, using the LCS (Lifecycle Services) agent in this process.

The impact of LCS on the D365 implementation model presented above is as follows:


We may manage and control the entire infrastructure via LCS, which means that also for the on-premises environments we may use telemetry and other LCS components supporting the efficiency diagnostics of servers. LCS is used to implement components in the cloud and to configure the architecture on the on-premises side. Which is more – the LCS agent, waiting for the opportunity to download a containerised packet with the code in order to be implemented on the server is located on those local resources.

Assets of the on-premises hybrid model

Microsoft specifies the cases in which the above model of infrastructure provides the most benefits:

  1. In the case where Retail is implemented. On-premises servers allow the continuation of the implementation of the order in the case of a failure of the WAN connection.
  2. Where industrial companies/factories having many plants want to improve their productivity using local resources for the connecting of the system users.
  3. Where distribution companies want to maintain full control over warehouse operations through the location of the distribution centre on local resources.
  4. Where the main productivity problem is the Internet latency
  5. The need to have local infrastructure caused by legal issues and regulations restricting the possibility of using resources in the cloud.

In all those cases, entities may launch Dynamics 365 for Operations on local resources. Transactions performed “locally” are replicated into the cloud. Such configuration will work also in the case where the organisation has many locations – worldwide on-premises implementations. The entire infrastructure is reproduced in the cloud, which is illustrated by the following diagram:


What is the possibility of implementation of the above infrastructure model?

  1. On-premises for the Retail module is already available – from November 2016*
  2. Warehouse operations and the production model – first half of 2017*
  3. Other business scenarios – second half of 2017 *

*- concerns selected markets

Therefore at the moment the only possible option is the implementation of D365 for Operations in the public cloud. We have to wait for other scenarios, licencing issues until the following year.


In the following articles we will look at the policies of the new version of Dynamics 365, Azure ó Dynamics 365 data security, as well as functional innovations, including the testing of the project module from the point of view of the construction industry.


ERP, Microsoft Azure, database, Microsoft Dymamics 365, Microsoft Dynamics AX
Dariusz Feliga

Darek is the Microsoft Dynamics AX programmer, employed in ITMAGINATION for three months. He has experience both in programming and in configuration and optimisation. In ITMAGINATION, besides developing and implementing solutions in the Dynamics AX system, responsible for implementation and configuration of the system on the side of the public Azure cloud.

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