Originally published as two separate posts in June 2022. Fully rewritten and consolidated July 2026.
Business Central hosting refers to where and how Microsoft Dynamics 365 Business Central runs: on Microsoft’s own cloud infrastructure as a SaaS service, on hardware your company owns and manages on-premise, or on infrastructure operated by a third-party Microsoft partner. Each option carries different tradeoffs for cost, control, backup, scalability, support, and as of 2026, access to Microsoft Copilot and AI agent features, which ship cloud-only.
This guide walks through each of the three, explains where the hybrid pattern fits, gives you a seven-question decision framework, and answers the comparison questions that come up most often. There is no universally correct choice. The right one depends on how your team wants to handle responsibility, customization, AI capability, and the day-to-day operating model.
The Three Business Central Hosting Options at a Glance
If you only have time for the short version, this table summarizes how Cloud, On-premise, and Third-Party (partner-hosted) Business Central differ on the factors that matter most.
| Cloud (Microsoft SaaS) | On-Premise | Third-Party (Partner-Hosted) | |
|---|---|---|---|
| Who owns the infrastructure | Microsoft | You | Your hosting partner |
| Pricing model | Per-user, per-month subscription | Subscription via CSP (perpetual closed to new customers as of April 2025) | Managed-service fee, scope-dependent |
| Upgrade timing | Microsoft schedule | You choose when | Negotiated with partner |
| Backup retention | 28 days, point-in-time restore via admin center | Whatever you configure | Configurable with partner |
| Scaling responsiveness | Real-time, automated; no published timing SLA | Limited by your hardware | Adjustable on request |
| Customization headroom | Extensions only (AL); Power Platform integration | Full code-level customization | Code-level customization typically supported |
| Copilot / AI features | Available | Not available (cloud-only) | Available if running BC online; not available if on-premise |
| Best fit | Teams that want AI features, standard requirements, light IT bench | Heavily regulated, performance-sensitive, or deeply customized environments where AI features are not required | Teams that want managed infrastructure with more flexibility than SaaS |
What is Business Central Hosting?
Hosting is where the application and its database run. Business Central is built to run in any of three environments. This first is Microsoft’s cloud, where Microsoft handles the infrastructure as a SaaS service. The second is on-premise, where you run it on hardware you own and manage. The third option is with a third-party Microsoft partner, where the partner runs the infrastructure on your behalf. A fourth pattern, hybrid, mixes on-premise Business Central with managed cloud services for the database tier.
Two changes since 2022 are worth knowing before you read on. First, Microsoft Copilot and AI agent features inside Business Central, including bank reconciliation assistance, sales line suggestions, and the Payables Agent, are only available in cloud-hosted Business Central. Microsoft has stated there are no plans to bring these to on-premise environments. Second, as of April 1, 2025, new customers can no longer purchase on-premise perpetual licenses; new on-premise customers must license Business Central via subscription through a Cloud Solution Provider. Existing customers with active enhancement plans retain their transition rights.
The hosting decision is related to but distinct from the licensing decision. We cover licensing in a separate guide; this guide focuses on where and how Business Central runs.
Cloud (Microsoft SaaS) Hosting
When you choose Microsoft’s cloud, you are renting Business Central as a service. Microsoft owns and operates the underlying infrastructure. You sign in to a Business Central tenant and use it; Microsoft handles patching, scaling, backups, and uptime. Pricing is bundled per user per month, and the costs are predictable from one month to the next.
What you get
- Per-user pricing with infrastructure included in the subscription. As of November 1, 2025, Microsoft list pricing is $80/user/month for Essentials and $110/user/month for Premium. Final pricing flows through your CSP partner and may include industry IP and extensions on top of base licensing.
- Automatic backups managed by Microsoft, retained for 28 days. Restore to any point in time within the window via the Business Central admin center; the restore creates a new environment rather than overwriting in place.
- Database export (BACPAC) is available for production environments on paid subscriptions, capped at roughly 10 exports per month. Sandbox environments cannot be exported.
- Deleted environments can be recovered for 14 days via the admin center, separate from point-in-time restore.
- Real-time, data-driven auto-scaling of compute and storage. Microsoft does not publish a specific scaling timing SLA.
- Access from any modern browser; no VPN required for routine use.
- Microsoft Copilot and AI agent features (bank reconciliation assist, marketing text generation, sales line suggestions, Payables Agent, and a growing roadmap of others). These ship cloud-only and are not available on-premise.
What to plan for
- Customization is extension-based (AL extensions). Direct code-level changes to the base application are not supported in the SaaS environment. Newer extensibility paths include AI capabilities via the System.AI module, deeper Power Platform integration, and AL-Go for GitHub pipelines for CI/CD.
- Upgrades happen on Microsoft’s schedule. Brief service windows are unavoidable, and you cannot defer indefinitely to suit a slow internal change-management cycle. Online ships first; on-premise gets the same release in subsequent cumulative updates.
- If your workload is bursty (month-end close, seasonal peaks), validate auto-scaling behavior under realistic peak loads. The platform is designed to handle this, but published timing is not guaranteed.
- Storage is a tenant-wide pool: 80 GB base plus per-license adders (typically 2 GB per Essentials, 3 GB per Premium, 1 GB per Device, 5 GB per Partner Sandbox). The pool is shared across production and sandbox environments. Each additional production environment beyond the first adds 4 GB of pooled storage. Additional storage add-on packs are purchasable through your CSP partner. [REPLACE: confirm current per-GB add-on pricing through your CSP before quoting figures in the post.]
- Microsoft’s documented support model for Business Central SaaS is partner-as-frontline: end customers contact their reselling partner, who escalates to Microsoft. There is no documented direct phone or chat channel from Microsoft to Business Central SaaS end customers.
On-Premise Hosting
On-premise hosting puts Business Central on hardware you own and operate. You provide the servers (or virtual machines), you run the database, you handle the network, and you set the policies for backup, security, and disaster recovery. The application is the same Business Central; the difference is who is responsible for everything around it.
What you get
- Full control over hardware sizing, performance tuning, and disk subsystem configuration. If your workload demands very high throughput or low latency, you can engineer for it.
- Customization headroom: code-level changes to Business Central are supported in on-premise deployments.
- Total ownership of your data, backup policy, and retention. You set the recovery time and recovery point objectives that match your compliance regime.
- Upgrade timing on your schedule. You decide when (and whether) to apply each release.
- Operates without continuous Microsoft cloud connectivity for core ERP workflows. Optional integrations (Excel add-in, Power BI, Power Automate) require connectivity when used.
- On-premise is in active support under Microsoft’s Modern Lifecycle Policy. The current 2026 wave 1 release (v28.x) is supported through October 2027.
What to plan for
- As of April 1, 2025, new customers can no longer purchase on-premise perpetual licenses. New on-premise customers must license Business Central via subscription through a Cloud Solution Provider. Existing customers with active enhancement plans retain transition rights.
- Several Business Central features ship cloud-only and are not available on-premise. The list currently includes Microsoft Copilot and AI agent features, the Teams app, the Shopify connector, Power BI auto-deployment, sandbox environments, late payment prediction, and company hub. Microsoft has stated there are no plans to bring Copilot to on-premise. The cloud/on-prem feature gap is widening.
- Upfront capital expenditure (or a steady operating cost) for hardware, software, and supporting infrastructure. You are buying or leasing capacity, not renting it elastically.
- Capacity planning is on you. You may need to provision for seasonal peaks that sit idle the rest of the year.
- Operational responsibility: backups, patching, security monitoring, network availability, and disaster recovery are your team’s job.
- Internal staffing implications. Running an enterprise application stack in-house assumes you have or can hire the IT bench to support it.
- Slower time-to-deploy compared with stand-up of a SaaS tenant.
Third-Party (Partner Hosted) Business Central
A third-party Business Central deployment runs on infrastructure operated by a Microsoft partner who specializes in hosting. You are still using Business Central with the same application and same data model, but the underlying compute, storage, backup, and support model are configured to your requirements rather than to a one-size-fits-all SaaS template. Tigunia is one such partner; there are others. The category is sometimes called “partner-hosted” or “managed Business Central.”
The pitch is essentially that you want managed infrastructure, but the SaaS template does not fit, and you do not want the operational burden of running everything yourself. Partner hosting sits in that gap.
Where partner hosting typically differs from Microsoft-direct cloud
- Backup policy. Retention windows can be set to whatever your business or regulatory environment requires, rather than the default Microsoft window. Backup copies can typically be requested or managed directly.
- Scaling control. Compute and storage can be adjusted on request — usually within minutes — rather than waiting for an automated scaling event to trigger. If you know a peak is coming, you scale ahead of it.
- Cost model. Pricing is typically a managed-service fee scoped to your actual usage and required SLA, rather than a per-user-per-month subscription with separate paid storage tiers.
- Customization. Code-level customization is generally supported, similar to on-premise deployments.
- Support model. Microsoft’s documented support architecture for Business Central SaaS routes end-customer issues through the reselling partner first; the partner escalates to Microsoft. With partner-hosted Business Central, the partner is also the team running your environment, which collapses the support chain into one relationship rather than two. The tradeoff is partner-dependent — service quality varies — so vet the partner’s support SLA, response times, and on-call coverage before signing.
- Copilot and AI features. If your partner runs your Business Central in the Microsoft cloud (managed online tenant), you have full access to Copilot and AI agent features. If your partner hosts Business Central on their own infrastructure as an on-premise deployment, Copilot is not available — Microsoft does not offer it for on-premise. Confirm which model your prospective partner uses.
Hybrid Deployments
Hybrid is the variant when you do not want to commit cleanly to one of the three options. Most commonly, it means running Business Central on-premise (or on an Azure VM) but using a managed Azure SQL Database for the database tier. You handle the Business Central application administration; Azure handles the database server. Microsoft documents this configuration explicitly and recommends co-locating the Business Central Server instance and the Azure SQL database in the same region to minimize latency.
The idea is to keep the on-premise control where it matters, offload the parts that are headaches without giving up much. In practice the customer manages the Business Central middle tier and the front-end web server, and Azure SQL handles the database.
A second hybrid pattern is cloud migration from on-premise. Microsoft’s Cloud Migration tool (formerly branded “Intelligent Cloud”) replicates data from an on-premise Business Central or earlier Dynamics product into a Business Central online tenant. The pipeline uses Azure Data Factory and a self-hosted integration runtime. This pattern is useful both as a path to gradual cloud migration and as a way for organizations running on-premise today to plan their move.
Heavy code-level customization on the on-premise side reduces what can be replicated cleanly. The Cloud Migration Management page in the online tenant shows a migration log with counts of migrated tables and tables that failed due to warnings or errors, with drill-down to view specific issues. There is also a “Create diagnostic run” action that tests replication without actually moving data, surfacing problems in advance so they can be addressed before a live cutover.
Cloud Migration supports several source systems: Business Central on-premise (current versions), Dynamics NAV (which must first be upgraded on-premise to Business Central v14, then to a current on-premise version, before cloud migration), Dynamics GP 2015 and later, and Dynamics SL 2015 and later. The exact upgrade path depends on your starting version.
How to Choose: a Seven Question Decision Framework
There is no universally correct hosting choice. The right one comes out of how you answer these seven questions.
- Do you need Microsoft Copilot or AI agent features? Copilot in Business Central for AI-assisted features like bank reconciliation assistance, marketing text generation, sales line suggestions, the Payables Agent is cloud-only. If AI capabilities are a current or near-term requirement, you need cloud-hosted (Microsoft direct or a partner running BC online). On-premise is excluded from this category.
- Do you need full control over the application stack? If yes — for performance reasons, regulatory reasons, or because your business runs on a heavily customized Business Central — on-premise and partner-hosted give you control that SaaS does not.
- Do you have (or want) the IT staffing to run infrastructure in-house? If no, on-premise will strain your team. SaaS or partner-hosted are better fits.
- Do you want control over upgrade timing? Microsoft’s SaaS schedule is non-negotiable. On-premise and partner-hosted let you sequence upgrades around your business calendar.
- What backup retention does your business or regulatory environment require? Microsoft SaaS retains automatic backups for 28 days. If your retention requirements exceed that, you need partner-hosted or on-premise with custom retention policies.
- How responsive does scaling need to be? Microsoft does not publish a specific scaling SLA for BC SaaS, so if your workload is genuinely bursty and a delay would be operationally painful, validate behavior under realistic peak loads, or choose partner hosting where scaling is typically adjustable on request.
- How do you want to handle support? Microsoft’s documented model for BC SaaS routes you through your reselling partner first; the partner escalates to Microsoft. Partner-hosted collapses that into one relationship. On-premise means your own team is the first line.
Side-by-Side Business Central Hosting Feature Comparison
A more detailed comparison across the dimensions that come up most often in hosting evaluations.
| Attribute | Cloud (Microsoft SaaS) | On-premise | Third-Party |
|---|---|---|---|
| Infrastructure ownership | Microsoft | You | Hosting partner |
| Initial cost | Low (subscription) | High (capex or steady opex) | Low to moderate |
| Ongoing cost | $80/user (Essentials), $110/user (Premium) — Nov 2025 pricing | Subscription via CSP; perpetual closed to new customers (April 2025) | Predictable managed fee |
| Upgrade scheduling | Microsoft sets cadence | You set cadence | Negotiated cadence |
| Backup retention | 28 days (Microsoft default) | You configure | You configure with partner |
| BACPAC export | Production only, paid subs, ~10/month | Full control | Configurable |
| Environment recovery after deletion | 14 days via admin center | Your DR procedures | Partner-defined |
| Scaling responsiveness | Real-time, no published timing SLA | Limited by hardware | Manual, fast on request |
| Code-level customization | Extensions only (AL) | Full | Generally full |
| Copilot / AI features | Available | Not available | Available if BC online; not if on-premise |
| Power Platform integration | Deepest | Limited | Depends on hosting model |
| Disaster recovery | Microsoft-managed | Your responsibility | Partner-managed, configurable |
| Customer-facing support | Through reselling partner; partner escalates to Microsoft | Internal IT first | Direct partner contact (one relationship) |
| Time to first deployment | Hours to days | Weeks to months | Days to weeks |
| Sandbox environments | Yes (3 included per production) | Not available | Depends on partner |
Frequently Asked Questions
What are the three Business Central hosting options?
Business Central can be hosted three ways: in Microsoft’s cloud as a SaaS service, on-premise on hardware you own and manage, or with a third-party partner (also called partner-hosted) who runs the infrastructure on your behalf. A fourth hybrid pattern combines on-premise Business Central with managed cloud database services.
What is the difference between Microsoft-hosted and partner-hosted Business Central?
Microsoft-hosted (SaaS) Business Central runs on infrastructure Microsoft manages, with standardized backup retention, automated scaling, and per-user pricing. Partner-hosted Business Central runs on infrastructure operated by a Microsoft partner who can adjust backup policy, scaling, and support model to your specific requirements.
Is Business Central cloud-only?
No. Business Central can be deployed on-premise, in Microsoft’s cloud, or with a third-party hosting partner. Microsoft’s positioning is cloud-first, and on-premise is in active support under the Modern Lifecycle Policy with no announced end date. However, as of April 1, 2025, new customers can no longer purchase on-premise perpetual licenses; new on-premise deployments must license via subscription through a CSP partner.
Does Microsoft Copilot work in Business Central on-premise?
No. Microsoft Copilot and AI agent features in Business Central, including bank reconciliation assistance, marketing text generation, sales line suggestions, and the Payables Agent, are available only in cloud-hosted Business Central. Microsoft has stated there are no plans to bring these to on-premise. If Copilot or AI capabilities are a current or near-term requirement, the hosting choice is constrained to Microsoft cloud or a partner running Business Central online.
How long does Microsoft retain Business Central backups?
Microsoft retains automatic backups for Business Central SaaS environments for 28 days. Customers can restore an environment to any point within that window via the Business Central admin center; the restore creates a new environment rather than overwriting in place. Production environments on paid subscriptions can also be exported as BACPAC files to your own Azure storage (capped at roughly 10 exports per month). Sandbox environments cannot be exported. Deleted environments can be recovered for 14 days. Partner-hosted and on-premise deployments allow customer-defined retention policies.
Can I migrate from on-premise Business Central to the cloud later?
Yes, via Microsoft’s Cloud Migration tool, but the path depends on your starting point. From on-premise Business Central (current versions): direct migration to BC online. From Dynamics NAV: upgrade NAV on-premise to Business Central v14 first, then to a current on-premise version, then run Cloud Migration. From Dynamics GP 2015 or later, or Dynamics SL 2015 or later: direct migration to BC online is supported. The Cloud Migration Management page in your online tenant shows table-level success and error counts so you can address replication issues before final cutover.
Can cloud-hosted Business Central be customized?
Cloud Business Central is customized through extensions (AL extensions) rather than direct code modifications. The extension model now includes AI capabilities via the System.AI module, deeper Power Platform integration, and AL-Go for GitHub pipelines for CI/CD. On-premise and partner-hosted deployments support deeper code-level customization. Heavy code customization on on-premise Business Central can reduce the percentage of tables that replicate cleanly through Cloud Migration.
What does Business Central hosting cost?
Microsoft cloud (SaaS) list pricing as of November 1, 2025 is $80/user/month for Essentials and $110/user/month for Premium, bundled with infrastructure. Storage is a tenant-wide pool: 80 GB base plus per-license adders. On-premise now requires subscription licensing through a CSP partner for new customers (perpetual closed to new customers as of April 1, 2025), plus your own hardware and operational costs. Third-party partner-hosted pricing varies — typically a managed service fee that bundles compute, storage, backup, and support. For current Microsoft licensing prices, refer to the official Microsoft Business Central pricing page; for partner-hosted pricing, contact the partner directly.
Work Through Your Business Central Hosting Options
Hosting decisions are easier with a partner who has watched dozens of teams make them. If you want a sounding board on whether Cloud, On-Prem, Third-Party, or a hybrid pattern fits your situation best, Tigunia offers no-pitch consultations on Business Central hosting.
Contact Tigunia to talk through your hosting options.
