In Q1 2016 Microsoft’s flagship Dynamics Ax ERP system now known as Dynamics 365 for Operations, (I will call it DMO 365) was re-built on and for the Microsoft Azure cloud platform.

This move to the cloud raises questions for 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 in calendar year 2017, but hadn’t provided a lot of details around how they would deliver this model. It was clearly dependent on the yet to be released Azure technology stack which went into beta in July and into preview in September. This approach which was still being discussed in WPC at Toronto seemed to be to create a private cloud on premise. That approach raised a lot of issues, at least form us, and I am pleased to say has now been significantly revised, and is no longer dependent on the Azure technology stack, not on speclialised hardware.

The upcoming on-premise solution will not be a 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, that are designed to work together and to 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 in areas like: disaster recovery, and advanced intelligence capabilities.

So for organizations that are waiting for a pure, 100% on-premise solution, there is not current road map other than to stick with Ax 2012 R3 (which has an extended life).

This hybrid deployment model of Dynamics 365 Operations will start with a cloud component that is deployed on Azure in LCS. The application will provide the overall enterprise view, and will have built-in disaster recovery, and the use of the Cortana intelligence suite for machine learning and advanced intelligence. The customer can then also implement a component of Dynamics 365 Operations in to their own on-premise data center. This on-premise component – is currently being called “My Workspace” but may be renamed.

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. (That was the reason given at Toronto WPC for the delay in release). With this new, deployment approach, that moves away from the need for the Azure Stack, this requirement has been removed.

So customers that have already invested in an IT infrastructure will still have that ability with DMO 365 . 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.

The way we understand that this hybrid deployment will work is that each “Company” in Dynamics 365 Operations can be defined either 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 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 should the connection to the cloud components breaks, then they can continue to run locally, and then the on-premise and cloud components will synchronize when the connection is re-established. This also opens many potential opportunities for field sales and services.

Specific examples that Microsoft give where this type of hybrid configuration could be desirable are:
• 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, Dynamics 365 Operations will be able to run on hardware that is local to that entity. The transactions will happen on the local hardware, and will then replicate to the cloud.

This can be a 1:Many configuration for an organization that has a larger number of decentralized, on-premise, deployments around the world, that all replicate to the total enterprise view in the cloud.

This hybrid scenario will provide the ability to manage and to control the entire environment through Lifecycle Services (LCS). That includes the built-in telemetry and other components that assist with performance diagnostics and other management tools.

Components of an AX solution will be able to run on-premise. Christian Pedersen Dynamics 365 General Manager explained: “It’s clear we have considered using Azure Stack to run pure-Azure-based code in data centers. We’ve decide to allow you to adopt these components on premise without Azure Stack. If you decide to use Azure Stack, we will support that as well. We think that’s important for data center investments you’ve made.”

Pedersen, and the DMO 365 for Operations GM, Sri Srinivasan gave a range of reasons at the recent AXUG why they recognized that AX users may have a feel a need to have on-premise scenarios, including data sovereignty, regulatory compliance, and existing data center investments. He explained: “We want to bring the on-premise approach the benefits of the cloud. A benefit of the cloud is that updates are constant. And our cloud infrastructure will monitor many things and will discover and fix many things before anyone notices it. We want to bring the same services to deployments in your own data centers. And make anything running your data center an extension that works to a large degree as if it was running in the cloud.”
The idea with the hybrid model, Srinivasan said, is to allow organizations to “transact locally and scale globally.” He continued: “With this on-prem model it is a scale out solution that has long eluded us. It allows us to answer tough questions like how do I deal with the idea of a global sku? How do I buy something in the US and service it at a retail location [in another country]? Today that scenario would require a data warehouse, but [the new hybrid layout] can handle that scenario. We can use the right mix of on-prem and cloud to meet your needs.”