Dynamics 365 Cloud: What It Is, How It Works, and Key Capabilities

Microsoft Dynamics 365 Cloud enables organisations to run ERP and CRM together on a single, cloud-first platform, rather than across separate systems. It brings finance, operations, sales, and service onto shared data, with AI-enabled workflows and continuous updates delivered without the overhead of managing on-premise infrastructure.

According to The Total Economic Impact™ of Microsoft Dynamics 365 ERP, conducted by Forrester Consulting (2024), organisations using Dynamics 365 ERP achieved a 106% return on investment over three years. These results reflect the platform’s ability to streamline processes while supporting continuous improvement through cloud-based innovation.

For organisations evaluating cloud ERP and CRM platforms, this article explains what Dynamics 365 Cloud is, its core applications and pricing, how it fits into the Microsoft ecosystem, and how it compares with on-premise deployment. It also includes a practical checklist to help organisations assess readiness and plan a structured move to Dynamics 365 Cloud.

What is Dynamics 365 Cloud?

Microsoft Dynamics 365 Cloud is Microsoft’s cloud-based business platform that includes a suite of AI-powered ERP and CRM applications within a single, unified system. Hosted on Microsoft Azure, these applications are designed to manage core business operations, including sales, customer service, finance, supply chain, and operations.

Dynamics 365 Cloud builds on Microsoft’s earlier business systems, such as Microsoft Dynamics NAV, Microsoft Dynamics GP, and Microsoft Dynamics AX, into a cloud-first, continuously updated platform. It provides built-in scalability, enterprise-grade security, automatic updates, and embedded AI capabilities through Microsoft Copilot. This allows organisations to access modern functionality and ongoing product updates.

At a platform level, Dynamics 365 Cloud is SaaS, Azure-hosted, AI-enabled through Copilot, scalable by design, and built with enterprise-grade security and compliance, allowing organisations to adopt modern capabilities without managing on-premise infrastructure.

The platform includes a modular set of ERP and CRM applications that organisations can deploy individually or as a unified suite, including:

• ERP applications such as Business Central, Finance, and Supply Chain Management to manage finance, inventory, procurement, manufacturing, and operations
• CRM applications such as Sales, Customer Service, Field Service, and Customer Insights to manage the end-to-end customer lifecycle
• Specialised apps for areas like Projects, Commerce, and Human Resources, all sharing the same underlying data model

Dynamics 365 Cloud is best suited for organisations of all sizes seeking to modernise legacy systems, unify business and customer data, and adopt AI-enabled, cloud-first business operations. These core capabilities form the foundation for the key benefits and operational advantages that Microsoft Dynamics delivers, explored in the next section.

Key Benefits and Capabilities of Dynamics 365 Cloud

The key benefits of Microsoft Dynamics Cloud include AI-powered assistance, unified data, SaaS-based operations, scalable architecture, and secure access, enabling organisations to run connected, adaptable business operations without on-premise complexity.

• AI and Copilot in Dynamics 365 Cloud: Built-in AI capabilities, including Copilot, help teams automate routine tasks such as summarising records, drafting content, analysing trends, and surfacing insights directly within business workflows, helping teams work faster and make more informed decisions.
• Unified Data and Real-Time Visibility: Built on a shared data model, it connects financial, operational, and customer data in real time, reducing data silos and enabling consistent reporting, forecasting, and visibility across the organisation.
• SaaS Operations: As a fully managed SaaS platform, Dynamics Cloud eliminates the need for local servers, hardware and manual upgrades, with Microsoft handling automatic updates, patches, and platform availability.
• Scalability and Maintenance: The modular architecture allows organisations to start with selected applications and expand over time, while maintenance and feature updates are applied automatically as part of the cloud service.
• Accessibility & Security: Dynamics 365 Cloud is accessible through a web browser from any location and device, while enterprise-grade security, identity management, and compliance controls are built into the platform.

Together, these capabilities create a flexible and resilient foundation for running modern business operations in the cloud. Now, let’s explore its core applications and modules, showing how each component supports specific business functions.

Core Microsoft Dynamics 365 Applications and Modules

Dynamics 365 Cloud applications are organised into ERP, CRM, and specialised modules to support different business functions while sharing a common data and platform foundation. This modular structure allows organisations to adopt only the applications they need, such as finance, sales, or supply chain, while maintaining end-to-end visibility across operations and customer engagement.

Microsoft Dynamics ERP Modules

Dynamics 365 Business Central

Dynamics 365 Business Central (formerly Microsoft Dynamics NAV) is the core ERP application in Microsoft Dynamics for SMEs, providing an integrated foundation for finance, inventory, sales, and project management. It connects day-to-day operations with Microsoft 365 and other Dynamics applications, allowing growing organisations to manage core processes without the complexity of enterprise-scale ERP systems.

Key capability areas include:

• Financial management and reporting
• Inventory, purchasing, and sales operations
• Project and job costing
• Integration with Microsoft 365 tools and Power BI

Dynamics 365 for Finance Management

Dynamics 365 Finance serves as the financial backbone of Dynamics 365 for organisations with complex, multi-entity, or global operations. By connecting financial data with supply chain, sales, projects, and analytics, it delivers real-time financial control, compliance, and visibility across the entire business.

Key capability areas include:

• General ledger, budgeting, and financial consolidation
• Global compliance and multi-entity management
• Advanced financial reporting and analytics
• Integrates seamlessly with Office 365 and Power BI.

Dynamics 365 Supply Chain Management

Dynamics 365 Supply Chain Management manages manufacturing, inventory, procurement, and logistics within Microsoft Dynamics 365, enabling organisations to plan and execute supply chain operations using shared operational and financial data. Its tight integration with finance and analytics supports more resilient, data-driven supply chain decisions at scale.

Key capability areas include:

• Inventory and warehouse management
• Manufacturing and production planning
• Procurement and supplier collaboration
• Demand and supply planning

Microsoft Dynamics 365 CRM Modules

Dynamics 365 Sales

Dynamics 365 Sales is the customer revenue engine within Microsoft Dynamics, supporting pipeline management, forecasting, and relationship tracking using shared CRM and operational data. Connecting sales activities with finance, service, and customer insights, it helps organisations move from reactive selling to more predictable, data-driven revenue growth.

Key capability areas include:

• Lead and opportunity management
• Sales forecasting and performance tracking
• Integration with Outlook and Microsoft Teams

Dynamics 365 Customer Service

Dynamics 365 Customer Service manages customer support and case resolution on the unified the Dynamics 365 platform, integrating seamlessly with sales and operations. By linking service interactions with customer history and operational context, it enables consistent, informed support across digital and assisted channels.

Key capability areas include:

• Case tracking and resolution
• Knowledge management
• Omnichannel engagement

Dynamics 365 Field Service

Dynamics 365 Field Service supports asset-based and on-site service delivery within Microsoft Dynamics by connecting work orders, scheduling, inventory, and customer data. Its integration with CRM, finance, and supply chain systems provides end-to-end visibility from service request to on-site execution and resolution.

Key capability areas include:

• Work order and asset management
• Scheduling and dispatch
• Mobile support for field technicians

Dynamics 365 Customer Insights

Dynamics 365 Customer Insights acts as the customer data and analytics layer of Dynamics Cloud, unifying behavioural, transactional, and engagement data from ERP, CRM, and external sources. This consolidated view enables advanced segmentation, analytics, and more personalised customer engagement across marketing, sales, and service.

Key capability areas include:

• Unified customer profiles
• Behavioural insights and segmentation
• Marketing and engagement analytics

Dynamics Specialised Apps

Dynamics 365 Human Resources

Dynamics 365 Human Resources manages employee lifecycle and workforce administration as part of the Dynamics Cloud platform, allowing people-related data to align directly with finance and operations. This integration helps organisations gain clearer visibility into workforce structure, costs, and compliance.

Key capability areas include:

• Employee records and organisational structure
• Leave, benefits, and workforce administration
• Integration with finance and reporting systems

Dynamics 365 Commerce

Dynamics 365 Commerce provides a unified platform for managing retail and e-commerce operations across physical and digital channels, using a single source of product, pricing, and customer data. It connects front-end customer experiences directly with inventory, finance, and fulfilment processes in Dynamics 365 Cloud.

Key capability areas include:

• Point-of-sale and in-store operations
• E-commerce and omnichannel retail management
• Unified product, pricing, and customer data

Dynamics 365 Project Operations

Dynamics 365 Project Operations supports project-driven organisations by bringing planning, delivery, and financial management into Microsoft Dynamics’s single, integrated system. It connects project execution with finance, resource management, and billing to improve control over margins and delivery outcomes.

Key capability areas include:

• Project planning and execution
• Resource and time management
• Project financials and profitability tracking

The following table provides a quick overview of Microsoft Dynamics Cloud applications, outlining each module’s primary function and typical business size.

Together, these applications form a flexible, role-based cloud platform that supports both operational efficiency and customer engagement across industries and business sizes. So, how does Dynamics 365 Cloud fit into the broader Microsoft ecosystem? See the answer in the section below.

How Dynamics 365 Cloud Fits into the Microsoft Ecosystem

Dynamics 365 Cloud is seamlessly integrated with Microsoft 365 productivity tools, Azure cloud infrastructure, and the Power Platform through common data model and native integrations, creating a unified, integrated digital environment.

What’s The Difference Between Microsoft 365 and Dynamics 365?

Dynamics 365 and Microsoft 365 serve different but complementary roles within the ecosystem. Microsoft 365 focuses on productivity and collaboration, whereas Dynamics 365 focuses on structured business processes and data.

• Microsoft 365 tools such as Excel, Outlook, and Teams support productivity, communication, and collaboration
• Dynamics 365 manages transactional and operational data behind sales, service, finance, and operations
• Integration allows users to access Dynamics 365 data directly within familiar tools, such as tracking customer interactions in Outlook or collaborating on records in Teams

What is The Difference Between Microsoft Dynamics and Azure?

Microsoft Dynamics 365 is the software that runs business processes, including finance, sales, and customer service, while Microsoft Azure is the cloud platform that hosts and powers these applications. In short, Dynamics 365 is where users work in, and Azure is the cloud infrastructure that makes it secure, scalable, and always available.

• Azure handles scalability, availability, and performance
• Security, identity, and compliance services are applied at the platform level
• Azure enables Dynamics 365 to scale reliably as user numbers, data volumes, and workloads grow

This architecture enables Dynamics 365 Cloud to operate as a fully managed SaaS platform rather than a self-hosted system.

Power Platform and Unified Data

The Microsoft Power Platform extends Dynamics 365 by enabling analytics, automation, and custom applications on the same data foundation.

• Power BI provides reporting and analytics on Dynamics 365 data
• Power Apps allows teams to build custom applications connected to Dynamics 365
• Power Automate enables workflow automation across Dynamics 365 and other systems

Together, these integrations position Dynamics 365 Cloud as part of a connected Microsoft business ecosystem, rather than a standalone ERP or CRM system. The next section compares Dynamics 365 Cloud vs on-premise deployment, helping organisations understand the practical differences and trade-offs between the two approaches.

Dynamics 365 Cloud vs On-Premise

The key difference between Dynamics 365 Cloud and On-Premise comes down to how the platform is hosted, maintained, and evolved. While both models support core ERP and CRM functionality, they differ significantly in cost structure, scalability, maintenance effort, and access to advanced capabilities.

The table below details the fundamental differences between Dynamics 365 Cloud and On-Premise deployments, contrasting them across key areas such as hosting, cost structure, maintenance, and access to innovation.

What are the benefits and disadvantages of Microsoft Dynamics Cloud?

Dynamics 365 Cloud is well-suited to organisations seeking lower infrastructure complexity, faster innovation, and greater flexibility.

What are the benefits and disadvantages of Microsoft Dynamics On-Premise?

Microsoft on-premise deployments remain relevant for organisations with strict data control, regulatory, or operational requirements.

In practice, Microsoft continues to prioritise cloud-first innovation, with many AI-driven capabilities, integrations, and analytics features available only in Dynamics 365 Cloud. This makes the cloud deployment the preferred option for organisations focused on long-term agility and continuous improvement.

Next, we will examine the pricing plans for Microsoft Dynamics and discuss how to initiate a trial before committing to a purchase.

Pricing & Free Trials of Dynamics 365 Cloud

Dynamics 365 Cloud pricing is subscription-based, modular, and designed to scale by product and number of users, while free trials allow organisations to validate fit before committing. This model gives businesses flexibility to start small, control costs, and expand as needs evolve.

Pricing Plans for Microsoft Dynamics 365

Microsoft Dynamics 365 cloud uses a subscription-based pricing model, where organisations pay based on the applications they use and the number of users they need.

Key characteristics of the pricing model:

• Per-app licensing: ERP and CRM applications (such as Business Central, Sales, or Customer Service) are licensed separately. For example, Dynamics 365 Sales Professional is at AU$97.30 per user/month, while Business Central Essentials is at AU$119.70 per user/month.
• Per-user cost: Pricing scales by user count and role. Dynamics 365 uses role-based licensing, with different plans for light users (limited operational tasks), full users (core ERP/CRM functions such as sales or finance), and team members (view-only access and basic reporting), depending on required functionality.
• Cloud-first cost structure: No upfront hardware or server investments, with predictable subscription-based OPEX and the flexibility to add or remove users and apps as business requirements change.

For comprehensive details regarding Dynamics 365 licensing, please refer to the Dynamics 365 Licensing Guide and the Product Terms site.

Dynamics 365 Free Trials and Evaluation

Dynamics 365 Cloud offers free plans or time-limited trials for select applications that allow organisations to test real workflows, usability, and value before making a licensing decision. Trials are designed to support practical evaluation rather than surface-level demos.

What free trials are useful for:

• Business fit and adoption: Validate process alignment, industry suitability, and ease of use for key teams.
• Data, workflows, and integrations: Explore sample data, core workflows, and how Dynamics 365 connects with Microsoft 365 and the Power Platform.
• Implementation readiness: Identify gaps, risks, and customisation requirements early to inform planning.

With flexible subscription pricing and practical free trials, the cloud-native platform makes it easier for organisations to evaluate value, manage costs, and scale confidently over time. Understanding how licensing and trials work helps ensure the platform is adopted strategically, not just purchased.

The next section provides a practical checklist for moving to Dynamics 365 Cloud, helping organisations plan a structured and successful transition.

A Practical Checklist for Moving to Microsoft Dynamics Cloud

A practical checklist for moving to Dynamics 365 Cloud outlines the key decisions and readiness steps organisations should address before, during, and after migration, covering mindset, data, customisation, and long-term operations. Refer to the table below for detailed information.

This checklist provides a structured way to approach Dynamics 365 Cloud adoption, helping organisations reduce risk while maximising long-term value. For more information, please refer to Microsoft’s documents.

Next, we’ll address Dynamics 365 Cloud FAQs, answering common questions around suitability, deployment, security, and real-world usage.

Dynamics 365 Cloud - FAQs

Is Dynamics 365 (D365) hosted on Azure?

Yes. Microsoft Dynamics 365 Cloud is hosted on Microsoft Azure, leveraging Microsoft’s global cloud infrastructure to deliver security, availability, compliance, and scalable performance.

Is Dynamics 365 the same as Microsoft 365?

No. Dynamics 365 is an AI-powered ERP and CRM platform, while Microsoft 365 focuses on productivity and collaboration tools, including Outlook, Excel, Word, and Teams; the two are designed to work together.

Does Microsoft provide a CRM system?

Yes. Microsoft offers Dynamics 365 CRM, a suite of applications including Sales, Customer Service, Field Service, and Customer Insights, designed to manage customer relationships across sales, service, and marketing.

Implementing Microsoft Dynamics Cloud

Dynamics 365 Cloud brings AI, ERP, and CRM together on a single, scalable Microsoft platform, enabling organisations to modernise operations, unify data, and respond more effectively to change. For organisations running legacy Microsoft systems such as NAV, GP, or AX, it provides a structured path to cloud modernisation while preserving core business processes and data.

If you are planning your next step, a guided evaluation can help assess readiness, costs, and migration strategy. As a trusted Microsoft Dynamics implementation partner in Australia, our team supports organisations from initial assessment through deployment and long-term optimisation.