Is An On-Premises ERP Still Viable For UK Mid-Market Distributors?

At a Glance

Choosing between on-premises and cloud ERP for distribution businesses depends on your existing Microsoft ERP platform, operational requirements and long-term strategy. While cloud deployment is the standard option for new Business Central customers, existing Dynamics NAV and Business Central on-premises users may still benefit from upgrading within an on-premises environment.

To learn which Business Central deployment model is ideal for your distribution business, contact Brookland Solutions today.

On-Premises vs Cloud ERP for Distribution Businesses

After conversations about which ERP is best for wholesale, distribution and supply chain businesses, the discussion has shifted to the choice between on-premises and cloud ERP.

Many ERP vendors offer cloud ERP as the default choice for distribution businesses, with lower setup costs, automatic updates and better flexibility. But the reality for UK mid-market distributors is far different. Even as cloud ERP adoption for distribution businesses continues to gain momentum, existing Dynamics NAV and Business Central on-premises customers may still find remaining on-premises a viable and preferable option.

Answering the strategic question of when to use cloud vs on-premises depends on multiple factors, including your existing ERP platform. If you’re already running on Dynamics NAV or an existing on-premises Business Central deployment, upgrading to Business Central on-premises is a supported path. But if you are implementing BC for the first time, you may be expected to adopt the cloud version as Microsoft no longer offers new on-premises Business Central licenses for its new customers.

Rather than asking whether cloud ERP is better than on-premises ERP, distributors should focus on choosing the deployment model that best supports their business’ requirements and Microsoft’s licensing model.

Our guide explores what modern distributors need from an ERP, why on-premises is still relevant for some businesses and the benefits cloud ERP delivers for distribution businesses.

What Mid-Market Distributors Really Need From an ERP System

Businesses in the supply chain and distribution industry face an uphill task of managing shrinking margins, supply chain disruptions, rising customer expectations and tough competition. They need an ERP system that can manage all these challenges.

Mid-market distributors need an ERP system that can:

  • Manage stock inventory and control in multiple sites with real-time visibility
  • Support efficient warehouse operations
  • Generate accurate demand forecasts
  • Generate financial reports
  • Automate purchase processes

Of all of these requirements, managing and controlling stock is very critical for distributors. Without proper inventory and stock management, distributors risk overstocking under-demand products, understocking high-demand products and tying up working capital.

Modern ERP systems like Microsoft Dynamics 365 Business Central help distributors manage their stock inventory and control it better by providing:

  • Stock levels updated in real-time
  • Automated replenishment rules
  • Tracking supplier lead times
  • Tracking batch and serial numbers
  • Forecasting demand
  • Managing multiple warehouse locations

With supply chain systems becoming increasingly volatile, mid-market distributors need a solution like Business Central that offers visibility into inventory performance, purchasing requirements and customer demand, enabling data-backed business decisions on the fly.

The Advantages of On-Premises ERP for Distribution Businesses

Even as cloud-based ERP adoption grows, on-premises ERP systems continue to offer many advantages for distributors with specific operational needs.

It’s important to note that these benefits mainly apply to businesses already operating Microsoft Dynamics NAV or an existing on-premises Business Central environment. While existing Dynamics NAV and Business Central on-premises customers can still upgrade within an on-premises environment, it’s no longer the standard deployment option for purchasing Business Central for new customers.

Greater Data Control

One of the key reasons businesses continue to run ERP on-premises is to have better control over data. In an on-premises deployment, your business has complete ownership of data storage, backups, security policies, disaster recovery and overall infrastructure management. This can be a major advantage for distributors in regulated industries or those working with sensitive data.

Flexibility in Customisations

Over decades of operations, many distributors have developed unique workflows in complex pricing, industry-specific stock allocation rules, bespoke warehouse processes and custom supplier management procedures.

On-premises systems can enable deeper customisations than cloud systems, allowing distributors to modify ERP functions to fit existing operations.

Reduced Dependency on the Internet

While internet reliability has increased significantly, some distribution businesses still value the resilience of local systems. On-premises ERP systems continue to operate even when there is an external connectivity issue, without disrupting warehouse operations.

Predictable Long-Term Costs

On-premises ERP requires a high upfront investment, but some organisations prefer predictable capital expenditure over ongoing subscription fees.

When On-Premises ERP Makes More Sense Than Cloud

Although cloud ERP for distribution businesses is the preferred deployment model, there are still situations where retaining or upgrading to an on-premise deployment may be a good business choice. This is especially true for organisations already running Microsoft Dynamics NAV or Business Central on-premises.

  • Existing Microsoft Dynamics NAV or Business Central on-premises customers who have a significant investment in servers, data centres and IT infrastructure.
  • Distributors with extensive legacy system integrations that rely on specialist software for managing inventory, logistics, warehouse systems, manufacturing processes and industry-specific compliance.
  • For organisations operating under strict policies requiring tighter control over data storage and access.
  • Businesses with highly customised workflows where moving to a standardised cloud environment may need significant process redesign.

When Cloud ERP is the Clear Winner

  • Standard deployment option for new BC customers: If you’re moving from non-Microsoft ERP platforms such as Sage, SAP Business One or other legacy systems.
  • Faster deployment: Cloud ERP solutions can be deployed faster than on-premises solutions.
  • Lower upfront costs: Subscription-based pricing reduces initial capital expenditure.
  • Anywhere access: Remote working, mobile sales teams and multi-site operations benefit significantly.
  • Automatic updates: Cloud providers manage updates, security patches and platform enhancements automatically.
  • Scalable: A modern cloud ERP distribution platform enables businesses to scale their user and location counts.

How Microsoft Dynamics 365 Business Central Supports Different Deployment Approaches

One of the reasons Microsoft Dynamics 365 Business Central continues to be popular among distributors is its ability to support different deployment strategies, depending on your existing Microsoft ERP environment. 

However, the deployment options available depend on your business’ starting point. Existing Dynamics NAV and Business Central on-premises customers can continue upgrading within an on-premises environment if appropriate, whereas most new Business Central implementations are delivered as cloud deployments.

Cloud Deployment

For new Business Central customers, cloud deployment is now Microsoft’s standard licensing model. Distributors looking for a modern cloud ERP benefit from automatic updates, flexible subscription licensing, integration with Microsoft 365 and Power Platform, Microsoft-managed security and remote accessibility.

On-Premises

For existing Dynamics NAV and Business Central on-premises customers, upgrading while remaining on-premises can still provide advantages such as local data hosting and greater control over upgrade timelines.

Hybrid

Some existing Microsoft ERP customers also adopt a phased migration approach, maintaining certain systems on-premises while gradually introducing cloud capabilities where they deliver the greatest value.

How Brookland Solutions Helps Distributors Choose the Right ERP Strategy

At Brookland Solutions, we understand the importance of choosing between a cloud ERP and an on-premises ERP and that it’s not just a technology decision but a strategic decision for your business.

We also help businesses understand which deployment options are realistically available given their existing ERP platform. If your organisation is already running on Dynamics NAV, an on-premises upgrade may be appropriate. If your business is moving to Business Central from other ERP systems, cloud deployment is usually recommended.

Before we recommend any solutions, we work closely with your wholesale and distribution business to understand:

  • Operational processes 
  • Growth objectives 
  • Inventory management challenges 
  • Existing technology investments 
  • Compliance requirements 
  • Budget considerations 

Whether your priority is improving inventory management, enhancing visibility into it, understanding how to manage stock effectively or evaluating the benefits of a modern cloud ERP distribution platform, we can help you identify the solution that best fits your business.

You can also ask us about Empowered for Business Central Wholesale and Distribution, a set of advanced functionalities and whether it’s best suited for your business.

Contact us to book a consultation with our team.