Navigating the New Cloud Opportunities of Microsoft Dynamics NAV 2009 R2

February 23 2011

While technology progresses at a seemingly unstoppable pace and the opportunities of cloud computing and SaaS enterprise solutions seem limitless, Microsoft Dynamics NAV partners and customers have been left, to some degree, scratching their heads.  For small and mid-sized businesses, Dynamics NAV has historically offered little in terms of solutions not delivered on-premise.

But with Microsoft Dynamics NAV 2009 R2, the latest NAV release, Microsoft has taken the steps needed to not only enable unprecedented flexibility in deployment options, but also demonstrate its determination to enter the cloud market for small and mid-market ERP, if not directly, then by enabling the Dynamics partner channel.

Before the Dynamics NAV 2009 R2 release, NAV wasn't too cloud-friendly. In fact, SaaS offerings for NAV have been pretty much earthbound. Its architecture and technical capacities largely favored the on-premise deployment model. Hosting was possible, but it offered few of the benefits that SaaS software offerings typically bring to the table. If we had talked in a "pre-R2" world about compelling advantages of a SaaS Dynamics NAV solution, then it likely would have been a short conversation. NAV was simply a domestic animal - as long as you kept it on-premise, it served you well.

R2 is changing this fundamentally.

NAV over Internet

There are two primary reasons for low feasibility of SaaS NAV (I'll touch on what it means to run NAV "in the cloud" a bit later) in previous versions. In versions prior to 2009, NAV was a fat-client without any support for distributed architectures, and while 2009 resolved this issue, it brought a new one: it didn't allow non-intranet deployment due to security restrictions. R2 is now addressing both these issues, efficiently.

To put it simply, earlier releases of NAV 2009 allowed deployments only within a domain, and the only possibility to access a NAV server installed on a remote machine was to establish a VPN link between client and server. Since VPN link can potentially give access to more than just NAV and since it did require configuration and maintenance, it wasn't a convincing option for hosting providers.

R2 opens a new possibility here. It allows protecting the communication flow between the client and the server with an SSL certificate, while at the same time introducing the ability to authenticate a user directly without depending on a domain to do so. This added protection fully eliminates the need for both deploying VPN, and maintaining separate domains for accessing NAV remotely, and effectively allows secure deployment of NAV over the Internet in a fully multi-tenant environment.

These communication enhancements are important both for NAV customers and NAV hosting providers. Seen from upstream, hosting providers can now relieve the strict network requirements and prerequisites, enable multi-tenancy at no extra cost, and achieve higher economies of scale, which all results in a simpler-to-deploy, easier to maintain, and cheaper service for the end user. From end user's perspective, companies don't have to analyze complex requirements and invest time, energy and money in making sure their network will match the provider's prerequisites.

Application Virtualization

Another equally important improvement in R2 is the support for Microsoft Application Virtualization technology, popularly called App-V. This technology allows applications to completely execute remotely, while at the same time-due to the way they interoperate with users' desktops-they manifest as if they execute at the client.

App-V enables even more efficient distributed deployment scenarios through quicker deployment times and simplified maintenance, as it requires a single installation point. Once configured, the application will run properly for all users without further configuration, and any upgrades or configuration changes to that single installation will automatically propagate to all users.

This allows even higher levels of multi-tenancy, simpler activation of service for SaaS NAV providers, and ultimately reduces the operating costs for both hosting providers and end users.

What about the Cloud?

From a perspective of a typical NAV hosting provider, the real value of Dynamics NAV accessed over the internet is the SaaS model - lower maintenance and IT costs for the customer and economies of scale for the partner.  Improvements in internet connectivity and application virtualization are priceless new features to enable a great SaaS experience, as they provide unparalleled possibilities of hosting flexibility, which should make SaaS a real option for many more organizations. 

But is Dynamics NAV now ready to be offered in a pure Cloud environment? As with many other things, it depends.

In the sense that NAV is not fully accessible from a browser, the answer is no. Neither improved connectivity nor application virtualization enables full Web client capabilities, as the software still require the RoleTailored Client to be installed either physically on end-user's machine, or remotely for consumption through App-V technology. Yes, indeed it would be perfect if NAV could be deployed as a web application and accessed completely through a browser, but it doesn't have to be any less Cloud if it requires either the full RTC or thin App-V client layer.

Technically, yes, NAV is capable of providing a true Cloud offering, but NAV in the Cloud depends less on NAV itself, and more on the value-added offering that a Cloud provider builds around it. At the very least-now that NAV enables true multi-tenancy with pure over-Internet deployment-NAV in the Cloud will become a reality. It's only a matter of time.

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About Vjekoslav Babic

Vjekoslav Babić is an independent Microsoft Dynamics NAV consultant, trainer, author and blogger, with 10 years of experience in NAV and 16 years of experience in IT.

As a solutions architect and a project manager with a leading Microsoft Dynamics President's Club service provider company, as a Microsoft Dynamics NAV consultant with Microsoft Services, and as an independent consultant, he has been working on Microsoft Dynamics NAV implementations ranging from tiny one-man-bands to international mega-corporations, delivering services and trainings all over the world.

In 2008, Vjekoslav co-authored the acclaimed book "Implementing Microsoft Dynamics NAV 2009". Vjekoslav runs an active blog about NAV implementation, project management and development best practices, acts as a columnist and editorial advisory board member at, and as a columnist in a number of other web or printed periodicals in Croatia and worldwide. Vjekoslav is also a frequent speaker at Microsoft or Microsoft Dynamics conferences.

Since spring 2010, Vjekoslav has been awarded the prestigious Microsoft Most Valuable Professional (MVP) award for Microsoft Dynamics NAV.

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wishlist's picture

I don't agree that hosting reduces the cost of IT. It merely moves it - either to some other place in the financial statements, or to some other time. In the long run, it will cost the end user more. The Microsoft SaaS licence model requries the customer to rent every piece of the technology stack installed on the server. When you start adding up the cost of renting not just NAV, but Windows, SQL Server, Terminal Services, perhaps Sharepoint and Office, the costs quickly escalate. And just because the server is sitting somewhere in the Cloud, doesnt mean it is being managed and maintained for free. Somewhere, there are techies sitting running backups, maintaining user rights and managing firewalls (at least we trust so), and someone (ie the customer) still has to pay for them. Companies tend to keep their ERP deployments for at least 5 years. For anything beyond 3 years, outright purchase is cheaper.

cbmagnet's picture

I agree. It is not cheaper, and if you cannot host all of your IT, it is even more costly. Maybe prices to host NAV will improve in the next year or two. Chris Ballard