Considering an upgrade from AX to Dynamics 365? After Microsoft ended the mainstream support for AX 2012 R3 on October 12, 2021 and with the extended support ending on January 10, 2023, businesses are gearing to move to the cloud.

An upgrade process can be a big move, especially when you are a global business with siloed, legacy ERP implementations in several offices. While this can seem like a daunting task, there are several reasons why you should not postpone the decision for too long.

Continuing with AX can be more expensive for your business

It is natural to associate new software implementation with additional costs. In this case, however, businesses that continue to use AX will actually be spending more money when compared to their peers who have been early adopters of Dynamics 365.

Dynamics 365 has a subscription-based pricing model that works out to be less expensive than AX because you only pay for what you use and you have the flexibility to scale down or scale up the usage as per the business needs. This system allows you to have predictable cost estimates that will help you manage cash flows more efficiently.

While calculating the costs, you should note that the licensing cost is only one aspect. A move to the cloud means that you will no longer need those heavy investments in IT infrastructure to maintain all the on-premise software installations. Not only does this save your business from a massive upfront cost (and the replacement costs in the future), but you also save on the regular maintenance costs and other overheads.

Moving to the cloud means that you can save on six indirect costs. Find out more about the direct and in-direct cost reductions and the business value of migrating to the cloud.

 

What is the Total Cost of Ownership when upgrading from Dynamics AX to Dynamics 365?

Total Cost of Ownership is a concept that helps business leaders estimate the investment for a software/product that includes both the direct and indirect costs. For example, when you implement an on-premise ERP system there is a tendency to consider only the licensing cost and ignore the IT infrastructure and maintenance costs that are needed to run these systems.

What kind of savings in Total Cost of Ownership can you expect when you move to the cloud? A study by Forrester that is based on analyzing the financial impact of the upgrade in different businesses found the following:

  • 20% savings by consolidating on-premise licenses and support costs
  • $25,500 average savings per server as server hardware, network hardware, and other software costs are no longer needed
  • $13,950 per server per year savings as maintenance, cooling, and electricity costs are avoided
  • 50% productivity savings as IT administrators shift from maintenance to high impact tasks

One of the businesses that Forrester interviewed had witnessed over $400 million in revenue gains-a revenue opportunity that would have been lost if they had continued to stay on the legacy ERP systems.

 

What is the typical cost of an upgrade project?

There are different components to estimating the cost of an upgrade project. The cost depends on customizations, redesign required, changes to data model, deprecated features that may be needed, the number of licenses and users, and many more variables. There is also the implementation cost and support costs or Managed Services costs, depending on what services you choose.

As far as the licensing costs are concerned, all the different modules have individual cost structures. The price of the Finance module for instance starts at $180 per user per month (as of March 2022). There are also different seat types, such as Full user or Team member, that come with different prices.

A typical cost of an upgrade from AX to Dynamics 365 for an SME can be around $100,000 (not including the Microsoft license costs). For a business that operates in over 10 countries and wants a reimplementation for a heavily customized legacy ERP system, the cost can be around $1 million.

The estimates should also include costs related to change management and training. Change management was an important approach for Lippert Components when they undertook an upgrade project-the biggest implementation in their history-and ensured a smooth upgrade with their approach.

Does Microsoft offer any incentives?

Microsoft is currently offering a 40% discount for those opting to upgrade from AX to Dynamics 365. Interested to see how much you can save and know more about how you can further reduce costs with the right upgrade plan? Schedule a no-obligation virtual workshop with sa.global and our consultants will answer all your questions.

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