Is Your On-Premises Business Central Cloud-Compliant? It could end up costing you!

Is Your On-Premises Business Central Cloud-Compliant? It could end up costing you!

One of the features that made Navision, and later Dynamics NAV, so popular was how easy developers could customize the application for a client by modifying the base code. The downside was that upgrading the base code required merging the code from different application versions. This merge process is known as a code upgrade or application upgrade.

As NAV matured into Dynamics 365 Business Central (BC), Microsoft introduced the idea of extensions. Extensions allow developers to customize the core functionality but keep these customizations separate from the base application. By using extensions effectively, upgrades became a breeze – the base application can be updated without altering the behavior of any modifications. The introduction of extensions was a necessary step toward cloud deployments where multiple tenants could be updated automatically without impacting their operations.

Microsoft’s Universal Code Initiative

Microsoft announced its Universal Code Initiative in 2022. This initiative aimed to make all Business Central installations cloud-ready by ensuring that all customizations were placed in “cloud-optimized” extensions. There are several benefits to ensuring all new modifications are cloud-optimized, and all older modifications are rewritten as cloud-optimized extensions:

  • Upgrades are less expensive because they become a non-event, and
  • BC users can remain on-premises or upgrade to the cloud whenever they want.

Beginning in 2023, BC users still running code that does not comply with the Universal Code Initiative will be charged annually for every fully licensed user. The fees charged for non-compliance will increase over the coming years.

Recurring fee scheduleImplemented Code Is Not in ExtensionsImplemented Code is Not Cloud-Optimized
2026, beyondTBDTBD
Module license fees for non-compliance with the Universal Code Initiative

Code is considered non-compliant with the Universal Code Initiative if it uses extensions compiled with a target other than “target”: “Cloud” in the app.json, as well as any solutions or customizations that modify the base application.

BC customers not running customized code as cloud-optimized extensions will be required to buy one or both of the following modules:  

  • Implemented code is not in extensions
  • Implemented code is not cloud-optimized

When clients running BC on-premises have customized code that is not in extensions, they must purchase both modules. When all customizations are in extensions, but at least one extension will not work in the cloud environment, they will only need to license the Implemented code not cloud-optimized module.


Existing Dynamics NAV users not migrating to Business Central on-premises or users that implemented Business Central on premises before October 3, 2022, are exempt from the Universal Code licensing requirement.

Also, Demo and Developer licenses do not require the non-Universal Code modules to function.

Questions? Contact us

There are many advantages to ensuring all your customizations comply with the Universal Code Initiative. It will make upgrades easier, save you money in the long run, and allow you to move to the cloud on your schedule and take full advantage of Microsoft’s cloud tools, like the Power Platform.

If you have any questions about your compliance with the Universal Code Initiative, call us. We can answer your questions and help you sort out any issues you might have.

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