Upgrading AX to Dynamics 365 is essential for businesses that want better technology and more security. Dynamics 365 is a cloud-based system that helps companies manage everything from finance to customer service in one place. Before Dynamics 365, many businesses used Microsoft Dynamics AX, an older on-premises system. However, as technology improved, Microsoft introduced Dynamics 365, which is more flexible and accessible from anywhere.
This guide will explain the steps involved in upgrading AX to Dynamics 365. Understanding the upgrade journey will help you with a smooth and successful transition.
Steps to Follow During Dynamics 365 Upgrade
Upgrading from Dynamics AX 2012 to Dynamics 365 happens in three main phases:
- Analyze
- Execute
- Validate
Since this is a major upgrade, the process isn’t automatic. It requires careful planning. Microsoft provides tools to help with the upgrade, but every business has different data and customizations, so some manual work is needed.
Analysis Phase of Microsoft Dynamics 365 Upgrade
The first phase of the AX 2012 upgrade to Dynamics 365 is called the Analyze Phase, which helps you understand the time, cost, and effort required for the upgrade. This phase is crucial because it allows you to prepare a project plan before purchasing. It also identifies potential challenges and ensures the transition is as smooth as possible.
Key Steps in the Analysis Phase
1. Sign Up for a Preview Subscription
Before committing to the upgrade, you can sign up for a preview subscription to test Dynamics 365 Finance and Operations. This will allow you to see new features and understand how the upgrade will benefit your operations.
2. Use the Upgrade Methodology in Lifecycle Services (LCS)
Microsoft provides a step-by-step upgrade methodology in LCS to guide you through the process. It explains all three phases of the upgrade and provides links to important resources.
3. Run the Upgrade Analysis Report
The Upgrade Analysis Report scans the AX 2012 system to identify areas that need improvement before the upgrade. This report helps with;
Data Clean-up: This process helps you find and remove unnecessary data without affecting the system. The tool scans your database and shows different types of data that you can safely delete. It also explains how removing each type of data will impact your system.
Database Settings Check: This part of the report checks how the database is set up and suggests improvements. Optimizing SQL helps speed up the upgrade process.
Application Settings Review: Highlights settings that need to be adjusted before upgrading.
Identifying Deprecated Features: Detects any features in AX 2012 that won’t be available in Dynamics 365 and suggests alternatives.
4. Complete the Pre-Upgrade Checklist
Before upgrading AX to Dynamics 365, you need to install a pre-upgrade checklist in AX 2012 to prepare your data. This checklist helps in entering the required information for the upgrade process. For example, Microsoft Entra sign-in details must be provided for each AX 2012 user so they can access Dynamics 365.
Depending on your AX 2012 version, certain updates must be installed before upgrading. AX 2012 R3 users must install KB 4035163. AX 2012 R2 users must install KB 4048614. These updates ensure that AX 2012 is running the latest version before starting the upgrade.
5. Estimate the Effort Needed for Code Upgrade
This step updates your AX 2012 code to a new format and finds any issues that need fixing. First, you export your code and upload it to the LCS Code Upgrade tool. The tool upgrades the code and creates a report showing any remaining problems. A developer reviews the report to see how much work is needed for the upgrade. This helps plan the upgrade process for your development team.
6. Deploy a Demo Environment
Before fully upgrading, you can test Dynamics 365 in a demo environment to explore its features. This is a sample system with demo data, not real business data. It allows users to compare existing AX 2012 processes with how they will work in Dynamics 365. You can deploy the demo in Microsoft Azure or download it as a virtual machine. Microsoft regularly releases quality updates to improve system performance and fix issues. You should ensure that their Dynamics 365 version is up to date.
7. Create a Project Plan for the Upgrade
The final step of the Analyze Phase is to prepare a detailed project plan based on the findings from earlier steps. A well-structured plan helps avoid last-minute surprises during the upgrade. A good project plan includes;
- Data Upgrade Testing – Ensuring all business data is correctly transferred.
- Mock Cutover Testing – Running a test upgrade to identify potential problems.
- Functional Testing – Checking that all business processes work as expected.
- Resource Planning – Assigning tasks to different team members.
Execution Phase of Dynamics 365 Upgrade
In this phase, you complete the tasks planned in the Analyze phase. To start, you must purchase finance and operations apps and ensure you have the necessary resources for the upgrade.
Key Steps in the Execution Phase
1. Switching to the LCS Implementation Project
The public preview project you used in the Analyze phase is no longer needed, so you can delete it. From now on, you only need the project plan you created at the end of the Analyze phase. When you buy a finance and operations subscription, you’ll get details on how to sign up for a new LCS project. This is called an implementation project, and it will be your permanent LCS project as long as you have the subscription. Its characteristics are;
- It supports Sandbox and Production environments.
- Microsoft manages the Sandbox and Production environments, not your team.
- DevTest or Demo environments must still be deployed on an Azure subscription. It’s best to redeploy them from the LCS implementation project so all environments stay in the same place.
When signing into the LCS implementation project, use the Project Onboarding wizard to mark your project as an AX 2012 upgrade.
2. Preparing for the Upgrade
You’ll need to complete the tasks identified in the upgrade analysis report. Your system administrator and database administrator (DBA) should handle these tasks to make sure everything is set up properly before you continue with the upgrade process.
3. Code Upgrade
In this step, your developers need to complete the tasks that were planned during the Analyze phase for the code upgrade. From now on, AX 2012 code changes should be frozen, with exceptions made only for emergency changes. If any changes are made, they will need to be manually transferred to the new codebase. At this point, you need to complete the fit-gap analysis tasks that focus on configuring and customizing the system to accommodate any new features being introduced as part of the upgrade.
4. Optimizing Data for Upgrade
It has four main steps;
Data Compression: It’s recommended to compress large tables before running the upgrade. This helps speed up the upgrade process.
Data Clean-up: Removing unnecessary or outdated data will help reduce the size of the database and reduce the time it takes to complete the upgrade.
Document Attachments: In AX 2012, document attachments are stored in various locations, such as file shares, databases, or SharePoint. However, in Dynamics 365, attachments are stored in Azure Blob Storage or SharePoint Online. Before the upgrade, it’s important to move these attachments into the AX 2012 database so they can be properly migrated during the upgrade process.
Data Upgrade: After completing the code upgrade tasks, the first database upgrade happens in a development environment. This allows quick debugging and adjustments, making it easier to fix issues and rerun the upgrade in minutes. Before starting the upgrade, it’s important to apply the latest Quality Update for Dynamics 365.
After the upgrade in the development environment, you need to upgrade the data in a sandbox environment. Unlike a development environment, sandbox environments take several hours to debug, update, and rerun. This is where you can test the upgraded data and processes. Make sure the development environment upgrade is successful before moving to the sandbox. The AX 2012 Database Upgrade Toolkit is used to move data to Azure SQL Database and run the upgrade in the sandbox environment.
Validation Phase of Microsoft Dynamics 365 Upgrade
In the Validate phase, you will have environments that include your upgraded custom code and data. This phase is about making sure the upgraded environment works as expected and preparing for the go-live.
Key Steps in Validating Phase
1. Cutover Testing and Plan
“Cutover” refers to the final process of switching to the new system. It involves tasks that take place between turning off AX 2012 and turning on Dynamics 365. Cutover testing, or mock cutover, helps everyone involved practice the switch for a smooth go-live.
There are two main parts of this process;
Technical Workstream
This involves running the data upgrade while minimizing downtime. The technical team may need to fine-tune the upgrade to stay within the allowed downtime.
Functional Workstream
After the upgrade, some configuration tasks in finance and operations need to be completed. These tasks should be well-documented and assigned to the right resources to fit into the overall downtime.
2. Functional Test Pass
A complete functional test of all business processes is necessary. This test will cover both old processes from AX 2012 and new processes using new features in Dynamics 365. Depending on the quality of the code, issues may come up that need fixing and retesting. After any fixes, all related processes should be retested to ensure everything works correctly.
3. Pre-Go-Live Checklist
A checklist before go-live helps avoid errors. One week before go-live, stop configuration changes in AX 2012. It’s also important to freeze any changes to the new system code unless they are necessary. After these freezes, run the data upgrade one last time to ensure everything is still working as expected.
4. Go-Live
Once testing and cutover procedures are completed in a test environment, it’s time to go live. The cutover process involves switching off AX 2012 and turning on Finance and Operations in your production environment.
Upgrading from AX 2012 to Dynamics 365 is intricate and demands careful attention to detail, especially when it comes to data integrity, system customization, and the final transition to the new platform. Choosing the right partner for this upgrade is crucial. Your partner should have deep technical expertise and also understand the unique needs of your business. A successful upgrade depends on more than just meeting technical requirements, it’s about having a partner who ensures smooth implementation, minimal disruption, and long-term system performance. If you’re planning an upgrade and want a smooth transition, contact us today to get started.