If you’re still running Microsoft Dynamics AX—be it AX 2009 or AX 2012—you’re likely aware that it’s nearing the end of its support lifecycle. But upgrading isn’t just about staying supported. Moving to Dynamics 365 Finance and Operations (now part of Dynamics 365 Finance and Dynamics 365 Supply Chain Management) offers significant benefits:
- Cloud-based scalability
- Real-time analytics
- AI-driven insights
- Seamless integrations
- Global compliance tools
The transition might seem complex, but with the right approach, you can modernize your ERP system and unlock long-term agility and innovation.
Let’s walk through the upgrade process step by step.
Step 1: Assess Your Current AX Environment
Before jumping into any Dynamics 365 Finance and Operations upgrade, perform a detailed assessment of your current AX setup:
- What version are you on? (AX 2009, AX 2012 R2, R3, etc.)
- What customizations have been made?
- What ISVs or third-party integrations are you using?
- How complex is your data model?
- What are your reporting requirements?
This baseline assessment helps identify the project’s scope, any roadblocks, and the best upgrade path—re-implementation, migration, or hybrid.
Step 2: Define Business Objectives
Upgrading your ERP isn’t just an IT decision—it’s a strategic move. Take the time to align on business goals:
- Do you want to consolidate entities?
- Improve financial visibility?
- Automate global operations?
- Integrate with Power BI or Microsoft Teams?
Clearly defined objectives ensure the upgrade delivers real business value, not just technical improvement.
Step 3: Choose the Right Upgrade Approach
Depending on your AX version and environment complexity, there are typically three upgrade paths:
1. In-place Upgrade (Available for AX 2012 R2/R3)
This path involves directly upgrading your database and codebase to Dynamics 365 Finance and Operations using Microsoft’s tools.
2. Re-implementation
If you’re using AX 2009 or have a heavily customized AX 2012 environment, treating the upgrade as a new implementation may be better. This allows you to redesign business processes and fully utilize D365 features.
3. Hybrid Approach
Some organizations choose to upgrade core modules while re-implementing others (e.g., finance vs. supply chain). This offers more control over transformation.
Step 4: Set Up Your Upgrade Project in Lifecycle Services (LCS)
Microsoft Lifecycle Services (LCS) is your central project hub. Use it to:
- Create a new project
- Upload AX metadata
- Upgrade analyzer tools
- Set timelines and manage milestones
LCS provides access to tools like the Data Upgrade Tool, Code Upgrade Tool, and Regression Suite Automation Tool to streamline the process.
Step 5: Clean Up and Prepare Your Data
Before migrating, clean your existing data:
- Archive or delete obsolete records
- Standardize data formats
- Resolve duplicate entries
Data integrity is crucial for migrating to Dynamics 365 Finance and Operations. The better your source data, the fewer issues you’ll face post-upgrade.
Step 6: Migrate Custom Code and Extensions
AX systems often have years of customizations. Not all of them should go to the new system.
- Identify which customizations are still needed
- Rebuild them using extensions in D365 (not overlayering)
- Retire or replace legacy ISVs
Dynamics 365 Finance and Operations encourages a modular, maintainable extension model. This makes future updates easier and protects your core system.
Step 7: Rebuild Integrations and Reporting
D365 FO uses different integration methods than AX. Plan to update or rebuild:
- APIs and connectors
- File-based integrations
- BI dashboards (move to Power BI where possible)
Also, based on your updated data structure, recreate or redesign your reports using Electronic Reporting (ER), Power BI, or SSRS.
Step 8: Testing and User Training
Testing should happen in multiple phases:
- Unit Testing – Each component
- System Integration Testing (SIT) – End-to-end processes
- User Acceptance Testing (UAT) – Validate against real business scenarios
Run training sessions for key users simultaneously. Since Dynamics 365 Finance and Operations offers a redesigned UI and new workflows, early user adoption is critical.
Step 9: Go Live with Confidence
Once testing is complete and stakeholders are on board:
- Freeze changes in the legacy system
- Finalize and validate your cut-over plan
- Migrate the final data
- Go live with full user support
Consider going live with core modules (like Finance) first, followed by phased rollouts of others if needed.
Step 10: Post-Go-Live Support and Optimization
Upgrading is just the beginning. After go-live:
- Monitor system performance and user feedback
- Fine-tune workflows and dashboards
- Roll out additional features like AI insights, cash flow forecasting, or automation in accounts payable
Microsoft releases regular updates, so plan for continuous improvement with new capabilities in the pipeline.
Final Thoughts
Migrating from AX to Dynamics 365 Finance and Operations isn’t just about technology—it’s about preparing your business for the future. Cloud-based ERP systems offer the agility, visibility, and scalability today’s organizations need to thrive.
Whether you choose an in-place upgrade or a full re-implementation, having the right partner, tools, and plan will make all the difference. Take the time to assess, prepare, and align your team so the transition is smooth and strategic.
