The ERP solutions in Dynamics 365 are available on premises. Large companies can use the on-premises version of Dynamics 365 for Finance and Operations. For small to medium-sized companies, Microsoft offers Dynamics Business Central as an alternative. There is also an on-premises version of the CRM solutions, but we would still advise you to consider the cloud. In an on-premises solution, you lose a lot of the functionality that makes Dynamics 365 so powerful. This is because Dynamics 365 is hosted on the Business Application Platform. This underlying layer gives you access to a vast array of tools in the cloud, including Microsoft Power Automate (former Microsoft Flow), Power BI and Power Apps.
The main advantage of Dynamics 365 is that all the applications are integrated. Without the cloud, you are unable to connect the data from these tools, which results in fewer insights into your business processes.