From LCS Tiers to Unified Environments in PPAC (UDE & USE)

Dynamics 365 Finance & Operations (F&O) environment strategy is undergoing a significant transformation as Microsoft converges the F&O platform with the broader Power Platform and Dataverse ecosystem. This shift impacts how we provision, license, develop, and test solutions, and it is critical for architects and delivery teams to understand these changes clearly.

This blog post explains:

• The current LCS-based environment model
• The new Unified environment model
• The purpose and differences between UDE and USE
• A key licensing and cost model change introduced with unified environments

⚠️ Note: This article reflects the state of the platform as of December 2025. Microsoft continues to evolve these offerings, so always refer to the latest Microsoft documentation if reading this at a later date.

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Current Environment Types (LCS-Based Model)

Today, Finance & Operations environments are primarily managed via Dynamics Lifecycle Services (LCS) and are categorized into tiers.

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Tier 1 – Development Environment

Purpose

• Used for X++ development and debugging
• Intended for individual developers

Key Characteristics

• Infrastructure hosted in the customer’s Azure subscription
• Infrastructure costs billed directly to the customer
• Visual Studio connected directly for development and debugging
• SQL access available on the virtual machine
• Alternative option to use local VHDs for development

Usage Model

• Typically one Tier 1 per developer
• High flexibility but high operational overhead

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Tier 2 and Above (Tier 3, 4, 5) – Sandbox Environments

Purpose

• Used for non-production testing, including:
  • System Integration Testing (SIT)
  • Data Migration (DM)
  • User Acceptance Testing (UAT)
  • Performance Testing
  • Pre-Production validation

Key Characteristics

• Hosted in Microsoft-managed subscriptions
• Fixed infrastructure sizing
• Billed annually
• Just in time SQL access available from LCS

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The Shift to Unified Environments

With deeper integration across Finance & Operations, Dataverse, and Power Platform, Microsoft is moving away from the traditional LCS tier-based model toward Unified environments, managed via the Power Platform Admin Center (PPAC).

Going forward, organizations will primarily work with:

• UDE – Unified Development Environment
• USE – Unified Sandbox Environment

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Unified Development Environment (UDE)

Purpose

UDE is designed to replace the traditional Tier 1 development environment. It is intended for:

• X++ development
• Debugging and troubleshooting
• Building and validating customizations
• Developer-level testing

Key Characteristics

• Recommended one UDE per developer
• Deployed and managed via Power Platform Admin Center (PPAC)
• Visual Studio connectivity for development and debugging
• Optimized for developer productivity
• Native integration with Dataverse and Power Platform

UDE is Microsoft’s modern, cloud-first replacement for Tier 1 and Dev VMs.

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Unified Sandbox Environment (USE)

Purpose

USE environments are intended for testing and validation stages, such as:

• System Integration Testing (SIT)
• Data Migration (DM)
• User Acceptance Testing (UAT)
• Performance Testing
• Pre-Production validation

Key Characteristics

• Deployed and managed via Power Platform Admin Center (PPAC)
• Typically provisioned with more AOS instances than UDE
• Topology closer to production
• Used by functional consultants, testers, and business users

Important Limitations

• No direct X++ debugging
• Only READ access to SQL Server
• No ad-hoc code changes

All changes must be promoted through Azure DevOps pipelines, enforcing strong ALM discipline.

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Important Licensing & Cost Model Change

One of the most significant differences between traditional LCS tiers and Unified environments is the billing and licensing model.

LCS Tier-Based Model (Legacy)

• Tier 2 and above environments require specific environment SKUs
• Billed on a fixed annual cost
• Infrastructure sizing is pre-defined and inflexible

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Unified Environment Model (UDE & USE)

UDE and USE are billed based on Dataverse capacity, not environment SKUs.

This means:

• No need to purchase Tier 2+ environment SKUs
• Costs are driven by Dataverse database, file, and log capacity.
• More flexibility in environment provisioning
• Aligned with Power Platform and Dataverse governance models

This change brings F&O environments in line with how the rest of the Power Platform is licensed and managed.

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Why This Matters

From an architectural and financial perspective:

• Environment costs become capacity-driven, not SKU-driven
• Easier scaling and planning
• Reduced licensing complexity
• Better alignment with enterprise Power Platform strategies

Summary: UDE vs USE at a Glance

Aspect	UDE	USE
Replaces	Tier 1	Tier 2+ (Sandbox/UAT)
Primary Purpose	Development & debugging	Testing & validation
Target Users	Developers	Testers, functional users
Visual Studio Debugging	Yes	No
SQL Access	Read & Write	Read
AOS Topology	Lightweight	Multi-AOS
Provisioning	PPAC	PPAC
Billing Model	Dataverse capacity	Dataverse capacity
Environment SKU Required	No	No

The move from LCS-based tiers to Unified environments is not just a technical shift—it represents a fundamental change in:

• Environment governance
• Cost and licensing models
• ALM enforcement
• Alignment with Power Platform and Dataverse
• UDE is where development and debugging happen
• USE is where validation and business confidence are built
• Dataverse capacity becomes the new cost driver

Thanks for reading! I hope this overview clarifies the purpose and differences between UDE and USE and helps you navigate the evolving Dynamics 365 Finance & Operations environment landscape.