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                     DEEP DIVE: D365 F&O 
EXTENSION MODEL VS 
OVER LAYERING
A clear comparison of extension model and over layering for 
Dynamics 365 Finance & Operations
OVERVIEW: EXTENSION MODEL 
AND OVERLAYERING
• D365 F&O supports two ways to customize. One is the extension model. 
The other is over layering. Extensions add features without changing base 
layers. Over layering edits the core code directly. Next, we will compare 
upgrades, conflicts, and maintenance impact for real projects 
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WHY CHOOSE EXTENSIONS?
• Extensions keep the base application intact. They add features using 
events and extensions. This reduces risks during upgrades. Also, 
extensions help maintain separation between standard and custom code. 
Then, teams face fewer conflicts and lower long-term support costs.
WHAT IS OVERLAYERING?
• Overlayering involves changing base application code directly. Developers 
edit or replace standard objects to achieve deep customization. This gives 
full control for complex changes. However, it increases merge conflicts 
during upgrades and requires extra maintenance effort 
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IMPACT ON UPGRADES AND 
PATCHES
• Extensions reduce upgrade friction by avoiding direct edits. They use 
defined upgrade-safe extension points. Overlayering can break during 
patches and require manual merges. Next, plan for rework time if 
overlayering is used in production systems.
DEVELOPMENT AND TESTING 
DIFFERENCES
• Extensions use event handlers and chain of command. Testing focuses on 
integration points. Overlayering requires broader regression testing of 
altered base objects. Also, debugging becomes more complex. Good 
CI/CD and automated tests help manage both approaches.
PERFORMANCE AND TECHNICAL 
LIMITS
• Both methods can perform well when executed properly. Overlayering 
allows low-level tuning of core logic. Extensions may have limits at very 
low levels. Then architects must balance performance needs with 
maintainability and upgradeability.
GOVERNANCE AND CODE 
OWNERSHIP
• Extensions promote clear governance, as custom code stays in separate 
packages. This simplifies ownership and audits. Overlayering mixes 
custom and standard code. That makes tracing changes and managing 
compliance harder over time.
COMMON PITFALLS WITH 
OVERLAYERING
• Overlayering can introduce technical debt and hidden side effects. Teams 
often face repeated rework during upgrades. Also, lack of documentation 
and poor version control worsens the issue. Avoid widespread 
overlayering unless necessary.
BEST PRACTICES FOR 
EXTENSIONS
• Prefer extension points and chain of command patterns wherever 
possible. Use modular packaging and semantic versioning. Next, 
implement CI/CD pipelines, automated tests, and code reviews. Keep 
documentation current to ease future upgrades and audits.
WHEN OVERLAYERING MIGHT BE 
NEEDED
• Some scenarios require overlayering, like changing sealed methods or 
deep performance hotspots. In such cases, document every change and 
plan for upgrade rework. Also, involve platform experts to reduce risks.
CAREER AND LEARNING 
BENEFITS
• Mastering D365 extension development adds strong career value. Skills in 
eventing, chain of command, and upgrade management are in high 
demand. Visualpath offers hands-on labs and courses to help you build 
these practical skills for real projects.
CONCLUSION: STRATEGY FOR 
LONG-TERM SUCCESS
• Adopt extensions first to reduce upgrade risk and maintenance cost. Use 
overlayering sparingly and with controls. Then, maintain solid testing, 
version control, and documentation. A governance-led approach ensures 
scalable and sustainable D365 F&O customizations.
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