Extensions are a new concept that you can use for customization in Dynamics 365 for Finance and Operations. An extension allows you to add functionality to the existing code. The extension development approach is the best practice approach as it puts your customizations in a separate assembly that does not touch the standard application at all.

Extension models have several advantages, including the following:

• Application Lifecycle Management (ALM): Extension models simplify and improve the performance of deployments, builds, test automation, and delivery to customers.
• Design time performance: Building your model or project doesn't require you to recompile the entire application.
• Servicing: In the cloud, Microsoft can install, patch, upgrade, and change internal APIs without affecting your customizations.
• Upgrades: Unlike overlayering, extensions reduce the cost of upgrading to a new version as this approach eliminates costly code and metadata conflicts.

The following diagram shows customization through extension:

Now that we've learned about different aspects of the tools provided before developing the system, next, we will learn about development environments and how to manage them.