Enable Model Context Protocol (MCP) in the Dynamics 365 F&O sidecar

You might be familiar with the concept of Model Context Protocol (MCP) or not. In this post, I will introduce the concept, tell you about the advantages of using MCP, and explain what settings you need to let the Copilot for Microsoft Dynamics 365 Finance and Operations apps (in app sidecar) successfully use the MCP servers.

Model Context Protocol

MCP is an open-source standard for letting Artificial Intelligence (AI) Large Language Models (LLMs) interact with data, apps, and tools. You can consider it as a USB-C for different AI applications. Microsoft adapted the open-source standard and created MCP servers for a lot of its applications. For example, there is an MCP for Dataverse, but also for Dynamics 365 Finance and Operations.

Each of the MCP servers has its own list of tools supported. Where Dataverse has tools for e.g., creating tables, reading data, and writing data, the MCP for Dynamics 365 Finance and Operations apps supports business processes. Currently, the number of tools is limited. There are 13 tools, including support for e.g., Find approved vendors, and Find inventory.

More tools are expected to be released in the future.

Advantages

So far, when extending the Copilot sidecar experience in Dynamics 365, there were options to add the Dataverse knowledge source and use virtual entities or create X++ client plugins to query or interact with the data. The data model of Dynamics 365 Finance and Operations is very complex. There are over 10000 tables. A lot of them are supported with data entities to make them available for Dataverse virtual tables. In case you want to extend the Copilot sidecar or create your own autonomous agent, AI can get confused by entities with similar names and columns with the same meaning. E.g., the products and sales order lines do have a column for the Item ID. The customers and sales order headers have a column for the Customer account number.

The MCP server for Dynamics 365 ERP will give better implementation of the business logic and when to use what tool. Each tool has the knowledge of which tables/data entities are connected and should be queried. The MCP server will return an answer. As a citizen developer, you don’t need extensive knowledge of the data model and available data entities.

With help of MCP, you can:

• Accessing logic from multiple apps, databases, or tools
• Reuse of agents
• Access tools from any compatible MCP server

Copilot for Finance and Operations apps

One of the AI implementations is a sidecar that, by default, provides help and guidance on how to use the application. It is trained mainly with Microsoft Docs for the Microsoft Dynamics 365 Finance and Operations apps. You can extend the default behavior with the help of Copilot Studio. Laze Janev wrote a great article about this on LinkedIn before: Help your D365FO Copilot so it can help you!

After writing the mentioned post, a lot got changed and improved, like the introduction of MCP servers. Let’s have a look at a fresh environment where we want to get a reply about inventory levels for a particular item.

In this case, I asked if item 1000 is available in a particular warehouse, or where else we have the item available. By default, the application is not linked to any of your business data, so the response is telling you how you can navigate in the application to find the answer. In case we want to automate the process and let Copilot tell us the information about stock levels, we need to extend the Copilot Studio agent for Dynamics 365 Finance and Operations apps.

Add MCP to Copilot

We can get information about on-hand quantities in several ways, like building a client plug-in or enabling the On-hand inventory data entity as a virtual table in Dataverse. The purpose of this blog is to show you how to enable the MCP servers in the Dynamics 365 F&O sidecar. Open Copilot Studio and select the correct environment. You get a list of available agents.

If you click on the agent Copilot for finance and operations apps, it will open the agent, which has a deep integration with Dynamics 365 F&O. It not only acts as a “virtual agent”, but the Dynamics 365 F&O app is also sending triggers and information to this agent to let it know what form and what record is opened by the user. You can create context related topic in this agent.

As an illustration, I added some knowledge sources, which are not required for adding MCP servers. MCP servers can be added on the Tools page.

MCP servers can be added on the Tools page.

When adding a tool, you can choose different connectors. There are tools to support the creation and sending of emails, database records, but also MCP servers.

Do not use the Dynamics 365 ERP MCP (Preview) as this has no public tools available, instead select the Dynamics 365 ERP MCP option.

In the next step, it will ask you to create a connection using Entra ID credentials. You can then either click on Add to agent or Add and configure. When configuring, you can review the available tools and provide custom input variables, which are not required for this demo.

The documentation about the Dynamics 365 ERP MCP server contains a list of the tools. You can also find them listed in Copilot Studio. To show the difference with supported tools, I also added the Dataverse MCP server.

One thing to be aware of. At this moment (time of writing the blog), there is no support for virtual tables using the MCP server. This is possible using the Dataverse connector. So, when you want the agent to create, update, or delete records in Dynamics 365 F&O, at this moment, you need to use the connector for Dataverse and not the MCP server.

When asking the same question or another, where we expect one of the configured MCP servers would be inquired by the agent, initially, we get the same answer as the agent has a pre-defined orchestration. It is not possible to change the base of the Dynamics 365 Finance and Operations agent, as it is a Microsoft-managed solution. We can only extend with knowledge sources, topics, and tools.

One setting that is required for the agent to autonomously start using the tools can be configured. Go to the Overview page and enable the option for orchestration using generative AI.

After enabling this option, you can ask the same question. It will then first ask you to use the MCP server connection before providing the reply.

After allowing the connection, the MCP server replied with the correct information about the on-hand quantities.

Dynamics 365 Copilot sidecar

You can now publish the agent to make the changes available in Dynamics 365 F&O.

Also, within Dynamics 365, when the agent is published, you need to allow the connection with the MCP server. Follow the link Open connection manager to enter your credentials. After that action, the MCP can be successfully used.

There is more…

Having the Dynamics 365 MCP server connected in its own F&O sidecar is not the main purpose. The idea is to create agents with the available tools for use cases that make sense for every business. The tool takes away complexity and thus speeds up the process of creating an agent that interacts with Dynamics 365 F&O business logic.

From the Dynamics 365 F&O sidecar, you can also configure MCP servers from other applications to leverage cross-app AI value in Dynamics 365.

I do hope you liked this post and will add value for you in your daily work as a professional. If you have related questions or feedback, don’t hesitate to use the Comment feature below.


That’s all for now. Till next time!