[one-minute consulting] The risks associated with an ERP that is cloud-based
Last Updated on 16 June 2025 at 18:32
The context:
For a company, the notion of “cloud” can be understood as having the
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The question:
What are the risks associated with an ERP Cloud-based ?
The answer:
A large part of the answer lies in your
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Table of Contents
What are the main risks associated with a Cloud ERP ?
Most vendors of a Cloud ERP solution have a sales force that is sufficiently compelling to offer products that may not necessarily match the business needs and operational capabilities of the company.
Read more (in French): What is an ERP (Enterprise Resource Planning) ?
In the field, what hurts the most is the lack of human expertise and ERP needs that came later after the implementation phase. Or the risk of making the wrong choice.
On top of that, an ERP Cloud solution presents additional challenges such as hidden costs in the contract, risks of non-compliance, limits on functionality and performance, lack of skills.
As a general rule, you should keep in mind that strategic risks and especially those related to the day-to-day business of a company always increased with a cloud solution.
The risks related to the budget of an ERP implementation
When the ERP solution is “on-site” then the actual work can be more easily controlled, because technical consultants are present on-site. Be proceeding this way, during the implementation phase, and it is also easier to identify and solve any other problems.
On the other hand, for a cloud ERP solution, the implementation aspect is more hidden. The customer also thinks that this implementation would be more comfortable and therefore, less expensive. Indeed, this might be the case with a This is the case with a majority of turnkey, ready-to-use ERP solutions, but any additional options and requirements are costly.
The risks related to the Internet
First of all, cloud solutions require reliable and high-quality Internet access.
Reliable Internet access is entirely possible in Western countries. Still, this problem cannot have a quick, rapid solution. When the operational ERP outsourcing is in countries such as India, Philippines, Madagascar, then this difficulty can become a failure. These countries have other problems too, such as the power-grid cuts or improper back-ups processes.
All the above aspects are a real headache, both for the company and the company’s end-customer. These problems are a real obstacle to the performance of a cloud-based ERP solution. Under those conditions, there is a reduction in data usefulness and usage.
Secondly, security issues represent a risk for any cloud-based solution.
Most of the ERP Cloud vendors are controlling cybersecurity threats, but you should keep in mind that there is no such thing as a “zero-risk” solution. To limit those risks, you should focus on aspects such as a better selection of the ERP Cloud vendor, which should not necessarily be among the biggest ones on the market, constant education about the Internet security, and also the verification of various levels of access. However, the cost of Internet security is often a deterrent factor.
The Risks associated with limited functionality
The company that chooses an ERP Cloud solution wants, among other things, to simplify access to data. Unfortunately, many web browsers cannot yet support all the functionalities of a robust and reliable ERP. It is especially with large ERPs that this problem is most visible.
The server and technology performance of the ERP provider’s server can limit essential options. These options could be possible with an on-site solution. These technical limitations can also occur due to commercial contrasts: “pay more to get more”.
A company should also consider that the perfect ERP cloud solution does not exist. Therefore, a company must choose the solution that allows a functional integration with other on-premise or cloud tools. Not lately, before selecting an ERP Cloud solution, a company should also consider the portability factor.
Elena Debbaut is a strategic execution expert to boards and executive teams. She leads and advises on complex transformations when governance barriers, internal politics, or structural fragmentation prevent organizations from executing critical decisions.
Specialities:
• governance-constrained transformation
• operational restructuring
• strategic recovery & execution