According to Forbes, “in 2025, the landscape of enterprise resource planning (ERP) is set for a thrilling transformation,” with a shift toward cloud-native ERP solutions at the top of the list.
This transition is essential as businesses adapt to changing market demands and operational challenges. Gartner forecasts that end-user spending on public cloud services will reach $723 billion by 2025, indicating a significant migration of ERP systems to cloud platforms. . . . This reality highlights a pivotal moment in how organizations approach data management, particularly in light of increasing regulatory requirements and public concerns about data privacy. In this context, Forrester emphasizes that organizations should also consider investing in private clouds due to rising worries about data sovereignty and security. (Forbes, 2025 Cloud ERP Trends According To Industry Giants)
This article explores some of the unique considerations in the shift to cloud-native ERP solutions. These considerations are in addition to typical commercial contracting issues, such as risk allocation, downside protections, data protection, cybersecurity, and termination and disengagement services rights.
- Customers moving an on-premise ERP system to a cloud-native ERP system should carefully consider and, to the extent necessary, resolve (in a binding manner) issues that may arise with respect to the on-premise ERP system after completion of the migration. Consider, for example, the handling of prepaid amounts (including those for maintenance and support) that may be used, conversion of on-premise licenses to cloud ERP subscriptions, and potential claims that a cloud provider may have in relation to the on-premise ERP system, particularly if a customer is migrating from one provider to another.
- Define the concepts of “use” and “access” in a manner that properly reflects all aspects of enterprise use of and access to the cloud ERP system by people and systems, including bots and AI systems. Consider not only whether this access is permitted, but also how much it may cost, customer’s visibility into and control over such access, and the consequences of actual or alleged access use.
- Consider new issues that are common in cloud arrangements, but that did not apply to the ERP system. It may take a significant amount of time to consider issues that may be new for the operations or, as is commonly the case, require a new or different approach to vendor management, business processes, and potentially change management. For example:
- The cloud ERP agreements should address changes to use and access over time, and related impacts on pricing. Does the contract account for the initial period of migration from the on-premise to a cloud ERP environment, or otherwise the time and testing necessary before full use of the cloud ERP system may begin? Similarly, determine the rights the customer may have to increase consumption (with the benefit of volume discounts and other features of the negotiated pricing model applying to such additional consumption), and to decrease consumption (with an equitable reduction in fees).
- Negotiate the parameters around changes, given the cloud provider will have extensive control over updates, upgrades, and other changes to the cloud ERP system.
- Document the requirements with respect to the cloud ERP system, including key features, service levels, permitted subcontracting, implementation of artificial intelligence features and capabilities, and any other relevant parameters. Remember that the process for enforcing these standards (including through service level credits) may be as important as the standards themselves.
- Clearly define renewal rights, both with respect to the legal terms and conditions, and related pricing, both with respect to the governing terms and specific ordering document. The cost of new and rapidly evolving technology (such as artificial intelligence) and uncertainty in the geopolitical, regulatory, and economic landscape are resulting in increasingly complex renewal negotiations. Given the cost of ERP system implementation—whether on-premise or cloud—and the degree of dependency many enterprises have on ERP systems – the right to renew the contract on the same terms (importantly, including pricing terms) may be viewed as one of the key elements of a deal.