This article discusses the benefits of cloud based ERP system and its adoption in Saudi Arabia. It examines the factors affecting the process of adaptation of the ERP by various private as well as public organizations. The article also analyzes the performance of the cloud based ERP with respect to the traditional ERP systems. Additionally, it presents a study on the system updates of cloud based ERP systems and the challenges faced in the process. Furthermore, the article defines a cloud computing platform for ERP applications.