Can contracts overcome the challenges of ERP?

When ERP systems became the backbone of many organizations in the 1990s – 2000s, one of the frequent criticisms (and I was among those critics) was the extent to which it caused the embedding of rigid, siloed standards which added to the push for commoditization and drove tensions in the customer – supplier relationship.

In the eyes of those objecting, ERP standardizes and hard-wires business processes (including procurement and contracts) to the point where it constrains flexibility, makes it harder to accommodate exceptions, and limits the ability to adapt to diverse or changing market conditions.

So: were those concerns valid? Are they still correct today?

Then: The Nature of the Concern

ERPs were designed to impose discipline and standardization, which was a huge benefit for compliance, data integrity, and efficiency. But for contracts, which are inherently situational, market-responsive, and nuanced, ERP often presented a barrier. Templates and workflows embedded in ERP systems often reflected the policy at the time of implementation, and became very hard to change.

Negotiators and commercial managers complained of too-rigid clause libraries, overly standardized approval paths that didn’t recognize different risk–reward trade-offs and lack of ability to reflect business realities between different products or services, industry partners, market segments or geographic regions.

Now: Facing Market Volatility, Are Those Issues Evident?

The answer is yes – more so than ever.

Markets today are far more volatile, diverse, and uncertain than when most ERP systems were architected. Organizations are being asked to:

• Enter into new types of agreements (e.g., outcome-based, ESG-driven, multi-party ecosystems).
• Adjust terms more dynamically to reflect supply disruptions, inflation, new regulations, or competitive pressures.
• Recognize local market variations (cultural, legal, and commercial).

But the rigidity of many legacy ERP systems makes it slow and costly to adapt contracting practices. In fact, this rigidity has caused serious problems in building and managing trading relationships. Key examples of this are:

• Manual workarounds — people operating “off system” to enable exceptions.
• Data fragmentation, because contracts negotiated outside the ERP aren’t integrated back cleanly.
• Value erosion, because organizations can’t easily adjust to market signals or customer/supplier needs.

Is this changing?

ERP vendors have started responding. Many now offer more modular, API-friendly architectures that allow best-of-breed CLM or CPQ (Configure-Price-Quote) tools to integrate. Cloud-based ERP is more configurable than older on-premise versions, though still more rigid than a true CLM platform.

High-performing organizations now deliberately keep their contract intelligence and flexibility in a CLM or adjacent platform, while letting ERP handle transactions, compliance, and reporting. There is growing adoption of governance models which accept some decentralization to allow local or deal-specific adaptations. And the experience with ERP has taught us that adaptability and resilience must be designed into both processes and technology, not treated as afterthoughts.

So the challenge now is not to throw out ERP, but to augment it with more flexible, intelligent tools and governance frameworks that reflect the reality of modern contracting.