ERP vs CRM Systems – What is the Difference and Which do You Need?

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A Breakdown of the Essential Differences Between ERP and CRM Systems

To stay competitive in a digital and globalized world, modern enterprises of all sizes may find it necessary for different organizational departments to integrate key Information Technology (IT) systems in their daily operations. This helps to reduce overhead, increase productivity, and aid critical operational workflows, resulting in an increase in overall company efficiency. The point of technology is to reduce the “pain points” of an organization, and to make all core workflows and operations more feasible, while ultimately helping to increase the bottom and top lines of the enterprise.

The IT infrastructure of companies worldwide is typically divided into six key areas, including: hardware systems (workstations, computers, mobile systems), software systems (operating systems, applications), network systems (servers, hosts, hardware network security controls), database systems (data servers, data warehouse, cloud systems), enterprise systems (ERP, CRM, middleware), and web systems (DMZ, network firewalls, web server, web host, IDS).

Regarding enterprise systems, while there are myriad of different types of enterprise suites and software applications available, two very significant types of enterprise systems are Enterprise Resource Planning (ERP) and Customer Relationship Management (CRM). While both offer very unique and robust corporate advantages, it is important for businesses to recognize what these enterprise systems are and how they differ.

While ERP is a modular, suite-based, highly integrated set of software applications – typically including some CRM functions – and helps to modulate and optimize internal workflows and operations, CRM is more specifically customer-facing (externally-facing) and helps executives manage sales and marketing operations. Thus, while ERP is more internally-facing, and helps to increase the bottom line by increasing productivity and internal efficiency, CRM is more related to sales, marketing, and products/services, and thus is associated with increasing the top line of a business. Together, ERP and CRM can combine to form a powerful set of enterprise solutions for a business to increase sales, reduce overhead, and increase productivity and operational efficiency.

What is Enterprise Resource Planning Software?

Enterprise Resource Planning (ERP) solutions are a set of modular, integrated software suites and packages used by small, medium and large enterprises alike for the management of day-to-day operations and business workflows, including supply-chain management, data management, inventory checking, accounting, project management, and more. Additionally, ERP systems also aid a company in managing their warehouse systems, transportation systems, international trade logistics, and supplier relationships. ERP solutions are not stand-alone software applications, but are a combination of highly integrated modules that help a company’s executives to manage and lead all of their critical corporate projects, workflows, operations, and activities.

Because ERP systems operate as robust, all-encompassing corporate solutions to optimize and (oftentimes) automate internal business operations (e.g. supply-chain management), internal-facing processes (e.g. Human Resource management), and supplier-facing processes (e.g. supplier relationship management), ERP systems often operate as a company’s HQ for managing the day-to-day operations that keep the business going. An ERP system thus allows the integration of all essential business software systems into one primary platform in order to seamlessly manage all business processes in an efficient manner.

What is Customer Relationship Management Software?

Customer Relationship Management (CRM) is a powerful, externally/customer-facing enterprise software solution for managing all customer-interactions, communications and transactions, and is often associated with marketing, sales, and customer service processes. CRM systems are also used for driving sales, analyzing sales data, turning leads into customers (lead management), and conducting marketing operations (e.g. email marketing campaigns) that aid in customer acquisition and retention.

Essentially, CRM applications are customer data management suites specifically designed to aid marketing and sales teams with the requisite tools for managing customer data, maintaining relationships with customers, analyzing customer demographics, utilizing tools and data for the most pragmatic and cost-effective marketing/sales campaigns, and building better relationships with leads/prospects by better understanding their buying habits and needs. Due to the externally-facing (product/services nature) of CRM software, such applications can help to increase a company’s top line by driving additional sales.

How are These Two Systems Related?

While ERP and CRM enterprise software solutions may seem interchangeable at first glance, they are quite different in a number of ways. Despite their differences, both solutions have a number of shared features that may allow for the powerful automation of sales and marketing workflows (e.g. Sales Force Automation/SFA, or marketing automation) and customer support functions.

While ERP helps to manage projects, operations, accounting and other internally-faced factors of a company, CRM may help to utilize the data associated with the ERP in order to better facilitate marketing, sales and customer-based operations. Essentially, one of the most important aspects of how ERP and CRM are related is seen in the integration of ERP solutions with CRM systems. For instance, while an ERP solution may keep track of product availability via its warehouse and supply-chain management modules, a CRM solution may utilize that data in order to better maintain an ecommerce website’s customer leads and customer service workflows surrounding that particular product’s current availability. Additionally, the integration of an ERP solution with a CRM system may help to accurately detail the delivery data associated with a customer’s order, based on the ERP’s logistics modules.

Understand the Essential Functions of Each System and What They Do for Your Business

ERP and CRM solutions have a lot in common, as they both operate as robust enterprise suites that help to increase the overall efficacy of a company’s operations, so it is common to integrate ERP and CRM solutions. However, despite some key functionalities of each enterprise solution overlapping, the specific functionalities of each type of enterprise solution differs greatly in many aspects. Essentially, while ERP solutions are internally facing – and help to increase the efficacy of internal operations (and thus increase the bottom line) – CRM solutions are externally facing, and are associated with marketing/sales, and thus may increase the top line of a business.

The Defining Characteristics of an ERP

An ERP solution consists of several interrelated but distinct modules that help a company to manage and lead their critical enterprise operations and workflows. Such modules may be associated with several key company operations:

  • Accounting: Record, analyze and manage all financial transactions associated with a company, along with managing payroll, financial reconciliations, etc.
  • Supply Chain Management (SCM): Manage processes associated with the supplier, retailer, manufacturer, wholesaler, and customer, from production to distribution. SCM has several subsets, including Warehouse Management Systems (WMS), Transportation Management Systems (TMS), International Trade Logistics (ITL), Supplier Relationship Management (SRM), etc.
  • Inventory: Provides a company’s personnel with current, pertinent data associated with the availability of company products.
  • Business Intelligence (BI): Obtain business insights and intelligence derived from the analysis of raw business data-sets, allowing executives to make more strategic decisions in the future.
  • Human Resources: Management of Human Resources (HR) tasks, which includes everything associated with training, managing, regulating, paying and compensating personnel. Additionally, HR tasks include workers-compensation and tasks associated with worker health and safety , all of which ERP suites can manage effectively.
  • Manufacturing and Production: Management of manufacturing operations, planning production, managing the processing of raw materials, and managing inventories. Additionally, ERP suites can manage Material Requirements Planning (MRP), Bill of Material (BOM), Scheduling, Capacity Planning, and Quality Control / Quality Management.
  • Project Management: All critical company projects can be planned, managed, led and analyzed via robust ERP suites.
  • Data Management: All data that is associated with a company’s ERP system – which acts as a central IT-hub for an organization – can be stored, parsed, analyzed and converted into BI via an ERP system.

In ERP system has many core functionalities that a CRM system lacks, such as the ability to manage, optimize and effectively help to regulate internal operations associated with HR Management, SCM, Accounting, Data Management and BI, and Management of Manufacturing and Production. As a CRM system is concerned mostly with sales/marketing – externally facing workflows – such systems do not help a company to manage internal workflows.

The Defining Characteristics of a CRM

Contrasting an ERP solution, CRM solutions often operate as stand-alone applications that help a business to manage its integral sales/marketing operations to gain and retain customers for the purpose of increasing sales. CRM suites help marketing/sales teams with several key operations:

  • Sales Force Automation/SFA: Sales forecasting, pipeline analysis
  • Customer Service/Customer Support: Live chat, ticketing, knowledge management systems
  • Call Center Automation: Call monitoring, call routing, CTI
  • Marketing Operations: Email marketing, lead analysis, campaign management
  • Field Service Management: Invoicing, Scheduling, Dispatching
  • Lead Management: Managing leads, recording lead data, converting leads into customers
  • Help Desk Automation: Product troubleshooting, ticketing
  • Social Media/Community Management: Social Media lead management, inbound marketing metric analysis, marketing campaign management

CRM suites aid with customer retention, increasing sales, and marketing campaigns. which ERP suites do not focus on specifically.

Which System Does Your Company Need?

Determining whether a business should utilize an ERP solution or a CRM system – or both – is an important decision that every small, medium and large enterprise will have to make as businesses become more digitized.

There are several key factors that should be considered when attempting to make such a determination, including: company size, ERP and CRM shared features and functionalities. Regarding the functionalities, analyzing the specific features of each solution is important since it may be profitable for a business to start with one solution and integrate another later. Additionally, regarding company size, it is possible that utilizing both an ERP and CRM is best (which is typically the case for larger companies).

What are Your Main Pain Points?

The most important aspect of choosing an ERP or a CRM solution is determining the major “pain points” of a company. Since IT systems are designed to be leveraged for the purpose of solving company issues – whether it be operational (internal) or associated with increasing sales (external) – the usage of the pertinent IT solution should be in line with the overall strategy of the company. It requires  knowing the specific company problems an organization currently faces – and may face in the future – to know which IT solution is most needed to solve these problems.

Do You Need to Cut Costs Or Do You Need to Boost Sales?

Additionally, it is helpful for company executives to determine how their company can grow and scale, including financially. While most businesses seek to increase their top line by increasing sales (for instance, by five percent), oftentimes increasing overall “revenue” can be done in equal measure by decreasing costs/overhead by the same five percent. Instead of using a CRM solution for increasing sales, utilizing a robust ERP system would help decrease overhead and increase the productivity and efficiency of internal operations. This is because ERP solutions are a powerful solution for cutting costs via streamlining of operations and business processes. ERP solutions are great for large companies, especially since they are robust solutions for handling multiple aspects of a large enterprise, such as manufacturing, supply chain management, accounting, Human Resources while often having a CRM component as well.

At the same time, businesses need sales to thrive. Small companies may not require large-scale process solutions such as an ERP solution. But when a scaling company needs to increase sales and generate more income, a CRM solution may be best to increase sales via its sales-specific functions to ultimately aid a company with increasing its top line. Ultimately, a CRM is best for a scaling, growing company, while ERP solutions are more appropriate for larger enterprises who need to streamline their operations.

ERP’s and CRM’s In a Nutshell

While utilizing both an ERP and CRM has its advantages, it may be best for a company to decide whether an ERP solution or CRM solution is best for company operations and income. The functions of an ERP and CRM system overlap at times, though for the most part, ERP and CRM solutions offer vastly different core functionalities.

ERP systems are great solutions for reducing overhead, streamlining operations, increasing efficiency, and increasing overall operational productivity. CRM solutions are more appropriate for boosting sales, elevating the quality of marketing operations and campaigns, and increasing profits/income by helping a company to manage their customers and leads in the most optimal manner possible. Determining which solution is best is a significant decision for a business to make, but knowing that as a business grows, both solutions may be needed. If you are investing in only one of the solutions at a given time, implement the initial solution in a way that allows feasible integration of the other solution in the future. Ultimately, all solutions of a company should align with a company’s goals, and should be implemented according to the enterprise’s IT strategic plan.