ERP vs CRM: What's the Difference?

Customer Relationship Management (CRM) and Enterprise Resource Planning (ERP) can appear to be similar types of software to those new to IT. However, they provide different types of services, although they aren’t in direct opposition to each other. 

Combining the two types of software optimizes an organization’s opportunities for business growth and digital transformation. This blog post describes the differences between CRM and ERP, their benefits, and the methods of aligning the two systems with an organization’s requirements.

Overview

ERP is a system that provides the integrated management of a business’s back-office processes. Organizations use ERP software to collect, store, manage, and interpret data on business activities. Customer relationship management (CRM) is an approach for managing an organization’s interaction with its potential and current customers, generally for the purpose of improving those relationships. CRM software analyzes customer history and focuses on customer retention to drive sales growth.

Sales staff and the members of support organizations are traditionally the primary users of CRM systems. These roles are customer-facing and aren’t directly related to creating and fulfilling orders. On the other hand, ERP users are typically inward-facing and focus on internal operations, which include accountants, buyers, factory managers, production schedulers, and suppliers. These users rarely interact with end customers with certain case-by-case exceptions. In a traditional setting, the only people who would use both systems were members of the IT department, typically those who perform data analytics, integration, or warehousing.

However, this traditional distinction is beginning to blur somewhat, as ERPs and CRMs can integrate with each other and share data. The challenge for some companies is to determine when they need a fully functional ERP solution, and when they can meet their needs with a CRM application. The answer to this decision is different for each business. Enterprise companies need a comprehensive ERP system to manage their multiple distribution centers, factories, and supply chains. Smaller organizations may not be ready for an entire ERP system, since they can grow with only a CRM system in place.

What is ERP?

An ERP solution provides a 360-degree view of the customer. Its functions may be classified into three distinct layers, including finances, manufacturing, and scheduling.

Financial functions are the lowest level of an ERP, which include cash management, accounts payable, accounts receivable, taxes, and transaction journaling. Functions like invoicing and revenue recognition are also associated with CRM.

The next level of ERP includes tasks needed to manufacture a product such as distribution, inventory management, procurement, and supply chain management. Functions like identifying what has been ordered and by whom are shared with CRM, as are order forecasts.

Optimization is the highest level of ERP, which includes production scheduling and sequencing to maximize profits. Analytics, decision support, and improving supply chain performance are also part of ERP’s optimization layer, which may require thousands of tables for a large enterprise.

What is CRM?

CRMs provide insight into the relationship an organization has with its customers and prospects who may become customers. Sales Force Automation (SFA) is the core of CRM. Traditionally CRM users focus on prospects who may become customers, and deals that haven’t yet been closed. CRM also includes activities like account management, marketing, and customer care that occurs after a sale is made. Some CRM systems extend into other aspects of the customer relationship like e-commerce, but even the most expansive of these solutions store very little data that’s relevant to ERP systems.

CRM systems typically integrate with other systems, including ERP. In particular, CRM often provides the input for ERP in cases where the customer or order already exists. Data also flows from ERP to CRM, such as when CRM users are able to view ERP data on invoices, outstanding balances, and ship dates that are often of interest to customers.

Integration

All companies need some degree of integration between their CRM and ERP systems, even if it’s just a contact manager. Several major ERP vendors offer CRM solutions to perform functions such as order configuration and invoicing, although it may be through a partner product. This integration works best when integrated into the cloud.

Smaller companies can use low-cost solutions like Boomi and Pervasive to automate the integration between CRM and ERP. The situation is more complex for larger companies that need the exchange of data between these two solutions to occur in real-time, which is particularly important for managing supply chains and product shipments. Advanced ERP systems give companies real time data-sharing so all users are able to access the same information.

The increasing regulation of data security makes it essential for organizations of all sizes to protect data, especially if it relates to health or finances. This requirement means that data should be accessible by as few systems as possible. A single, advanced ERP system integrated with a cohesive CRM platform eliminates the need for additional software tools that add to overall costs and compromise security.

Summary

The difference between ERP and CRM is complicated by the fact that these applications may be packaged into the same solution. However, the distinction between the two becomes clearer when you consider the purpose of each tool, rather than how they’re often presented to the user.

ManoByte can help you streamline your integration of ERP with your existing business solutions. Contact us today to learn more about how we can help you with your ERP implementation.