Difference Between ERP vs CRM Systems

Enterprise resource planning (ERP) and customer relationship management (CRM) are two types of software solutions that many organizations use to run their businesses. In fact, one would be hard-pressed to find a company searching for enterprise software that doesn’t discover it needs one or both of these types of software systems. That’s because both ERP and CRM systems aim to manage and optimize paramount organizational processes.

But these two types of software are not the same. CRM and ERP systems vary quite widely in the sorts of processes they address and in the organizational benefits they offer.
 

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In this article, we’ll examine the differences and similarities between ERP and CRM systems, and outline why a company might decide to go with one or both systems.

 

ERP and CRM—Managing Processes and Customers

First let’s look at ERP and CRM at a high level and what each type of software is used for. Both systems allow information to be shared rapidly across the organization, and aim to streamline business processes. But ERP helps the entire organization, while CRM focuses on the customer relationship side of things.
 
The purpose of an ERP system is to integrate all business processes across the company into a single system—to efficiently manage business goals. An ERP management system collects data from across the company, records it, and integrates it, so that it can be interpreted to develop business strategies and goals, and to optimize the way each department is run. So, the main purposes of an ERP system are to organize, manage, and automate processes across the organization.

CRM software is also used to organize, manage, and automate, but its net is cast over a smaller area. CRM functions to manage, unify, and streamline sales, marketing, and customer service processes.

The functions of the solutions do overlap, however. Many ERP systems have CRM components, such as marketing and sales force automation (SFA), as part of their overall system.

But ERPs do not offer complete CRM systems. For example, a company’s management can use an ERP system to see how the sales and marketing departments are performing. But an ERP system will not show key sales and marketing performance indicators—those features are exclusive to CRM systems.

ERP and CRM managing systems can be completely integrated, however. Solutions from the same vendor can usually be easily integrated. Also, a CRM solution from one vendor can often be directly integrated with an ERP solution from another vendor.

Now we’ll take a closer look at how each type of system functions, and the benefits each offers.  

CRM—Managing Customer Interactions

The main purpose of a CRM solution is to manage information related to customer interactions. CRM software allows organizations to collect and share data about customers and interactions with customers in a standardized way.

Over the years, vendors have developed CRM systems that put a greater emphasis on the customer experience. The focus is on keeping customers happy, thus making loyal consumers of the company’s brand(s). CRM functionality in this area would include things like helping sales to identify potential leads or prospects, nurturing these relationships, and helping to transition these prospects into actual customers (i.e., making the sale). Then once the customer is on board, the CRM system helps an organization to maintain the relationship with that customer and to encourage further sales (up-sell or cross-sell the customer other products and services).

Existing customers are of course key to the functioning of a CRM system. A CRM solution is used to manage relationships with not only an organization’s customers, but also its prospects and partners.

Common ways a CRM system is used

• to organize or automate marketing efforts, and to manage or streamline the sales process
• to automate or manage customer service and support
• to create accurate sales projections
• to organize communications with clients
• to create invoices (billing department)
• to organize data for products and inventory
• to identify business opportunities and customer or partner leads

CRM system benefits

• more efficient and improved customer relationships
• new business opportunities and the attraction of new customers
• better customer retention
• increased sales and ultimately a higher bottom line

 

ERP—Managing Business Processes

An ERP system covers all aspects of a business. An easy way to understand the purpose of an ERP system and how it functions is to remember that an ERP system is designed with three Ps in mind—ERPs are built to improve the performance, profitability, and productivity of an enterprise.

An ERP solution integrates all facets of an operation, including accounting and financials; human resources (HR); sales and marketing; all production processes (such as product planning and development, and manufacturing processes); and distribution, purchasing, inventory, and order management.

Common ways an ERP system is used

• to manage the supply chain
• to improve the accuracy of financial data
• to improve project planning
• to standardize business processes
• to manage HR and payroll

ERP system benefits

• single data repository, i.e., no more data silos across departments
• more strategic decision making
• improved sales
• time and money savings with increased efficiency
• better managed expenses and increased profits

 

ERP vs. CRM

ERP and CRM are both useful types of enterprise software, as you can see. But when it comes to knowing which system is right for your organization, there are a few things to consider.

ERP and CRM software systems use different approaches to streamline processes and thus increase the profitability of a company. An ERP system aims to reduce overhead and costs and thus increase efficiency and save money. A CRM system aims to increase sales and improve customer loyalty, and thus increase profits.

Your organization’s needs will determine which solution you ultimately go with. A small company may invest in a CRM solution first to attract new customers and enhance its relationships with existing customers in order to help grow the business.

Once the company has grown to the point that different departments need to be established, it may then need an ERP system to help organize all the different types of data. An ERP system can be used to automate different types of processes, such as project planning, HR, accounting, and other aspects of the business. Additionally, it will allow data to be organized in a central repository—thereby removing departmental data silos.

However, sometimes a company will implement an ERP system first, to better integrate the company’s processes and data and bring about business efficiencies and improvements. But often companies use many software systems for different processes, for example, one system to receive and deal with payments, another for sales and customer orders, and a different one for the warehouse. In such cases, it is likely that the company wastes a lot of time trying to put all the information together when it comes to things like accounting and inventory management, especially if one or more of the systems require manual entry of data.
   
An ERP software system that integrates all these systems and puts a single database in place for the whole company may be a priority.  

Integrating ERP and CRM

Regardless of which system is implemented first, the time may come when your company needs both an ERP and a CRM system. The two systems can complement each other by reducing costs and maximizing profits. But if both systems are operating at the same time, they should be integrated so that the data does not operate in silos, resulting in information gaps within the company.
 
Let’s look at an example of a manufacturing company. The finance department of a sporting equipment manufacturer is keeping accounting records within the ERP system while the sales team is tracking opportunities and sales in the CRM system. The two systems are not linked, increasing the likelihood of errors. This is because orders are not automatically transferred from the CRM system to the ERP system. Orders need to be manually entered, increasing the chances that errors will be introduced along the way.

In addition to reducing errors, integrated CRM and ERP systems can also be useful in terms of customer relationships. ERP and CRM integration can give you a complete view of your customer, as data on the customer from sales and support (CRM) and finance and accounting (ERP) will provide visibility into a customer’s purchasing and order history, preferences, and account standing. This is useful information to help you manage your relationships with your customers.

ERP and CRM integration makes sure that your employees have the information they need when they need it, as the information all comes from one central place. Having the two systems together, whether they are from the same vendor or from different vendors, will ensure optimal use of your customer data—and save you time and money (and increase profits) overall.  

Streamlining Business Processes with ERP-CRM Systems

Organizations in basically every industry use CRM and ERP enterprise software solutions to manage their businesses. Although both types of software manage organizational issues and ultimately increase the bottom line, they do not do it in the same way, as they have different goals. CRM focuses on customer interactions to increase sales and therefore profits. ERP deals with business processes across the company and integrates processes and data to achieve efficiency and reduce expenditures.

To learn more about both ERP and CRM software, read these FAQs about CRM software and ERP software.  

Related Reading and Resources

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