pixel - Fotolia

CRM vs. ERP: Understand differences and CRM choices

As vendors' offerings of ERP suites and CRM standalone modules get more complex, it can be helpful to learn -- or review -- the basics. Here's a look at the ERP-CRM relationship.

With so much activity in the ERP market, it can be helpful to review some basics -- for example, the issue of CRM vs. ERP.

Both ERP systems and CRM systems handle complex business processes and help them run better. The main difference between CRM and ERP is the category of business processes that each is designed to support. But truly understanding the relationship between ERP and CRM requires further exploration.

CRM vs. ERP: the nutshell version

An ERP system, which is focused on a company's production, is used by accountants, factory planners and product managers to get goods out the door through the factory system.

"If you look at it departmentally, it's really the factory guys and the distribution guys who couldn't do their jobs without the ERP," said David Taber, CEO of SalesLogistix, a CRM consulting firm in Cloverdale, Calif.

ERP is not customer-facing, and the CRM system is not factory-focused, Taber said. Instead, CRM is what makes the sales organization go. Those focused on making the factory run well would have no use for CRM.

"A CRM [system] is used by sales primarily, then by customer support, marketing and the executives," Taber said.

Both ERP and CRM systems handle complex business processes and help them run better.

A basic CRM system focuses on the activities that are performed within the sales cycle, ranging from contacting a prospect to signing a sales contract, said Siamak Razmazma, in an email. Razmazma is the managing director and leader of the enterprise applications solution group at Protiviti Inc., a consulting company based in Menlo Park, Calif.

From a broader perspective, the ultimate goal of a modern CRM system is to create a compelling customer service and digital experience, he said. This in turn helps create knowledge-based responses to inquiries, tailored pricing and next-best action to satisfy a customer request. Modern CRM uses virtual assistance, chatbots, information portals and AI to accomplish these responses.

A basic ERP system, on the other hand, is designed to support financial and operational processes, including general accounting, accounts payable, accounts receivable, procurement, sales administration, order fulfillment, inventory management and cost accounting, Razmazma said.

CRM as part of ERP
Before the advent of cloud-based technologies, companies would likely have implemented CRM as part of their ERP systems, said Ilona Hansen, senior research director at Gartner. This happened because companies were managing everything under their own supervision in very secure on-premises environments, making integration difficult.

One question is: Do CRM modules that are part of an ERP suite still have a role in modern businesses?

Today, CRM as part of ERP is still purported to be a big business, said Bruce Culbert, managing director at Cultech Inc., a consulting company based in Atlanta.

"Just ask the vendors who sell these solutions," Culbert said. "In fact, the big ERP vendors also claim to have the most widely deployed CRM solutions in the world -- but deployed is the operative word vs. utilized and valued."

ERP vendors have been bundling, or in many instances, giving away CRM to their enterprise ERP customers in hopes of further cementing the ERP customer for life, Culbert said.

"Once the front end and back of the house have been integrated into one larger enterprise system that handles requirement planning, customer service, sales, marketing and accounting -- they got you," he said. "And it's almost impossible to ever leave."

But the best-selling and most widely used CRM systems are usually not from the ERP market leaders, Culbert said.

"Most companies want to work with the best-in-class ERP vendors and the leading CRM vendors -- and they are not one and the same," he said.

However, some manufacturing and distribution-heavy businesses find measurable ROI in the single enterprise offering, in other words, the CRM as part of an ERP suite from one vendor.

Newberry Tanks & Equipment LLC, in West Memphis, Arkansas, is one manufacturer that opted to implement a CRM tool from its ERP vendor.

The petroleum storage tank-maker implemented Sage 100 ERP in 2011. Until about two years ago, the company's sales organization was also using the ERP for its activities. Then, in late 2017, the company's sales team shifted its focus from just taking orders to selling and helping the business grow, said Chris Long, CEO of Newberry Tanks. The company decided to add a CRM system to help improve the productivity of the sales team.

"We needed to address some things in our sales organization, and we saw CRM as an answer to that," Long said.

However, the Sage 100 ERP system didn't have some of the traditional CRM functionality embedded in it, such as market segmentation, the ability to collaborate on account management, the ability for the sales team to manage their territories or the ability to manage the sales staff by sector, call and activity as well as the necessary reporting and metrics functionalities, Long said.

But Newberry Tanks didn't consider integrating a third-party standalone CRM system, such as Salesforce or Microsoft Dynamics 365 for Customer Engagement, with Sage 100, in part because of the integration challenges. Rather, the company decided to implement Sage CRM, a standalone CRM system that has its own database and its own program but is fully integrated with Sage 100, Long said.

The company used Sage CRM as a platform to help reorganize the whole sales function, he said. The result has been more active management of the sales process.

"Generally, sales guys are all a little resistant to CRM," Long said. "But there's enough efficiency in it for them to make their jobs easier in terms of being able to get a customer quote or get an order in the system."

ERP and third-party standalone CRM

Most major ERP vendors, including SAP, Oracle and Microsoft, also offer CRM functionality within their ERP systems, as well as standalone CRM tools that can be integrated with their ERP systems, said Eric Kimberling, CEO at Third Stage Consulting Group in Denver.

Oracle and SAP are probably the best examples of vendors that have add-on CRM modules, Taber said.

For example, the CRM module in SAP Business All-In-One ERP offers functionality for midsize businesses that supports end-to-end marketing, lead generation, sales, service and analytics.

"Generally speaking, [these add-on modules] are only a success in the finance department," Taber said. "Sales hates them, and the primary user of CRM is sales."

These add-on CRM offerings tend to require a lot of data entry, and the data entry screens tend to be inflexible and clunky due to too many fields, he said.

 "They're big, and clunky and ugly, and sales tends to like pretty, and they also don't like doing a lot of data entry," he said.

Sometimes, organizations just don't have the need or the risk tolerance for bigger ERP systems, so they might implement standalone CRM systems and integrate them with their back-office systems, Kimberling said.

Perhaps a company already has a decent back-office system that handles all its financials and inventory management needs, but it doesn't have a robust CRM capability, so it would just plug in a new CRM system for that, Kimberling said. That's one reason why an organization would opt for a standalone CRM system and integrate it with the back end, he said.

It could also be that the vice president of sales or someone on the business development side has the authority to move forward with the CRM initiative, but not necessarily the influence to move forward with a broader ERP implementation or overall digital transformation, Kimberling said.

"That's where a vendor like Salesforce does really well -- going after the VP of sales types that aren't necessarily looking for big ERP functionality," he said. "They're just looking to solve their immediate problem within their little silo."

Dig Deeper on ERP integration

Join the conversation

1 comment

Send me notifications when other members comment.

Please create a username to comment.

Based on these CRM vs ERP examples, which route would you choose for your organization?
Cancel

-ADS BY GOOGLE

SearchOracle

SearchDataManagement

SearchSAP

SearchBusinessAnalytics

SearchSQLServer

SearchContentManagement

SearchHRSoftware

Close