What are the differences – CRM vs ERP
The path to #DigitalTransformation (aka DX) is difficult and confusing. How and where do you start? Why is everyone doing it? What are ERPs? CRMs? HRMs, WMSs, PMTs and CMSs? Sometimes it feels like they make it confusing on purpose!
That is why I’ve taken upon myself to lift the veil and shine light into the inner workings of business and digital transformation! We’re slowly going through all the terminology and how to use it in our overview for beginners into DX.
Previously we’ve discussed the history of DX as well as the first steps you need to take and get the process rolling. Today we’ll dive more into the peculiarities of ERPs and CRMs and what are the core functions/differences between them.
As well as give some advice on which one is more suitable for you.
Introducing CRM-man! – “Definition of CRM”
Let me present – “CRM-man”! *Superhero intro music*
CRM-man the superhero every struggling business needs when they meet insurmountable odds and their sale numbers drop.
If growing and expanding your outreach is your priority, this is the hero for you!
“CRM stands for Client Relationship Management – a system that allows controlling and streamlining your sales process, developing strong relationships with your customers for proper sales/after-sales periods, and supplying digital structures for data management.”
It’s the main asset that allows you to automate and manage your sales pipeline as well as improve customer loyalty. CRM gives you insights into your lead generation and from a standpoint of the business owner reveals the entire pipeline of your customer.
If you’re a large enterprise or executive with a big or multiple sales teams, it allows you track all the activities and “territories” that they cover pushing those margins.
Think of it as your tool to improve and perfect the front yard (or front-end) of your business!
Beginning to end, from a new potential lead all the way to the “paying and satisfied customer” at the end of the sales-cycle. There’s a lot of processes and workflows involved in this but in conjunction with a properly set up graph (via BPMN 2.0 standard) and all the visibility provided by a CRM you can track where all the possible opportunities lie.
For a better result I recommend that you check our dedicated article on the subject.
What a swell guy that CRM-man is…
Meet ERP-Girl! “Definition of ERP”
But what’s that?! It’s a bird, it’s a plane! No! Its “ERP-Girl!” *Superhero intro music*
The best superhero when it comes to data convergence and optimization. She can find the smallest problem with your enterprise and end it with superhuman precision!
“Enterprise Resource Planning (ERP) – a system, framework or platform that allows enterprises to automate and integrate data provided by all departments within one’s enterprise.”
Large and small companies alike use ERP software for data management and successful optimization of their processes. Departments like development, HR, sales, marketing, manufacturing, procurement, distribution, finance and many more, benefit immensely from an ERP.
Lest we not forget the current IoT age, where you could have robots monitoring your warehouses live and provide all the relevant information among other things IoT. We live in an increasingly digitalized world and BigData or Data convergence is becoming more important.
Think of ERP like a cache where all that information from all the departments/territories congregates and transforms into usable data. Data that can later be used to isolate problems and dispose of them, thus optimizing your enterprise.
If a CRM is your face and drives customer acquisition and retention an ERP is everything that happens in the back-end of your enterprise. It’s important to mention that some ERP systems provide the CRM features as well.
In a perfect world the main scope of an ERP software is to provide a platform for everything and everyone, all in one Software. Out of the box most big Tier 1 ERPs provide these things. However, we do not live in a perfect world.
This is not a perfect world – Best-of-Breed ERP
The reality is that a software that attempts to be everything for everyone will simply fall short. Especially considering that different businesses have unique challenges and needs, and most of the time one system will not be able to meet them all.
In your enterprise you might already have a functioning CRM system working with your sales department. An HR department with its own human capital management software. Then your accounting is working with their own separate finance automation system.
You are going to accumulate a lot of expense during cultural shift trying to scrap everything and implement one system, however much the benefits of one system might be.
In comes something known as Best-Of-Breed ERP strategy, these systems are not meant to be one platform serving all needs, as much as a dedicated core point of information-gathering, a suite if you will.
Why does this matter? Well most ERP vendors will tell you that using their system and modules is the solve-all solution for you. They are doing it out of purely selfish reasons of course, and not a single ERP is considered the best at everything.
However some of their focused applications are among the best. So businesses began hyper customizing their own ERP-like systems out of pieces of different systems. Either modules of a dedicated ERP or a massive agglomeration of CRMs, HRMs, Ecommerce tools etc.
The difficulty of this approach relies on one question: Are you equipped to handle the difficult process of implementation? Sometimes its better to rely on one ERP software that handles everything, rather than work with multiple vendors trying to find the optimal way to make them play nice together.
I will be touching upon the best-of-breed strategy, as well as ERP tier lists and other topics later.
Here is the difference – CRM vs ERP
So, if both systems are so different, why has the question arisen in the first place?
A lot of it has to do with the fact that:
- Both CRM and ERP have a lot of overlap and similarities, both sometimes perform the same function/role in certain circumstances.
- Data convergence or BigData is a notoriously difficult subject and thus some of the methods used to achieve them is hard to understand.
Hey! We wrote a series of articles on BigData, go check it out!
But to summarize the core difference between the two. CRM is the front of your business, and primarily focuses on the growth and outreach. It gazes outwards! And it is more focused on one part of your enterprise, the sales!
While an ERP can be seen as the backyard and is generally used to optimize and cut expenses on existing processes. It gazes inwards! Its main goal is to provide wider capabilities to your business and tie in all the parts of your business into one.
This does not mean that they are limited to only those functions, both systems DO affect growth and optimization.
Which one should I use? – Conclusion
According to the Nucleus research and case studies for ROI; a CRM system will generate a return of $8.71 per 1$ spent on implementation. Not too shabby.
So, first and foremost, consider the following questions:
- How big is my enterprise and what is my foreseeable growth potential?
- What is your priority when choosing growth or optimization?
- How much do my departments interact?
- Are you more concerned with supplying products or services?
Once you’ve answered those questions, the answer is: both! Use both!
Ideally, you want to use the “Best-Of-Breed” approach and integrate the top CRM, HRM, DAT, PMT, and what not, and tie it all up with the help of a full-fledged ERP.
However, if you need to choose one or the other consider the questions again and go from there.
A CRM is a focused tool dealing with customer interaction thus primarily on growth and optimization from that standpoint.
Whereas in an ERP is arguably a more expensive option from the cultural implementation point of view (and sometimes even vendor prices). ERP supplies most of the benefits of a CRM, as well as cutting costs in other departments.
Finally, it’s highly advisable to get an independent evaluation of your business before making the decision. Thus, getting the best software on the market most suitable for the needs of your enterprise.
And that’s a wrap folks! Our heroes are off to save other businesses! Look at them go!
I would like to add that when choosing a ready and made solution on the market you might run into the dilemma of fitting your workflow to the ERPs or CRMs structure. Never forget tho’: you can develop a custom-made build for your needs by contacting a professional bespoke software developer… just saying.
With that I would like to wish a farewell and implore you to stick around, as we’re not nearly finished with our journey through #DigitaTransformation! Stay safe tech and business nerds!