Difference ERP and CRM - when should you choose which system?

ERP systems and CRM systems are often discussed in parallel in the same context, and when an ERP system is introduced anyway. It is important, but not always easy, to understand the differences between the two IT solutions. The search for the - difference ERP and CRM - occupies all companies that offer consulting-intensive products. Major changes in the competitive environment, digitalization and the associated new business processes challenge companies. Staying competitive is one of the major challenges. Many companies therefore ask themselves whether there is a suitable software that can support them in this. This quickly leads to the question, are ERP and CRM systems able to support us in a modern market environment?

What is a CRM system?

The core functions of CRM software include managing potential and current customer relationships. Powerful marketing tools such as social media management, online advertising campaigns and automated emails are part of the CRM suite that drives lead generation. Especially sales people and sales in general is always very attentive and demanding when implementing a CRM system. Hence this brief explanation of what is Customer Relationship Management (CRM) versus Enterprise Resource Planning(ERP).

Once leads become customers, CRM software also manages order creation and support processes, such as helpdesk and call center. Business analytics such as buying trends and loyalty metrics are other standard features.

At a high level, most CRM systems include the following functionalities:

  • · Marketing
  • · Automated marketing emails (including sales email automation - Salesforce Automation).
  • · Online campaign management
  • · Social media management
  • · Lead management
  • · Sales support
  • · Call center functions
  • · Order confirmation (mainly in the online store area strongly automated - otherwise ERP system task)
  • · Customer inquiries - hotline
  • · Service requests - customer service
  • · Budget information
  • · Sales opportunity information
  • · Purchase trends and analyses
  • · Loyalty management

An important task of the CRM system is to provide the different divisions with information about contacts, customers, customer behavior, the complete communication (customer relationship). The common data storage to the framework of customer master data, contact persons etc. is often specified in CRM systems.

Here too, however, it is important to consider where the source of the information lies. Where does all this data come from? Who qualifies this master data? At the ERP software in the context of master data management? so that all data would be entered there, qualified or do they lie with the CRM software?

What is an ERP system?

Unlike CRM software, ERP software has a wide range of functions for all business operations. From managing payroll for your company's employees to creating a bill of materials for the goods you sell, an ERP system is designed to run your business from start to finish without the need for additional software packages. Designed were ERP (enterprise resource management system) systems for managing materials and resources. The complete management and control of tasks within a production supply chain. As ERP software has evolved, manufacturers have begun to integrate more and more functions as well as business processes.

As a result, ERP systems have naturally become more and more complex. However, the most important business driver has always been the efficient use of all resources (human as well as material resources) and process efficiency. This efficiency can include throughput time, machine usage as well as the time until the customer order is fulfilled.

Which modules does an ERP system preferably have?

· Sales and marketing
· Purchasing
· Human resources
· Inventory management
· Warehouse and transport management
· Product Management
· Planning and production

The great advantage of an integrated ERP module is, among other things, the common data management. The generation of IT documents across the entire value chain (supply chain) is another advantage that should not be underestimated. System breaks and duplicate entries as well as the reduction of interfaces are advantages of integrated systems. This also applies when considering CRM functions within an ERP solution. This has motivated software manufacturers to integrate financial software and its functions in particular.

Therefore, these ERP systems include the requirements for

· Accounts payable management
· accounts receivable management and
· Asset accounting

and the user can demand modern, integrated software here.

Complex consolidation tasks within the scope of company participations, integration of foreign companies can also be solved with ERP systems of the large software manufacturers today. For this purpose, independent financial accounting with an ERP interface is usually no longer necessary. Some ERP software products are more specialized in certain industries, for example, manufacturing, retail/wholesale, or service providers and may have more comprehensive industry functions and connections to specialized software in these areas. When making an ERP selection, a thorough comparison of multiple ERP vendors is necessary, as each ERP system (people like to refer to it as an industry solution) has its own strengths and weaknesses. However, this comparison must by no means be limited to a comparison of functions. It must refer to the support of the business processes existing and planned in the company. Pure functions do not support processes. This applies to ERP systems as well as to CRM systems.

We recommend to our customers that their ERP software must meet the majority of their ERP requirements in order to avoid or at least minimize the amount of customization.

Overlapping functions between ERP and CRM

Since ERP systems today also include customer management and sales functions, there are some areas where the two software packages overlap. With most ERP programs, a company can manage customer data, create marketing campaigns, generate quotes and generate sales orders. However, when it comes to supporting marketing campaigns or tracking sales trends, CRM software has much more comprehensive capabilities.

Should you choose an ERP or CRM system?

This answer depends on two factors:

1 What are your current business needs (business processes) and IT capacity?

2 What are your future requirements?

If you want to optimize all your processes and replace an existing IT solution or software suite of a non-integrated applications, an ERP system may be the solution for you. On the other hand, if you need targeted capabilities for marketing and customer management, a CRM system is probably the best choice. For example, many CRM systems allow salespeople to use real-time data to personalize customer interactions.

Checklist on the difference between ERP and CRM

Please ask yourself the following questions:

Where might you find the greatest benefit: Process efficiency or higher sales volume? An ERP system primarily increases your profits by increasing efficiency. It does this by streamlining business processes and reducing overhead costs.

Compared to ERP systems, CRM systems are not so much about lean process improvement. Instead, a CRM system primarily increases your bottom line by increasing your sales volume. This is achieved by equipping employees with the tools to improve customer service to generate higher sales.

Could your company achieve a higher ROI by making your business processes more efficient than your sales volume? If so, an ERP system is a good choice for you - and vice versa.

Do you need a new financial system - a new financial accounting system?If you answered yes, you probably need an ERP system. Unless your business consists solely of a sales and marketing model, where all your needs can be met by a CRM system, you probably need a financial system. This will allow them to better manage both internal and external document flows. You'll also get better information for management decisions in less time.

Is your company ready to tackle an ERP implementation?While an ERP implementation is a huge undertaking compared to a CRM implementation, the benefits are significant. If your IT department has the resources and your company has the funds for an ERP project, an ERP project is probably worth the investment.

Does your IT department have the ability to develop integrations (interfaces)?A CRM system that is isolated from your ERP system will not have the full efficiency it could provide. Fortunately, many ERP vendors offer products with nearly "plug-and-play" configurations that integrate with popular CRM software. While this definitely helps speed up your ERP to CRM integration project, customization is often required to seamlessly integrate the two. Most often, this is required in interface management.

Is your project part of a digital transformation? This is an important question to ask yourself regularly, as it relates not only to the choice between ERP and CRM, but also to your overall digital strategy. This also takes into account the changes in the market environment in order to maintain and expand competitiveness.

Companies pursuing digital transformation want to create new business models. These companies usually need a scalable ERP solution with a promising software product roadmap. If this describes your company, it is important to evaluate the product and business development of software vendors. It is in this environment that questions need to be answered by vendors as part of the independent software selection process, best described as: Cloud, SaaS, on premise, hybrid and many more.

However, if you are not driving digital transformation, a full ERP system with a significant number of modules may be too much of a good thing for your business. Instead, consider whether a CRM system might be a better fit for your business.

Choosing the right software and technology for business process optimization: The decision between ERP and CRM software (or combinations and hybrids) can lead to interesting, controversial discussions within the ERP project team at the leadership and departmental levels. We strongly recommend deciding on the basis of the process requirements, which are documented in a requirements specification during requirements engineering. In this way, you reduce the decision risks and achieve resilient results.

Which questions should you answer?

which business processes are crucial?
which process optimizations are necessary? (resource planning)
which new processes have to be defined?
which customer requirements will be new for our company in the future?
which customer services absolutely have to be improved?

These requirements are usually met by using independent consultants from process optimization, data analysis (process mining) and experts in the independent search for the best software solution and the best software house.

It is important that external consultants have sufficient experience and expertise in knowledge of IT security, data protection DSGVO in its current form (ERP and CRM systems store personal data). Of course, this also applies to all issues relating to the processing of data and IT security. In our consulting projects, we are noticing more and more that precisely these requirements and questions are increasing. Sensitivity to the requirements of data protection DSGVO and security in IT has gained a higher attention factor.