Businesses that aim to automate essential processes usually focus on two key software solutions: enterprise resource planning (ERP) and customer relationship management (CRM). ERP assists companies by linking their financial and operational systems to a central database, while CRM manages customer interactions.
Both serve as crucial data repositories and touch on various departments. Although they may be built on the same platform, ERP and CRM are often purchased separately and integrated as needed.
This article will outline the main features of CRM and ERP, how they differ, and whether a business needs one or both.
What is CRM?
CRM, short for customer relationship management, is software that tracks all interactions a customer has with a business. Initially, CRM was created for sales teams and was often called sales force automation (SFA). Later, systems were developed to manage customer service and marketing, especially in call centers, which eventually evolved into contact centers as new customer service channels emerged.
Software companies began to combine these functions under one CRM system. Some systems also include sales performance management and sales incentive tools, though these are sometimes sold separately due to their complexity.
What is ERP?
ERP, or enterprise resource planning, evolved from material requirements planning (MRP), which helped manufacturers manage the resources needed to run a business. ERP acts as a shared database across an organization, primarily focusing on financials like the general ledger (GL), accounts payable and receivable, payroll, and financial reporting.
ERP also covers inventory, order, and supply chain management, as well as procurement, production, distribution, and fulfillment. Some ERP systems include human resources, CRM, and ecommerce tools as well.
CRM Benefits
The main advantage of CRM is that it centralizes customer data, tracking all interactions. With this data and analytics, businesses can make smarter decisions on which customers to focus on for more revenue, monitor sales performance, and provide efficient customer service.
For example, sales teams using a CRM system can check if a customer they’re meeting has pending service requests and address them. Likewise, customer service can quickly identify high-value customers and route them to the right service tier.
ERP Benefits
ERP’s key benefit is its single, shared database for all financial and operational data, improving reporting and analysis. This allows for faster, data-driven decisions that affect profitability, growth, and efficiency.
Many businesses also see faster financial closing times after switching to ERP, as the system automates tasks that would otherwise involve manual work, like gathering financial data from different departments. With ERP, closing the books may only take a few days instead of a week.
ERP systems also enhance financial control by restricting sensitive data access to authorized employees, which improves audit trails and reduces financial risks.
Differences Between CRM and ERP
Though both systems are used across the organization, ERP focuses mainly on financial data for the finance department, while CRM handles customer data used by sales and customer service. ERP is often called a back-office tool, while CRM is a front-office tool.
Some ERP systems include CRM features, but CRM systems don’t typically include ERP components. For instance, Salesforce.com isn’t an ERP system, though it can access order histories or invoices through ERP integration.
Similarities Between CRM and ERP
Both CRM and ERP store and analyze data using relational databases. They can be deployed either on-premises or via the cloud through software as a service (SaaS), where the vendor manages the software.
While NetSuite (ERP) and Salesforce (CRM) emerged around the same time, CRM systems were quicker to move to the cloud, as they were easier to develop, and businesses were initially hesitant to store financial data in the cloud.
Do I Need CRM, ERP, or Both?
Most growing businesses, from small and midsized companies to large enterprises, will eventually need both systems or a unified platform. Companies using basic accounting tools like QuickBooks or spreadsheets often turn to ERP when those tools become limiting. The same goes for businesses managing customer relationships through email or spreadsheets; they usually upgrade to CRM when they need something more robust.
Which system a business adopts first depends on its model. A company with few high-value customers and complex financials might start with ERP, while a business with straightforward finances but a large customer base might opt for CRM first.
Ultimately, both systems are necessary for most businesses.
Key Features of ERP vs. CRM
| ERP | CRM |
|---|---|
| Financial Management/Accounting | Sales Force Automation |
| Order Management | Customer Service/Contact Center |
| Production Management | Marketing Automation |
| Supply Chain Management | Customer Self-Service |
| Warehouse Management/Inventory | |
| Procurement |
Integrating ERP and CRM Systems
ERP and CRM systems must share data to function well together. For instance, a sales team may need access to a customer’s order history or payment status during upsell or cross-sell attempts, while the finance department might require CRM data to calculate sales commissions.
A CRM built on an ERP platform provides advantages to leaders who need to analyze pricing or monitor key metrics like customer acquisition costs and customer lifetime value.
A common process that demands tight CRM-ERP integration is configure, price, quote (CPQ). CPQ tools depend on data from both systems, and many vendors offer pre-built integrations. However, these integrations can be costly and tricky to maintain when the systems are updated.
Unified ERP and CRM Systems
Many companies using ERP focus on the finance module, but adding CRM for better customer communication is often the next step. Unified ERP-CRM platforms are usually more cost-effective and provide real-time data, eliminating the need for batch updates or middleware.
Systems designed for ERP can handle transactions better, making them easier to customize and integrate with third-party tools.
Discover how NetSuite can help businesses grow with a unified suite for financials, operations, and commerce.
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