With the constant evolution of tech, companies keep increasing their capacity to streamline processes, analyze real-time data and adapt their business to the future.
Two of the most sought-after technologies to manage and future-proof business processes are Enterprise Resource Planning (ERP) and Customer Relationship Management (CRM).
While both of these technologies allow companies to get a leg up on the competition, they are also distinctly different.
Adoption of ERP or CRM could be critical to your business’s success – but understanding the difference between ERP and CRM is crucial.
The short answer of the difference between ERP and CRM? Most businesses should have a CRM, but few businesses need an ERP system. If you're operating at scale you might benefit from the investment in an ERP to integrate your processes. But for smaller businesses, ERP is becoming less essential as other alternatives step in to tick these boxes.
Read on for our deeper dive into CRM vs. ERP to help you make the best decision for your business.
- What is ERP?
- Pros and cons of ERP
- When is ERP the best solution?
- Best providers of ERP solutions
- What is CRM?
- Pros and cons of CRM
- When should you use CRM?
- Best providers of CRM solutions
- Summary: ERP vs CRM – which solution is right for your business?
What is ERP?
ERP is a type of software designed to improve business process efficiency while reducing overhead and other costs. Although it's been around for years, it's not becoming obsolete just yet: the global ERP software market is expected to grow from USD 32.44 billion in 2017 to USD 49.03 billion by 2023.
While CRM’s focus is on boosting sales and managing interactions with prospects and customers, ERP takes a more holistic approach – cost reduction, increased visibility and streamlined processes.
In other words, CRM looks outward while ERP takes a look inside the business at what you’re doing and how efficiently you’re doing it.
When properly applied, ERP helps:
- Track business processes in real time in separate departments or cross-departmentally
- Let staff know when an issue outside their department might affect them
- Plan strategies departmentally based on total knowledge of the enterprise
- Manage orders and account updates automatically, triggering billing and order fulfillment
- Manage supply chains
- Track recruitment and new hires
- Manage HR information, payroll and benefits
Pros and cons of ERP
As your company grows, you might find that while you’ve got several software applications for various business activities, the platforms don’t interact well – if at all.
While solutions such as iPaaS can connect your apps, ERP can provide large corporations with even more complexity and customization to bring their activities closer together.
Pros of ERP
Adopting an ERP system is one way to help integrate communication, raise productivity and enhance efficiency across business aspects, such as:
- Order tracking
- Revenue cycle management
- Three-way matching to avoid paying an incorrect and perhaps fraudulent invoice
- Accounting for all the above tasks, such as revenue, costs and profits
Other pros of ERP include protections against crimes, such as espionage and embezzlement. With a strong ERP program, you can implement internal controls that prevent data tampering.
Cons of ERP
The disadvantages of ERP usually stem from using it in the wrong circumstances or a lack of investment and resources for adequate training. Some of these disadvantages include:
- Limited software customization
- Having to make changes to your specific business processes to match those set by the ERP
- Some ERPs are too rigid to allow for the changes you’d have to make
- Program can be quite costly
- If not integrated perfectly, a lack of accuracy can lead to inaccurate data and reduce the reliability of other apps
- After you’ve established a system, changing it is costly – on a financial and strategic level
- Company boundaries can become blurred, leading to accountability issues and a drop in morale
- If departments are hesitant to share certain sensitive information, the ERP won’t be as effective
- If actual customer needs aren’t that varied, an ERP might be too complex
Traditional ERP apps are also stored on your servers, which makes you responsible for hardware costs, maintenance, updates, and data backup and recovery.
However, some providers have switched to cloud-based solutions, and even offer the possibility to have a hybrid on-premises and off-premises ERP solution to match your business goals.
Has ERP become irrelevant?
With cloud-based tech becoming increasingly powerful, integrated and automated, it's easy to wonder if the time for ERP will soon be gone.
For many small to mid-sized businesses, ERP is irrelevant and you can get the results you're looking for with a powerful CRM and strong integrations to other SaaS apps. But if you have identified ERP as your best solution, make sure to choose a cloud-based ERP to streamline operations and future-proof your business.
For instance, with Sage Business Cloud X3 you can create a single solution for managing core business processes, including inventory, sales, customer service, finances and workforce – whether in the cloud or on-premise.
But take the time to decide if ERP is really the best decision for your business.
With an iPaaS (Integration Platform as a Service) like PieSync, you can enable your business apps to talk to one another and share the right data according to your own custom workflows.
If you're looking to streamline and automate core business operations, you have countless options ranging from easy-access automation tools such as ActiveCampaign and HubSpot, to enterprise-grade solutions such as Salesforce Pardot.
And with a powerful CRM, you can integrate your customer data, pipelines and workflows in one place.
When is ERP the best solution?
Each company has a different set of uses for which ERP could apply. When considering an ERP system, first check that a CRM, iPaaS or simpler automation platform can't tick the right boxes.
Next, check that these are the benefits you're after:
- Consolidating your financials for accurate forecasting and reporting while eliminating data funneling
- Tracking all costs attributable to doing business, such as rent, payroll, benefits and material procurement
- Identifying workflow and process bottlenecks while eliminating errors and enhancing communication
- Providing insight into ways you can increase your operational efficiency
- Maintaining legal and regulatory compliance with built-in fail-safes
To entirely comprehend the way an ERP system works, think of a human body. Accounting and financials are the backbone supporting all other actions within your company’s body. Your organization’s lifeblood, or internal data, flows through the ERP to sustain all departments and processes within your company.
Best providers of ERP solutions
Choosing the right ERP solution for your company is a big decision, and a lot of this decision hinges on the size of your organization. ERP systems aren’t one-size-fits-all in most respects.
Some of the best ERP providers according to company size are:
- Small businesses and those looking for an open-source solution – ERPNext
- Medium business – Sage
- Large business, corporation, or enterprise – SAP
With an app like ERPNext, you're in the best position to integrate your ERP with your other apps and keep your contact data in sync everywhere.
However, ERP is not the only solution. We mentioned the advantages of iPaaS and automation software earlier to satisfy some of your requirements, but let’s take a look at CRM and its benefits and drawbacks to see if it's a better match for what your business needs.
What is CRM?
A CRM (Customer Relationship Management) system is at the heart of many businesses. It's where all key customer data is held and is particularly useful for increasing sales from new and established customers.
CRM helps you improve relationships with your customers by consistently improving experiences for leads and customers alike. With a CRM, you can develop stronger connections with leads and ensure reliable and high-quality services as you transition those leads to customers. As your new customers transition to loyal customers, long-term profitability increases.
In other words, CRM looks outside your company and focuses on the customer experience. This is one of the most critical differences between ERP and CRM – while ERP helps you with internal processes and management, CRM assists you on the sales and customer service ends of the spectrum.
For most businesses, a CRM is relevant from day one, while an ERP is only required after a lot of scaling and additional complexity in your business operations.
A good CRM can help you:
- Seamlessly manage your customer data in a centralized place
- Improve your response times
- Identify new prospects more efficiently
- Create and deploy successful marketing campaigns
- Streamline the sales process
- Analyze interactions between sales staff and customers
- Identify customer purchase patterns
- Offer better customer service
- Facilitate repetitive task automation
Pros and cons of CRM
Pros of CRM
Just like ERP, CRM also has its own sets of advantages and disadvantages. Some of the advantages of CRM include:
- Customer data collection
- Remote access for cloud-based systems
- Integration with the rest of your tech stack
- Faster conversions
- Simplified and targeted marketing
- Improved customer and sales staff interactions
- Lower daily costs
Cons of CRM
CRM is much more essential to the running of the average business than ERP, and disadvantages tend to be caused by a poor software choice. These disadvantages can include:
- Overhead costs for costlier systems
- Elimination of the "human" element if good personalization isn't in place
- Security deficits if the correct processes aren't followed
- Lack of tech support
- Messy data if proper clean-up processes aren't implemented
- Access to data by third-parties
When should you use CRM?
CRM is a great solution used by a multitude of companies regardless of size. CRM platforms allow you to interact positively with current customers, new prospects and leads. This type of solution provides businesses the ability to create beneficial relationships between the company and its customers.
CRM is a good choice if you’re looking to reach beyond your current customers to highlight your services to prospects, all while providing a more personalized purchase experience. For most businesses, it's a no-brainer.
Best providers of CRM solutions
Just like ERP, CRM solutions vary according to the size of your business. Some of the best CRM providers according to business size include:
Summary: ERP vs CRM – which solution is right for your business?
Faced with the similarities and differences between ERP and CRM, you should keep the following three factors in mind:
- What do you really need?
- How much are you willing to invest?
- Is scalability important to you?
While these two business solutions have some similarities, both serve a different set of needs.
|Helps boost your raw sales figures||Helps reduce each cost of sale|
|Is normally less expensive than ERP||Is usually a large, up-front investment|
|Scales much easier, especially for new businesses expected to grow over time||Scales well, but offers better benefits to larger, more complex companies|
If your business isn’t ready for the full-scale investment of an ERP solution, you can always opt to begin with a good CRM and either integrate with or move entirely to an ERP solution later.
Looking at this comparison, you might also decide that a combination of both ERP and CRM is best for your business, which can provide a strong integrated solution for larger companies that need the complexity.
When you’re ready to select a business solution, whether you choose ERP or CRM should be based on what your business needs right now and where you're planning to take it next.
If your aim is sales and marketing improvements, but your financial or HR processes are fine as-is, you should consider a good CRM system.
If you find, however, that there are several departments or individual processes in your larger company that could benefit from a complete overhaul, a robust ERP solution could be better suited.
Once you know the advantages and disadvantages of each option – and the scope for a hybrid solution – you're in the best position to adapt your tech stack to match your business needs.