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CRM vs. ERP: Understand the differences
Some companies may require CRM software in addition to their ERP system. Learn more about CRM vs. ERP and whether your company requires CRM software as well.
Many companies use ERP software, but some may require a CRM system as well, depending on their business needs. Company leaders should evaluate whether their organizations would benefit from purchasing CRM software in addition to their ERP system.
Some enterprise executives implement CRMs in addition to ERPs, while others opt to implement ERP software and use the ERP's CRM functions to handle the organization's customer relationship needs. A company's size, strategic objectives and data needs typically affect whether it should invest in a CRM as well as its ERP system.
Learn more about CRM vs. ERP as well as which organizations may require a CRM system.
What is ERP software?
An ERP system combines the day-to-day business processes of multiple departments, including finance and logistics. ERP systems also usually include customer relationship management functions.
Companies sometimes purchase new modules, such as a supply chain management module, to meet their specific business needs. ERP software is available through on-premises, cloud and hybrid options, with the latter blending on-premises and cloud.
ERP software can benefit organizations in various ways, including the following:
- improved visibility into company operations;
- higher standardization throughout the enterprise;
- improved adherence to business rules and processes; and
- improved collaboration.
What is a CRM system?
A CRM system collects and stores information from an organization's customer-facing functions, such as marketing and sales, and potentially automates some parts of the customer journey. Its purpose is to help companies better manage and understand their customer or client information.
Through a CRM system, users can track customer-related communications and leads, generate sales projections, create sales funnels to nurture prospective customers, and manage invoices, among other functions.
Newer CRM systems also include AI, which can produce additional insights to aid customer-related efforts.
The business benefits of CRMs can potentially include the following:
- higher conversion rates of prospects to clients;
- improved customer data organization; and
- better customer service overall.
Key differences between CRM and ERP software
While CRM and ERP systems share similarities, including their product types -- both are available in on-premises and cloud versions – and their potential usefulness for data analysis, key differences exist between CRM software and ERP software as well.
CRM systems specifically support customer-related business functions and processes, while ERP systems are designed to manage an enterprise's full range of functions and processes. Also, CRM software supports tasks related to the front office, which are the departments in a company that interact with customers directly, such as sales. However, ERP software supports mostly processes carried out by the back office, or departments that don't interact with customers, such as the finance department.
In addition, since CRM systems focus on a company's customer relationships, CRMs often have more advanced customer-related capabilities than those offered by ERP systems.
Company leaders may opt to purchase a CRM system in addition to ERP if they believe their new ERP software's CRM features will be inadequate or if their ERP system's CRM features are failing to meet the organization's needs.
For example, if a company has thousands of customers, the organization may require more than an ERP system's comparatively basic CRM capabilities to manage its customer relationships.