ERP vs CRM: Which Should You Bet On?

Trying to find the winner in the ERP vs CRM competition is challenging for many businesses. Understanding how each of these systems works and how it can benefit your company will help you decide which one is right for you.   

Enterprise Resource Planning (ERP) and Customer Relationship Management (CRM) are two types of powerful software that help businesses handle a number of important tasks, from taking care of back-office workflows — ERP — to customer life cycle management — that’s what CRM covers. Both systems have a lot in common and aim to boost business growth and success. Some of their features overlap, but there are also noticeable distinctions that shouldn’t be ignored when facing a CRM or ERP dilemma. To help you figure out what your business really needs, we will describe the central functions of each system, determine the cases that require CRM, in which ones you’ll need ERP, and when it’s time to adopt both.

CRM at a Glance 

The primary purpose of the Customer Relationship Management software, as the name implies, is to help customer-facing teams manage relationships with the company’s leads and customers. It includes, among others, automating and streamlining repetitive tasks such as tracking purchases and deals, managing tickets, scheduling regular meetings, and preparing customizable analytical reports. As your company grows, so does the complexity of data, making it increasingly difficult to keep track of all the ongoing processes. No wonder, human errors such as forgetting to update a spreadsheet or mistakingly duplicating customer data, become more habitual and can significantly impact businesses. CRM keeps all this information in one accessible place and provides organizations with a 360° customer view, connecting the dots between marketing and sales data, and facilitating collaboration between the customer-facing departments. 

According to Nucleus Research, CRM pays back $8.71 for every dollar spent, leading to impressive ROI with the CRM system. Most businesses view building and maintaining relationships with clients as the number one goal, which prioritizes investing in CRM during the first five years after a company is launched. Grand View Research indicates that around 82% of organizations use CRM systems for sales reporting and process automation. CRM has become an essential business software that enables companies to increase sales through improved customer service and retention. 

ERP at a Glance

While CRM focuses on customer interactions and boosting sales, Enterprise Resource Planning is usually heavy-duty software that unites different aspects of your business such as financial management and accounting, human resources, and supply chain management into one single database accessible to all departments. The main role of ERP is to provide data integrity by tying together all the functions and processes across your business, ultimately leading to a reduction in costs and an increase in the visibility of your operations. Just like CRM, ERP uses real-time information to help management respond to business needs more efficiently. 

According to the Panorama Consulting Group, 93% of businesses that implement ERP projects consider them a success. Research by the TEC advisory firm determined that the top three benefits businesses said they gained from an ERP system are reduced process time, increased collaboration, and a centralized data system.

In order to make an informed decision between CRM and ERP software, let’s explore each system separately.

When do you need CRM?

The CRM platform is an excellent tool to nurture your interactions with the clientele. Without it, you are unlikely to sustain the relationships with your customers on an appropriate level. Here are the sure signs that your business cries out for a life preserver in the form of CRM.

• You’re swamped with manual processes

Despite the digitalization that occurs in various types of business, many organizations still manage their data manually, wasting precious time on looking for a particular customer record, keying in new leads by hand, reformatting rows and columns, etc. Instead, they could use this time to convert leads into paying customers and let the CRM system do the job of organizing and pulling the necessary data. 

• Your customer data is all over the place

Has your data ever been scattered around multiple spreadsheets, emails, or, maybe, post-it notes? Don’t say a word — the answer is probably, yes. The problem with it is that you might need to spend hours or even days looking for the necessary information. Furthermore, with manual data entry, you might encounter many duplicates, typos, and other human-caused mistakes. CRM software helps to avoid them by automating the processes related to entering the information and updating the records. Cloud-based CRM also allows you to share the data among employees in real time, saving you and your colleagues from unnecessary emails and phone calls. 

• You lose track of your leads

When tracking your sales leads manually, you have fewer chances to turn them into loyal customers due to the lack of a unified, visible sales funnel. So what’s the point in increasing your lead flow, if you can’t keep up with it? Sorting, analyzing, and prioritizing your contacts have to become a priority. CRM is here to help. 

• There’s little to no interdepartmental collaboration

When your clients and leads interact with your company, they may find themselves bounced around and misinformed because there is no clear vision within your department on how to handle their requests or inquiries. The clients become increasingly dissatisfied with the level of customer service leading to higher levels of complaints. 

Also, without a CRM, you don’t have visibility of what your sales team is doing, so it gets easier to miss out on the opportunities within a pipeline such as bid invitations, prospective sales deals, important new leads, and more. When all the stakeholders can share and exchange purchase history and other relevant customer data, it enables you to deal with customers in a united and cohesive fashion. 

• You don’t know your clients the way you should

In many instances, customer data is not connected to a focal point, making it difficult to gather statistics and other relevant information on your customers. This results in considerable gaps in information on your leads and clients and misinterpretation of your customer’s preferences. CRM keeps track of all customer information, allowing you to better tailor your products or services to your clients’ needs. 

• Customer service leaves a lot to be desired

Your customers might communicate with you via a myriad of channels — phone calls, chatbots, social media, messengers, surveys, etc., — and their requests can become increasingly harder to track. If you don’t get comprehensive information on time, it naturally leads to low retention rates. When your customer service lacks automation, response times increase, and service quality declines, irrespective of how intensely your sales department operates. Meanwhile, by getting your data organized and managed by a CRM platform, you have a more centralized and well-controlled two-way relationship with your customers. CRM helps to digitize and automate your company’s outreach, facilitating marketing efforts, sales, and product delivery speed. The system also provides important assistance with personalization – a critical method of keeping customer attention. 

When do you need ERP?

Unlike CRM, an ERP system mostly focuses on your organization’s internal processes. For example, when you’re under a deadline to submit an accounting report and it takes ages to retrieve the required information, ERP can help. Here are some other issues that could indicate you need an ERP solution:

• You’re using disparate systems

After your software has been updated, the disparate systems you have might not work well together. For instance, new accounting software isn’t compatible with an old HR system. ERP provides a platform that keeps all these systems under one umbrella, ensuring their full compatibility and easy coordination. 

• Generating reports takes tons of time

Let us imagine a situation when you need to provide your stakeholders with an all-in-one report that includes your company’s spending, revenue, and the number of new customers for the last three months. Digging into each Excel spreadsheet and combining them into one report will take days.  This is too much effort and precious time wasted on something that could be done automatically. ERP gathers all this data in a single database with convenient and simple reporting options so that you can consolidate the necessary information into a beautiful report within minutes.

• You’ve outgrown the existing software

If the software sets limits on your market expansion and ability to develop by making it increasingly hard for the staff to complete tasks, chances are that your business has outgrown your legacy software. The good news is that you don’t necessarily have to dump your outdated system. If done carefully, the integration of the existing databases and software with new ERP solutions will become a success — just make sure that you’ve analyzed your current software, discovered any flaws in the processes, and made the necessary fixes.

• Inaccurate inventory

Keeping track of the inventory, especially in big companies with many remote warehouse locations can be a challenge. When your sales, customer, and inventory data is not synced, the situations wherein you have insufficient or excessive stock will become commonplace and can impact your company. ERP inventory management system keeps all items in one single easily managed database reducing human errors, eliminating guesswork, and helping efficiently manage available resources. 

• Accounting management is tedious

As you watch your staff spending hours every week manually entering paper-based invoices and sales orders into different accounting and sales systems, you are probably wishing that there could be some system that could simplify and automate the process. Since an ERP keeps all information in a central database, there is no need to enter data into multiple systems. Moreover, with effective electronic document processing available through ERP, paper-based invoices and orders are quickly becoming a thing of the past. 

• IT management is a nightmare

Managing multiple software systems simultaneously can be quite painful for your business. Customizing these systems, integrating them, and updating with patches and upgrades is complex, costly, and saps critical time. If your patchwork of systems includes on-premise legacy software, system upgrades can be more trouble than they’re worth, whereas having an ERP instead of multiple disparate systems requires way fewer resources spent on its enhancement. Not to mention a cloud-based ERP, which is updated automatically.

CRM or ERP dilemma: three things to consider while making a major business decision

Having explored different features and functionalities of both CRM and ERP software, let’s get back to the same question we posed at the beginning of this article: which one of these two to opt for? We recommend considering several factors:

Business needs. If your business is primarily customer-oriented and you need software that is designed to help your sales and marketing teams handle their work more efficiently, then you should consider CRM. If you are looking for a system with a diverse and broad set of capabilities to automate various processes within your business, such as financial management, accounting, inventory, etc., then you probably need an enterprise-wide solution. You can also integrate a customer relationship management module in your ERP. However, these modules are usually not as effective as an independent solution, so if you focus on sales, you’d better get a separate CRM.

Investment. The amount of money you are willing to pay for the software is another critical issue when hesitating between the two systems. CRM is usually cheaper while ERP needs a larger investment as it’s a bigger piece of software that serves the needs of the entire organization. However, with various solutions offered on the market today, sometimes a detailed, high-quality CRM costs more than a simplistic ERP. Besides, considering CRM and ERP in cloud computing, you need to take into account that the subscription price will rise in direct proportion to the amount of data stored in the system. So if the number of customers is estimated in tens of thousands, you will probably pay more for a CRM rather than an ERP. 

Scale. The size of your business also determines which system would be more beneficial to you: CRM is great at providing benefits to small and mid-size businesses, while ERP is more valuable to large, complex organizations where it can provide potentially huge ROI. For example, if the company’s focus is B2C, then a separate CRM system might be a better solution. For industrial factories, where the organization of internal processes is becoming too complex, ERP is definitely a better choice. If in doubt, you can start off with CRM and then purchase an ERP, integrating one into another. 

The chart below showcases the capabilities of both systems.

If large organizations are equally interested in reducing costs and increasing sales, they can’t do without a high-quality CRM system. At the same time, ERP is not only limited to large-scale enterprises: if a small or medium business is rapidly growing, it most likely will need an ERP. While CRM is synonymous with growth, retention, and customer satisfaction, ERP is effective when it comes to optimizing the resources that you’ve already amassed. In many cases, it’s about growth to the same extent as it is about optimization. In such cases, you may want to consider deploying both systems.   

Even if you can’t implement them simultaneously, there’s always the option to start with the system that meets your major requirements first, and then combine it with another solution later. By CRM integration with ERP, you can exchange information through a single source and collect feedback simultaneously. With all data in one place, you can leverage it easier.

CRM and ERP software is beyond a versus question

As two different systems, CRM and ERP are not direct competition. Each of them performs its own functions and helps your business in its own way. To choose the right platform, you should investigate the issues that your company faces, examine the complexity of your internal processes, analyze the level of your company’s involvement in sales and marketing, and determine the amount of money you are willing to spend. If you think that you might make good use of both, there is no need to limit yourself to just one of the options. ERP and CRM systems can complement each other so that your company will save on costs and expand to new markets at the same time. Both systems can work in sync, and be fully integrated into each other helping your business grow and win more customers.