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The Difference Between CRM and ERP

The Difference Between CRM and ERP

20 November 2020

What is the Difference Between CRM and ERP?

While the entire organization will come to rely on both ERP and CRM systems, the fundamental difference between ERP and CRM is that ERP is primarily for financial data and the finance department, while CRM is customer data used by the sales and customer service departments. The former is commonly referred to as the back office, and the latter is the front office.

Some ERP systems include a CRM component, while others do not, but CRM software systems do not include ERP components. For example, Salesforce.com is not an ERP system because it does not handle transactional data. It may access order history or invoices, but that data is brought in through an integration with the ERP system.

 

How are CRM and ERP Similar?

ERP and CRM are both business applications that store and analyze data in a relational database. Both are delivered either through a traditional on-premises model or through software as a service (SaaS), where the vendor manages the software in its own data center and customers access it through the cloud.

While NetSuite and Salesforce.com, the two pioneers in SaaS ERP and CRM respectively, got their start around the same time, CRM systems were quicker to move to the cloud because the systems proved simpler to build and businesses were initially wary of putting financial data in the cloud.

 

Do I need CRM or ERP or both?

Nearly all growing companies, from small and midsize businesses (SMBs) to enterprises, will eventually need both an ERP and a CRM system — or a single platform for both. Companies running their financials on entry-level accounting tools like QuickBooks or even spreadsheets often turn to an ERP system when they find those systems are holding back their growth, are inefficient or they simply need something more robust.

The same can be said for businesses managing their customer relationships in individual sales reps’ email clients, spreadsheets or contact management systems. Whether a company first invests in CRM or ERP will depend on its business model. A company with a small set of high-value customers and complex financials might be more apt to first invest in an ERP system, while a company with relatively straightforward financials and a large customer base requiring frequent contact might do the opposite.

Ultimately, however, both systems are essential for most companies.

 

Integration of ERP and CRM Systems

ERP and CRM systems do need to be able to share data, and this is better done through a technical integration vs. having two sets of data that need to be maintained separately.

The finance department might need access to the CRM system to calculate sales commissions when they run payroll or bulk order discounts. A CRM system built on top of an ERP platform also creates advantages for business leaders who may need a consolidated way to examine pricing structures and manage KPIs like customer acquisition costs and customer lifetime value.

One common process that requires tight integration between CRM and ERP is configure, price, quote (CPQ). CPQ tools require information in both the CRM and ERP systems and are vital for many businesses. The larger CRM and ERP vendors typically have prebuilt integrations for one another that they or a third-party partner offers. However, these integrations can be expensive and difficult to maintain when the CRM or ERP system goes through an upgrade.

ERP systems with CRM built on the platform offer a number of advantages. First, unified ERP and CRM systems tend to be less expensive than purchasing both systems individually. Second, the unified data model means all information is updated in real-time, without having to wait for batch uploads or middleware connections. Finally, systems built for ERP from the ground up are better able to handle transactional processes. That means simpler programming, customizations and third-party tools.

Source: Oracle Netsuite  

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