ERP and CRM: Differences and Advantages of a Linkage

1. ERP vs. CRM: What are the differences between an ERP and CRM system?
2. What are the benefits of linking ERP and CRM for companies?
3. Who is suitable for using a CRM and ERP system?
4. What are the advantages of an ERP software solution with CRM functions?
5. How can ERP and CRM be connected?
6. Which systems combine CRM and ERP?
7. Conclusion and action recommendation

Do we need an ERP? Do we now need a ERP system as well as a CRM? Wouldn't it be awesome to have everything from one source? 

CRM & ERP systems – each 3 letters – but behind them are very different applications, strategies and objectives. Our guest author and CRM and ERP expert Dirk Emminger explains exactly where the differences lie, and whether you need both.

ERP vs. CRM: What are the differences between an ERP and CRM system?

First of all: The definition and differentiation of ERP and CRM solutions in the market are not clear and if you look at the individual applications, there are many differences. There are ERP and CRM solutions for specific industries, as well as solutions for different business processes. Both systems always aim to help companies with software to get processes under control, to work faster or more intelligently and to bundle data in a unified source. The differences are, however, very large.

Put simply, you could say that ERP systems (Enterprise Resource Planning) are solutions for corporate management and CRM systems (Customer Relationship Management) are solutions for sales and customer care. 

ERP systems therefore often include solutions from purchasing, materials management, manufacturing, financial accounting, human resources, warehouse and logistics, controlling and reporting. Even simple ERP software helps to manage or record all these business processes in one system. 

In the past, the introduction of a software was one of the biggest projects in a company and many projects led to very large and negative efforts. The reasons were often the individualization of the software and the technical implementation. Modern ERP systems are still complex - but they are now provided via the cloud in a SaaS model and use the latest technologies in terms of UX and integrations with other systems. 

In professional terms, an ERP system is often referred to as the "central nervous system of a company". In order to achieve the highest possible benefit, all data of the company or the respective company areas should be in the ERP system.

Departments where ERP systems are used and typical tasks:

• Finance: Management of accounting incl. closing of books, creation of financial reports, accounting and compliance with standards e.g. for revenue recognition, minimization of risks. 
• Procurement and acquisition: Request for quotations, contract creation and management. Setting up approval processes and automating procurement via CRM, ERP connection to marketplaces.
• Logistics and supply chain management: Tracking of resources/goods and deliveries through the entire supply chain incl. stock management, warehousing, transport planning. 
• Production: Production planning, documentation of manufacturing processes, material planning, optimizations and quality management.
• Management of company parts: Overview of existing and needed machines and devices, management of real estate, fleets
• Personnel: Classic personnel management, resource planning, payroll accounting, time recording

The importance of ERP software and the number of projects in companies continues to rise from year to year. Either through complete new investments when setting up an ERP system for the first time or through massive investments in the renewal of systems that have been running in companies for several decades. The big buzzwords in today's ERP environment are Cloud/SaaS, vertical integration also through APIs and higher personalization of content. Especially the latter is very important to increase the acceptance of systems. Modern ERP systems therefore take into account the development towards low and no code in order to allow quick adaptations. 

CRM systems are tendentiously the "smaller" systems compared to ERP systems and equipped with functions like contacts, quotes, orders, marketing activities, support and other functions for sales/marketing. The goal of a CRM is to support all tasks related to the development and expansion of business relationships. The possibilities of use are as various as with the ERP system and can affect several departments. In professional terms, a CRM is usually used in the areas of lead generation, customer acquisition, management of customer relationships and customer service. 

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Typical areas of application for CRM systems are

• Collection and use of all available customer data incl. product usage
• Preparation and execution of sales or marketing campaigns 
• Automation of sales processes 
• Evaluation of all available CRM data and derivation of optimization measures in customer relationships
• Reporting and planning of sales/revenue figures

In the past, CRM projects and the software used were often not much more than better address books and were mainly used for storage and documentation. Sales and Marketing automations were hardly possible due to lack of digital sales channels. Modern CRM systems nowadays have a variety of automations and noticeably ease the daily sales and marketing work. Good CRM solutions offer a high degree of evaluation and reporting functions. The big buzzwords are almost identical to those in the ERP environment, but are much more specific to customer/marketing and sales functions. There will be increased demand and new functions for the use of artificial intelligence, such as smarter chatbots, higher automation and better personalization. As in the ERP environment, low and no code will play a big role, because who wants to program for the development of a new marketing form or a product landing page today and has corresponding developers or resources.  

Source: fctb. GmbH (own representation)

The devil or the added value of both ERP and CRM systems is often in the detail. You should take your time when choosing. For example, there are special ERP systems for regulated companies such as banks and financial service providers, who would not be able to do anything with an ERP system for a machine manufacturer. Similarly, there are CRM systems with focuses on mobile sales, with which companies with a focus online cannot do anything. Therefore, during the introduction/selection, enough time or a good database should always be available for the selection of the suitable tool. At the same time, long-term use should be taken into account during the selection, as both systems are deeply integrated in the company and a change would be correspondingly expensive or elaborate. 

What are the benefits of linking ERP and CRM for companies?

The linking of both systems is a minimum requirement today, regardless of the industry or company size. Thanks to the technical capabilities of modern software, the efforts are low and the benefits outweigh.

Two examples from different areas:

Customer data: Since marketing, service and sales are all connected via the same data source, the customer information is always up-to-date. Details such as payment behavior, dunning status, creditworthiness and delivery times are easier to retrieve. This leads to a more comprehensive overview of each customer or supplier, e.g. returns can be tracked quickly, which without integration would have to be searched for in at least two systems.  

Product data: Product master data, which is created in the ERP system, is directly synchronized with the CRM. This means that sales and marketing can immediately see which products are available, sellable and should be the subject of the next marketing campaign. In return, a product management can also directly incorporate positive and negative feedback in the form of sales figures or reasons for complaints into the development. 

In addition to the specific examples, a link leads to the following added value:

• Streamlining of business processes
• Shortening of lead times
• Better and complex reporting

As mentioned before, the only thing against a link is the initial effort, especially when outdated software is being linked. If this is the case, you should check whether a replacement would not be more sensible. Small businesses or start-ups should choose systems from the outset that can grow in terms of skills and complexity. 

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Who is suitable for using a CRM and ERP system?

Clearly – every company! It doesn't matter if we're talking about a owner-managed snack bar, a decentralized working start-up, a medium-sized company or a corporation. Provided the budget is there, software like ERP CRM always makes sense. 

In every company there is information that should be stored in central systems and as soon as a company employs several employees, there are also different responsibilities. The question is therefore less whether or not, but rather the extent and complexity. In addition to day-to-day business, which suffers without such systems, further development also suffers. Incomplete data, missing documents, undocumented business processes do not allow a complete view of the company and it becomes difficult to control it. The running and one-time implementation costs should not deter any company from using appropriate solutions nowadays. In almost all areas, there are either free or cost-effective variants and many ways to build and combine small systems. 

Start-ups in particular should invest in systems early on, especially when current company figures are needed for talks with capital providers. Later scalability of employees and customers is easier with a software solution introduced early than later digitizing manual processes.  

What are the advantages of an ERP software solution with CRM functions?

Whether a CRM ERP complete solution offers advantages has to be judged individually based on the tasks to be accomplished and especially the depth of tasks. In general, modern CRM ERP solutions often offer sufficient functions for many companies. A combined product doesn't necessarily have to be cheaper in terms of acquisition, but it plays a role in ongoing operations, for example during updates or upgrades, whether one or two systems have to be maintained and tested. The number of interfaces in a combined product vs. isolated ERP CRM software is usually lower, which in turn affects the costs. A disadvantage of combined systems can be that they are not as innovative as individual systems. Therefore, it is important to check individually to what depth functions are needed.

Practical tip for selection and introduction:

Different departments tend to want to have their own systems and to have to deviate from a standard. Such special functions are often not really relevant in practice, do not bring any noticeable added value and should therefore always be backed up with a business case. 

Example: Sales needs an Excel and PowerPoint report for evaluations, because the built-in reporting functions are not sufficient according to the sales manager. Such an individual solution means one-time and ongoing maintenance efforts. Are these efforts in relation to additional income, time savings or is it just a wish, because it has always been done this way? In implementation projects, it has proven to be successful that a business case in euros must be set up for deviations from the standard. However, it is important to maintain the balance, as this could otherwise negatively affect the basic acceptance and use of the new software. Practice shows, however, that many "particularly important" individual functions do not provide any added value when looked at more closely.

Source: fctb. GmbH (own representation)

How can ERP and CRM be connected?

Integration and testing of redundant functions

Often (especially with older companies and existing solutions) a lack of integration is a problem because the software was purchased years ago from different departments. For example, a certain function was not available in the past, such as the ability to store customer relationship information in warehouse management. Especially traditional industrial ERP systems did not have customer data in the past. Basic CRM functions, like the capturing of master data or the storage of customer data, are standard in most ERP systems today. So it is important to check if systems and thus functions can't be merged. 

Interfaces

If the CRM functionalities are not sufficient, then interfaces are the easiest and best solution. Ideally, the system provider has a standard interface or a ready-made integration. Modern solutions have these standard interfaces (APIs) and exchange data at the professional/function level. This simplifies the integration and also the further development of interfaces. If there is no standard interface, it becomes more technical. Interfaces can then be realized e.g. at the database level of the systems. However, this is only possible and meaningful if there are well-documented data models on both sides and a unique mapping of the data can be guaranteed. 

Automation and integration tools

With an integration tool like Zapier, Make, N8N or also IFTTT, applications can also be easily and quickly connected and synchronized. These services all use so-called triggers, i.e. a triggering event, in one application to control an action in another. However, it should be noted that this means operating, observing and usually also paying for another software. The advantage is a high degree of flexibility and in addition to the pure connection of the systems, cross-system processes can also be automated. 

Which systems combine CRM and ERP?

On OMR Reviews you can find the best and most used ERP-CRM system providers. At the same time you see the existing functions and often a statement from users in which industries they use the solutions. The selection of an ERP or a CRM should be well thought out and through a catalog of requirements. 

If you are looking for a solution that can do both, then first think about which functions are most important to you and start your search with that. 

As a guideline, the following ERP system examples also have CRM components in their standard:

Microsoft Dynamics 365 Business Central

SAP S/4HANA Cloud, public edition

weclapp

Sage 100

Oracle NetSuite

Conclusion and action recommendation

• CRM and ERP are supposed to help get processes under control and make data in the company visible 
• ERP is the more comprehensive system that centralizes front and back office processes
• CRM mainly deals with sales and marketing processes 
• Which system is best suited depends on the scope of requirements and the budget
• A system that combines functions of ERP and CRM systems is usually more cost-effective than purchasing both systems individually. 

Linked ERP and CRM systems are definitely standard today. If a system is to be introduced for the first time or old systems are replaced, then a minimum requirement should be that the systems can be connected to each other via standard interfaces. Isolated systems with manual processes make no sense today. 

Whether a combined product or two systems suit your situation depends on the respective requirements. The less individual CRM or ERP functions are used, the more likely a combined tool will be sufficient. If quite innovative functions are used on one of the sides, then two systems are usually the better choice.  

A (if small) catalog of requirements with some typical use cases definitely makes the selection easier. Almost every supplier offers free and/or limited demo versions to carry out these tests. As a rule, it makes little or no sense to pack every conceivable and desired function in advance into an Excel or a function description. What makes sense is to involve several decision-makers from different departments in the selection process from the very beginning.

Especially start-ups and growing companies should look at the provider's roadmap or functions that will be needed later. Keyword: Internationalization. If it is planned to have several foreign locations at some point, then the cost-effective local system should be reconsidered. Also important are pricing models that remain flexible enough and also affordable later on - unfortunately, it happens all too often that systems offer top conditions for a few users with a few functions and as soon as a special function is needed or the number of users exceeds certain thresholds, costs explode.