In the simplest terms, ERP and CRM are very similar, but suited to different purposes. They are both applications that allow employees to share and coordinate information throughout the organization… while also giving executives access to reports and forecasts based on the data collected within these systems.
The way I see it, companies can only grow their profits in 2 ways:
• Increase sales
• Reduce costs
These can be thought of as 2 opposing forces, requiring 2 completely different strategies. For this reason, it would make sense for organizations to manage these 2 forces separately:
- Customers and sales can be managed via a Customer Relationship Management system (CRM)
- Employees and productivity can be managed via an Enterprise Resource Planning system (ERP)
Customer Relationship Management (CMS)
Most newer or growing businesses are simple enough that they don’t need an enterprise-wide set of integrated systems to manage their workflow. For them, the REAL challenge is getting those first customers and proving the business model.
However, since customer acquisition is a substantial cost center early on, there is definitely value to be gained in having a single system that combines Marketing, Sales, Contact Management and Customer Support.
When you combine these areas of the business, you keep a high-level view on the progress of your marketing activities and locate areas for improvement.
A good CMS should also help you forecast revenue by tracking the progress of your pipeline.
Many modern CMS systems even provide marketing and sales automaton functions, such as automated email.
Enterprise Resource Planning (ERP)
Once a company has achieved critical mass, they reach a point where cutting waste becomes a more effective revenue-generation method than increasing sales. (It’s easier to cut costs by 5% than to increase sales by 5%)
Another challenge presented by growth is lack of organization which can lead to expensive errors and poor customer satisfaction.
This is usually the point when a company will start looking into an ERP system.
ERP software has been around for quite a while. But they’ve mostly been the domain of larger, established companies. Earlier systems were strictly focused on operational areas of the company such as Finance, HR, Manufacturing and Order Management.
- ERP systems help to standardize business processes, ensuring that information remains structured and useful. This is critical when you have 5 different departments – each with 10 employees – all generating business data.
- Using ERP, employees across the organization can find, store and share information from a centralized repository. This ensures more efficient processes and workflow with fewer errors, while eliminating the need to transfer, re-enter or duplicate data.
- For executives and management, ERP systems can give clear insight into the state of the organization, and assist them in locating opportunities for efficiency and productivity improvements. This is where the REAL value of ERP can deliver, by helping drive corporate strategy.
Although ERP – in the traditional sense – has usually been thought of in the context of internal operational processes, modern systems have also crossed over into other areas such as those traditionally covered by CMS system. Some ERP components are even designed to integrate with external entities such as suppliers and banks.
Hopefully, this overview has been helpful in showing the difference between ERP and CMS. In future posts, I’ll try to dig down a bit further and give a bit more insight into these concepts.
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