Both CRM and ERP systems handle contacts, companies, quotes, orders and forecasts… and they may handle line-item configuration, bundles, delivery schedules and invoices. Where does one start and the other stop? Behold this guide for the bewildered
The footprints of enterprise resource planning (ERP) and customer relationship management (CRM) systems seem to overlap — they both handle contacts and companies and lots of details about orders. Indeed, several ERP vendors claim that CRM, HR and the scheduling of executive golf outings are part of the ERP domain. Consequently, there is sufficient vagueness and confusion on these topics to …ahem… cloud the issue.
Since there’s not much confusion about who uses ERP vs. CRM systems, let’s start there. The main users of CRM systems are in the sales and support organizations – they are ultimately customer-facing and they don’t do the actual work of producing and fulfilling orders (they just yell at the people who do that). In contrast, the ERP users are focused on the process and logistics of producing the widgets: factory managers, production schedulers, buyers, supply chain types and finance types. ERP users are internal and supplier-facing, rarely calling a customer except to reply to a complaint of some kind. The ERP and CRM users do not party together, they work at different paces, and they would barely recognize the other group’s software as useful to them. Essentially the only people in your organization to have logins on both the CRM and ERP systems would be IT folks charged with integration, data warehousing or analytics.
Yet several ERP vendors have CRM offerings and Salesforce.com is increasingly encroaching on ERP turf. So, despite the disparity of user groups, these software vendors must be seeing a business opportunity. The challenge for us customers is figuring out how much of each kind of system to buy, and where we can “go light” versus insisting on best of breed.
For large enterprises, the decision has already been made: they need to have a full-fledged ERP system to manage multiple factories, distribution centers, supply chains and currencies…. They also need a full-fledged CRM system to manage their sales, support and some of their marketing functions across international markets. Amusingly, the Fortune 100 may already have several ERPs and CRMs, and the real work is integration and maintenance of the customer master. Thanks to system upgrades and technology evolution, that is an evergreen problem.
There are millions of smaller companies that will never face that issue, and can grow profitably with fragmentary ERP and CRM feature sets. For example, a professional services firm (engineering, legal, accounting, investment banking, etc.) can grow to significant size with little more than an accounting package and a contact management system. Yes, there will be problems as they grow internationally and make acquisitions, but a professional services firm can operate with multiple accounting systems and contact managers. Even if that approach has ugly warts, they will never be life-threatening.
Deconstructing ERP: Let’s look at the bedrock of ERP: financials. Every company – and even non-profit organizations – will need a financial management system. Financials mean transaction journaling, accounts payable, accounts receivable, treasury, tax, cashflow management, quarterly statements and reporting/decision support – the only areas that are remotely connected with CRM functionality are invoicing and revenue recognition.
At the next level of ERP is everything involved with making the factory produce the highest output of stuff that can actually leave the loading dock before quarter-end. The master production schedule, procurement, inventory management, distribution/shipping/fulfillment, supply chain management – those functions are connected to the CRM system in only one significant way: what has been ordered by whom, and what’s the forecast of orders.
At the highest level of ERP is optimization: coordinating production across multiple factories, warehousing and distribution, scheduling and sequencing discrete production to maximize profitability or minimize constraints, improving the performance of the supply chain, “reverse logistics” (aka “warranty returns”), hedging multi-currency cash positions, and of course tons of analytics and decision support.
To make all this work, ERP systems hold hundreds (or even thousands) of tables. Typically, the tables are fairly narrow and have multiple levels of children, and it is rare for binary large objects (BLObs) to be used.
But even with the ne-plus-ultra of ERP—the 360 degree view of the customer—the ERP system by itself does not have much detail about the customer relationship: that is nicely squirreled away in the CRM system. Only through extensive integration or data warehousing efforts do those 360 degrees become fully balanced. (Of course, SAP and Oracle will argue that you won’t need to integrate anything if you buy all your financials, ERP, and CRM from them. This single-vendor approach is an optimal solution for them, but for the customer…not so much.)
CRM and sales force automation: If the core of ERP is finance and factory planning, the foundation of CRM is sales force automation (SFA). While both systems operate on contacts, companies and orders, they work in very different contexts. The ERP user is almost entirely focused on hard facts from “done deals” – addresses of companies that are customers, orders that have been placed, and contracts that have been signed. In contrast, the SFA user is largely focused on things that aren’t true yet: people who might be purchasers, companies that might become customers, orders that we are chasing. Sure, there’s always account management and post-sale customer care, but that’s not where the energy is in a sales rep’s life.
CRM systems must support the following sales business processes:
- Lead qualification
- Early sales cycle (including demos and call scheduling)
- Forecasting and pipeline management
- Quote generation and order configuration
- Order confirmation and fulfillment
- Contract establishment and termination
- Ongoing account management
- Renewals and repeat orders
Of course, CRM systems such as Salesforce may extend into the arenas of ecommerce, customer service, call centers, and other areas of the customer relationship. Even for the most expansive CRM system, 99%+ of the data it stores is irrelevant to the ERP system (which has little use for speculation, and no use for orders that didn’t or won’t occur).
Even the simplest CRM system will use a dozen database tables to manage these processes, and some of the tables are quite wide (it’s not at all unusual to have 200 columns for the Account table) and tables may have several levels of children. CRM tables are mainly standard data types (almost never a BLOb), but unlike ERP systems, the CRM holds a lot of unstructured text and may hold gigabytes of documents. CRM systems typically have several integration points with other parts of the corporate infrastructure (such as the web site, contract management, electronic signature, ERP, shipping/distribution and accounting systems).
Obviously, the output of the CRM system should be an input to the ERP system. But that linkage should be only for those companies that are customers and orders that have been signed. Going the other direction, it is useful for CRM users to get read-only access to shipments, promise dates, invoices, outstanding balances and other information that customers may inquire about.
How integrated should CRM and ERP be? Salesforce.com subsumes order configuration, invoicing and (through partner products) financials and billing. Several ERP vendors subsume all of CRM under their umbrella.
If your company is large enough to need an accounting package (and let’s face it, that’s everybody), it is large enough to need basic integration with your SFA system (even if that’s just a contact manager). In this era of cloud computing, there’s not much of an excuse for using spreadsheets for this integration – but it still happens.
Thanks to Boomi, Pervasive and other low-cost integration approaches, the integration can be automated – and most of the time, the data rate is really low except for the last week of the quarter (read: daily batch is good enough as long as you don’t have a severe “hockey stick” in your order patterns).
The situation at larger companies is driven by two needs: supply chain and delivery/service management that may need real-time ERP-CRM interchanges, and data warehousing/analytics requirements that can typically be fine with a daily batch update cycle.
Due to GDPR and other regulations, it is essential to keep customer private and financial information in as few (heavily fortified) systems as possible. Consequently, integration becomes more a matter of pointing to the “one source for that data item” rather than shipping the data across multiple systems. This can make integration much more complicated, as application screens may have to be reworked to display data stored in a different database, managed by a different application, running in a different cloud. End\