The Difference Between CRM and ERP

Updated: April 30, 2009

Introduction

Organizations are increasingly trying to tie applications together — especially business-critical solutions like CRM and ERP. Many vendors sell both CRM and ERP products, often promising that data from CRM will have a positive impact on decisions administered by the ERP solution. But the two technologies are very different in focus, and allowing too much ERP influence to creep into CRM can shift your company's emphasis away from where it should be: the customer.

CRM and ERP have a collaborative relationship. Imagine that CRM is the point of a large V that faces outward to your customer base, where it is used to track and predict sales. To back up that effort, information coordination with the sales department's sister organizations — finance, manufacturing, product development and marketing — smooth the way. But how do these teams communicate with each other effectively? That's where ERP comes in. ERP is an internal system that coordinates information between various departments and ensures the lifeblood flows through your enterprise to help profitability.

Analysis



Getting Buy-In
: All departments need to communicate what they contribute and what can be gained from collaboration to generate buy-in. Ideally, an overseer or project planner not associated with a particular function can bring all the stakeholders together.

Ownership: All players should consider their area as an element of the whole enterprise and work in concert with each other. Concealing proprietary information about customers or other aspects of doing business is detrimental.

Security: After departments agree that they should share information, protection must be offered for confidential employee, customer and industry data. A system to grant access to information is needed.

Common Data Formatting: Data already exists in each department that is useful to the organization. Back-end data from all departments, for example, is valuable to the on-the-firing-line sales team. But sometimes, the processes of sharing information are flawed. Make sure data isn't unnecessarily duplicated. Review information to ensure that it is not contradictory or out-of-date. The data format should also be the same for each department to avoid confusion.

Scalability: Any ERP system should accommodate enterprise growth and cross-company communication with business partners.

Cost: The initial cost of ERP can be high if communication between departments is seriously lagging. Implementing your solution might be done effectively in stages, perhaps growing outward from an existing CRM system. Ultimately, the improvement in focus on the customer should pay off.

Oracle Corp., SAP AG, IBM Corp., Microsoft Corp. and others are creating integrated software for CRM and ERP that can be specific to everything from HR to manufacturing to e-commerce. ERP can be implemented in stages, and a lot of software is now Web-based or open source.

The difference between CRM and ERP is that the former is outward-looking, while the latter is inward-looking. Building an organization that can accommodate both views is crucial to improving your bottom line.

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