CRM vs ERP: What's the Difference and Which Should You Choose?

The difference between CRM and ERP comes down to scope. A CRM (customer relationship management) system runs the front office: prospects, sales pipeline, marketing and customer service. An ERP (enterprise resource planning) system runs the back office: finance, purchasing, inventory, production and HR. Many companies use both, connected so that customer, order and invoice data flow between them.

Introduction

Embracing digital transformation often involves choosing between different paths, and CRM and ERP software frequently come into play; while they point towards the same direction (improving performance and supporting growth), they address distinct functionalities and challenges. So how can you avoid feeling lost and choose the most suitable path? Confusion between these two widely used types of management software is frequent and can hinder their adoption; CRM or ERP, that is often the question! While these two types of tools address common objectives, their functional scopes are indeed distinct. Understanding the differences between CRM and ERP software allows you to deploy the tool best suited to your objectives… even if that means choosing both.

CRM and ERP: What are the differences?

Definition of a CRM

CRMs are customer relationship management tools; they allow you to centralize all data related to your customers and prospects, to personalize and effectively manage your interactions with them, and to optimize your sales efforts to, ultimately, maximize sales. Thanks to the centralization of customer information in a single tool and the analysis derived from it, marketing actions to be taken can be more easily identified and automated.

Definition of an ERP

ERPs, on the other hand, are resource management software solutions. They allow you to manage all operational processes of your company within a single centralized system (logistics, sales, finance, human resources management, etc.). By offering a 360° view of operations, ERPs enable improved team productivity and efficiency, cost reduction, and more informed decision-making.

CRM and ERP: Key Differences

A CRM generally does not offer the functionality of an ERP, and vice versa, even though some suites cover both scopes. By definition, the two types of software do not address the same challenges: CRM software will focus on the customer/prospect and aim to increase sales, while ERP software will streamline and plan company resources to optimize costs.

These challenges are addressed by distinct user types:

• CRM software will be a valuable tool for marketing, sales, and customer service teams;
• ERP software is used more by finance, purchasing, logistics, production and HR teams, as well as by executives and operations managers.

Finally, the deployment of these solutions does not come at the same cost: an ERP is generally longer to implement and more expensive than CRM software, because it touches more processes. Adopting an ERP is more justified for companies of a certain size, with complex operational processes (industry, commerce, logistics, etc.).

CRM vs ERP: comparison table

As Oracle sums it up, CRM systems support and connect front-office functions (marketing, sales, customer service), while ERP systems connect back-office functions (finance, supply chain, HR). In practice:

The overlap runs mostly one way: according to Oracle, many ERPs contain CRM features, but CRMs do not handle ERP transactional data. For a closer look at the main vendors, see our comparison of the best ERP software. Keep in mind that the examples above are product families: a vendor such as Microsoft or Oracle sells CRM and ERP applications separately, so check which module actually covers your need before comparing prices.

CRM vs ERP: Making the Right Choice

As you've probably gathered, the choice between a CRM tool and an ERP tool primarily depends on your company's objectives, the scope of your needs, and your available budget:

• If you want to improve customer relationships, support your sales team's activities, and boost sales, a CRM like Salesforce will be the most suitable choice;
• If the priority is to streamline and optimize your company's organization and reduce management-related costs, an ERP like SAP will be more effective.

Good to know: Some hybrid software solutions, such as Microsoft Dynamics 365 or Oracle's cloud applications allow you to combine the functionalities of both tools.

Should you start with a CRM or an ERP?

Rather than "one or the other", the real question is often which comes first. Some guidelines:

• Start with a CRM if your immediate challenge is commercial: little visibility on the pipeline, prospects tracked in spreadsheets, missed follow-ups, a growing sales team.
• Start with an ERP if your problems are operational: re-entering data between accounting, purchasing and inventory, invoicing errors, production that is hard to plan, painful month-end consolidation.
• Choose a suite that covers both if you are a small or midsize company with simple processes and want one vendor and one database.
• Connect two specialized tools if each function has advanced needs: a leading CRM for sales and a robust ERP for operations, linked through APIs or a connector.

In every case, decide from the start which system is the reference for each piece of data (customer, item, price, order) to avoid duplicates and conflicting updates.

Complementary Software

The combined use of CRM and ERP is often recommended, given how complementary their functionalities are.

Data collected by CRM software can be used to feed the ERP system and improve resource planning and management based on customer needs. For example, if a customer orders a specific product, information about that product can be used to trigger an order for raw materials from suppliers and to plan production based on demand. Similarly, information collected by ERP software, such as inventory levels, pending orders, production costs, etc., can be used to improve customer interactions and provide them with more precise information on delivery times, prices, available quantities, etc. However, you must ensure that data from both software systems can easily communicate with each other to support your streamlining efforts. You can also choose a single suite that covers both CRM and ERP. Integrating CRM with ERP helps break down barriers between different company silos, consolidate data into a single point, and provide all employees with a comprehensive understanding of the business and your performance.

Train your employees with Knowmore

The deployment of your CRM and/or ERP tools will only be effective if your teams understand their purpose and how to use them. Implementing this new software necessarily involves new working methods and new habits; it is essential that your employees embrace them to reap all the benefits.

Knowmore offers tailored solutions to quickly train your employees on any type of web, CRM, or ERP software used in your company. With in-app guidance and software simulations, your employees learn directly in their applications, when they need it.

Discover our onboarding solutions now at Knowmore.