Table of Contents

Difference between CRM and ERP is much deeper than you think.

Read Time: 7 minutes

How do you choose, whether you need a CRM or an ERP? Or both? The question is much trickier than it looks on the face of it. You will find the answer in this article. 

Most of the people think that there is just a difference of a few modules in CRM and ERP. But the difference is much deeper. In fact, the philosophy and psychology of both platforms are very different. 

Yes, sometimes, CRM related modules are included inside an ERP system, but the fundamental purpose of both the platforms is different. 

The difference in philosophy between CRM and ERP

Purpose of ERP is to MEASURE MONEY and MATERIAL, apart from other things. At the same time, the fundamental purpose of CRM is to MANAGE PEOPLE AND PROCESS for better customer experience. 

Measure v/s manage is the core difference in the focus. Before we understand the above line in detail, let us know both the platforms individually and list out the difference. 

What is CRM

CRM or customer relationship management is the system to manage the entire life cycle of the customer experience. It includes functionalities for marketing, sales and customer support. 

A few decades ago, CRM meant only having a database of customers with their transaction details. But that has evolved now. 

Now CRM software has modules to bring in the customers, engage them, which we refer to as a marketing function. 

Then there are modules to handle Sales functions, to help the customer buy the product. Generally, these sales modules are configured according to the buying journey of the customer. 

Finally, there is a customer support function that is handled by the CRM system. Support includes ticketing, AMC (Annual Maintenance Contracts) management, SLA (service level agreement) management, RMA (Return Material Authorisation), and such other functions. 

Cross-selling is an important function that is now generally part of any good CRM system. 

The role and functionality of CRM have evolved a lot in the last few years. First, now it is mobile and cloud-based. Secondly, now it is more complete and encompasses the entire customer lifecycle.  

What is ERP

While CRM deals with managing the customer experience, ERP solution is used to manage entire business processes. It generally includes modules like Accounts, Finance, HR, SCM, Inventory, production and even CRM. 

The core focus of the ERP system is to get streamlined and standardised reports from all the departments. The purpose is always to help the organisation to reduce costs and increase profitability.

Accounts and finance handle all the cash, bank, sales, purchase and other financial transactions and help to create the final accounts statements like profit and loss account and balance sheet. 

Production and Inventory happen to be the core part of any ERP system. Managing Inventory is much more complicated as compared to handling finance and accounts. 

Almost any ERP software generally has modules for SCM (Supply chain management) and HRMS (Human Resource Management System). 

Practically, in the market, there are different types of ERP systems available at very different price points. Obviously, a 20,000 Rs ERP system is not the same as a 20,00,000 (20 lac) Rs. ERP system. Every vendor tries to define ERP as per their own convenience. 

To know more detailed information about CRM and ERP

Difference between ERP and CRM

What does CRM manage?

  1. Sales CRM is used to manage the Sales Process and Tracks Sales team. 
  2. Captures lead (enquiries) from all the sources and helps analyze lead sources and marketing activities. 
  3. Enables Sales follow up and captures all the activities done by the salesperson. 
  4. Monitors whether sales goals and objectives are achieved or not. 
  5. Time and cost analysis of the Sales (and support) team’s efforts. 
  6. Manage Customer service by capturing tickets, tracking them and resolving. 
  7. Analysis of sales funnel, forecast and targets. 
  8. Enables sales executives to perform at their best and at the same time, help sales managers to coordinate and coach as required to achieve targets. 
  9. Manage and update Customer database, history and customer characteristics. 
  10. Enable personalised and relevant marketing, cross-selling and up-selling. 

What does ERP Manage?

  1. Basic Accounting. Record all the transactions and create reports. 
  2. Manage and report financial status.
  3. Inventory management and product movement. 
  4. Production management and optimisation.  
  5. Payroll management and other HR related functions, like hiring, onboarding and legal compliance. 
  6. Supply chain management functions. 
  7. Logistics management, in many cases. 
  8. Help in reducing costs of material, processes and even services. 
  9. Project management, where applicable and available. 
  10. Report complete 360-degree view of all the functions of the business. 

What they capture. 

While ERP records actual and factual data regarding money and material, CRM mostly records observations and feelings of the salesperson, especially in case of Sales and marketing. 

  • Factual and historical data in ERP
  • More of Estimates and Observations and feelings, especially in Sales.  

Why people make a mistake in differentiation 

Many people think that CRM and ERP can play the role of each other if certain modifications are made, which is grossly wrong. 

Most of the people who make mistakes are either first-time buyers of any of this platform or completely unknown to these environments. 

They think that since both are pieces of software and that too for business functions, both are similar. 

Managing a production or purchase team is significantly different from managing a Sales team. Why, because both function differently. Same is true for ERP and CRM System. 

Why does CRM not have an Inventory Module?

Although almost all the CRM platforms have products or items masters for managing AMC (Contracts Module) and Quotations module, it does not have an inventory module. 

Just having inventory masters is different from managing inventory. Because managing inventory includes tracking of items, sales, purchase, inward, outward, return, scrap, etc. 

This cannot be done effectively in CRM because the basic architecture of CRM is not designed to handle this. It is designed to handle the Sales process. 

Also, managing inventory is much more complicated as compared to money (Finance and accounting).

Why? Because the value of Inventory changes with external and internal factors:

  1. Location of inventory v/s Money:
    • The value of money does not change whether it is in cash, bank or with anyone else. But the value of inventory (stock item) can change with the change in location. 
  2. Type:
    • Money does not have a type. A 100 Rs note is a 100 Rs note, anyway, we look at it. But the value of inventory changes with its type. E.g.: Scrap material, damage material, returned material, saleable item. Unfinished items etc.
  3. Possession v/s ownership. 
    • We might hold material owned by someone else, (material received invoice not received) or our material is in possession of someone else. This has to be tracked for inventory. 
  4. Serial number:
    • We don’t need to track the serial number of a currency note, but the serial number of an inventory item needs to be tracked. 
  5. Manufacturer:
    • Need to track the manufacturer of an inventory item. But for money, we don’t need to track that. 

But then sometimes, the sales team needs to know the final stock level while making a sale. How do you achieve that? Well, the best way is to integrate your CRM with your ERP. 

There are many CRM vendors in the market which claim to have inventory and accounts functionality and try to showcase it as ERP. But generally, that is not a very successful idea. Talk to their customers for the proof. 

To know more detailed information about CRM and ERP

Is CRM part of ERP?

At least that is what many ERP vendors claim. 

Most of the people think so, and rightly so since most of the ERP systems have CRM modules. But there is a very big difference between a dedicated CRM system and the CRM module included in the ERP system. 

See, the ERP has a much larger role to play. Also there is a difference in the focus area, as discussed before. 

Secondly, ERP is designed with the idea of reporting and creating MIS, whereas CRM is more focused on helping the Sales executives and Sales managers in their day to day activities also. 

So the obvious question is, do I need CRM even if I have ERP? The answer is YES. What is missing in CRM modules that are built in the ERP, you might ask? Well, the philosophy behind CRM is missing. 

Although there are many ERP systems, which claim to have CRM modules and functionalities, they thoroughly fail to deliver effective functionality for the sales team because the fundamental premise on which ERP is built is not suitable for a CRM system. 

What do I need ERP or CRM?

If you are looking for managing accounts, finance and inventory along with managing sales, then you should go for an ERP system. 

But generally, most of the ERP systems do not have an effective CRM functionality. That is because the psychology and philosophy required for both are very different. 

Most of the companies who go for ERP, generally go for a specialised CRM, which is good in the managing Customer lifecycle. 

Conclusion in one line: Even if you go for an ERP, you need a CRM, if you are serious about managing Sales, marketing and support.  

That brings us to our final topic of discussion: Can we and should we integrate CRM and ERP systems. 

CRM ERP integration

The best example in India is the integration of Tally ERP with Sangam CRM. Integrating CRM and ERP gives us the best of both the worlds. 

Also, the cost is significantly reduced.

The main advantage of integrating CRM and ERP is the reduction of duplication of work.  

Sending
User Review
4 (1 vote)

Leave a Reply

How to prevent failures in buying, implementing, and using CRM

All CRM company tells what CRM can do but no one tells you what you have to do

First CRM Book by CEO of CRM Company