What is the Difference Between ERP and CRM?

On the surface, an ERP and a CRM system might look like they have a lot in common. 

Both are data repositories that provide a single source of truth for the entire business. Both are used to streamline operations and improve the customer experience. And – both play a central role in optimizing revenue. 

But –  each system supports these goals in its own distinct way. 

The main difference between the two is, the ERP is primarily used to manage finance, accounting, and back-end operations, whereas the CRM handles front-facing processes and relationships.

In this short guide, we’ll explain how each system supports the business in its own way. Then, we’ll dive into why you’ll need both to deliver high-impact outcomes for both your business and its customers.

ERP

The main purpose of the ERP is to improve the way resources are managed and utilized by connecting core financials and back-end operations to a single database. 

As a result, orgs gain access to reporting and analytics capabilities that help them plan, forecast, budget, and improve all operations quickly and accurately. Users can automate processes and oversee end-to-end operations related to accounting, risk management, procurement, production, compliance, and project management.

While finance and operations tend to get the most from these platforms, ERPs also function as a central hub or system of record for all processes, tasks, and workflows — across all departments.  That means, everyone — from sales, service, and marketing to accounting, HR, and production work from the same set of insights. 

The benefits of ERPs are near endless. However, it’s important to understand that these platforms function more as a foundational building block than as a complete solution. 

CRM

Customer relationship management (CRM) platforms are designed to support human-to-human relationships. 

Like ERPs, CRMs provide real-time data that syncs across all connected sources. Unlike ERPs, CRMs focus specifically on customer-facing functions and processes. Think – Sales, Marketing, or Customer Service. 

CRM software stores and organizes customer data, providing an interface where users can manage everything related to leads, prospects, and customers. This might include emails, texts, call logs, and notes, docs like contracts, quotes, and purchase orders, and relevant insights that support employees during customer interactions. 

Additionally, these platforms typically include some sort of task management system that helps users stay on top of things like meetings and follow-ups. 

Often, you’ll find some CRM capabilities in off-the-shelf ERP software, but dedicated platforms provide more advanced customer-centric features for teams that interact with customers (or other end-users like employees and partners) directly. Think – sales, marketing, customer service, and field service. 

Generally, ERPs include basic features for, say, managing customer contact records or tracking sales. But, they’re often missing the capabilities you need to deepen relationships with customers and scale those 1:1 connections. 

Dedicated CRMs include a more robust set of features that can take things to the next level. Think – journey orchestration, omnichannel support, sentiment analysis, lead scoring, guided selling, etc. 

ERP or CRM?

The short answer is, this isn’t really an “either-or” type of question. Eventually, you’ll need both an ERP and a CRM to effectively run your business.

That said, when you decide to integrate each type of software into your business depends on your business model.

Companies with a smaller customer base and more complex operations or financials should invest in an ERP first. Companies with a larger customer base and more straightforward business model should start with a CRM.

Increasingly, though, we’re seeing a new model emerge where the ERP acts as the foundation, and the CRM builds on it. 

Companies like Oracle, Microsoft, and SAP are building these modular ecosystems that center around the core ERP. Customers choose an ERP that best aligns with their needs, then choose from a selection of CRM modules, add-ons, and integrations to fill in any capability gaps. 

Ultimately, it’s about embracing a new mindset. It’s not about ERP vs. CRM – it’s about building an ecosystem that can give all of your stakeholders everything they need. 

Integration is Everything

As we just mentioned, most companies will eventually need to invest in both ERP and CRM solutions. But, it’s really important to understand that these solutions need to work together as a single platform.

See, most modern ERPs were designed to be built upon. Essentially, these systems act as this “skeleton” that you can add customizations, accelerators, and CRM modules – one layer at a time. Ultimately, it’s the ERP’s unifying capabilities that create the real competitive advantage.

Now, what you don’t want to do is cobble together multiple CRMs from different vendors. Nor do you want to force an integration between, say, a Netsuite ERP and a Microsoft Dynamics 365 CRM.

In most cases, integrations are available that allow business systems from different vendors to pass data back and forth. That said, you’ll get the most value from your investments by building an integrated ecosystem with dedicated modules for each business function. 

If you look at the big names in enterprise ERPs (Microsoft D365, SAP, Netsuite, etc.), you’ll find that these platforms all follow a similar approach to building an integrated business ecosystem.

The ERP serves as the foundation, while CRM modules can be added to the core system to improve customer communications and other front-facing activities. In most cases, ERP systems include some out-of-the-box CRM functionality, like built-in features for handling service requests or tracking sales opportunities.

Additional modules can be purchased to support customer service, marketing, HR, field service, or sales, depending on which areas require more advanced insights or capabilities.

But, generally, you’ll want to stay within that same ecosystem, so that the ERP and CRM systems run on the same data model and can easily pass data back and forth in real-time.

Without that tight integration, you’ll face a number of issues from decision latency and inaccurate data to security and compliance problems.

Final Thoughts

The ERP and CRM both play critical roles in running a business. 

Early on, you might be able to get away with choosing one kind of platform over the other. But – it’s important to note that picking sides is a short-sighted decision. 

You’re going to need both to power your long-term game plan. And – let’s be real, you need both kinds of platforms to ensure that your business sticks around for the long-haul.

Still, finding the right ERP isn’t always easy or straightforward – much less determining whether you’ll need to invest in additional CRM modules, and if so, which solutions make the most sense for your business. 

Velosio offers a range of services that can help make this process easier. Experts can help you put together a roadmap, ID and implement the right stack, and provide long-term support to ensure you get the most from your investments. Get in touch to learn more.