ERP Vs. CRM: What is best for your business?
We’ve written before about the importance of choosing the right CRM software for your business. But do you know if your company is best suited for an ERP vs CRM system?
While both software help improve productivity and automate tasks, how do you choose one over the other?
Since both are vital to any business nerve centre, choosing between ERP vs CRM software might just be the biggest conundrum you could face while shopping for business software.
Picture this. Making your company profitable can be achieved in two ways.
- By increasing your sales
- By streamlining all your departments toward one common goal (i.e., cutting costs and ensuring everyone meets their targets
While a CRM software tracks your sales activities, and helps engage better with your prospects and customers to close more deals, an ERP system tracks all your financial activities in the backend and helps you make crucial decisions to keep your purse tight.
To choose between the two, you need to know what they are, and how this knowledge can help you.
Because even after an extensive selection process, if you choose the wrong business software, it can cost you in 3 ways:
- You lose revenue due to a bad implementation. According to Gartner, 75% of ERP Implementations result in failure. For instance, in 2000, Nike got a new software package for $400 million but an upgrade glitch caused an estimated $100 million in losses and dipped their stock price. So make sure you pick the right software that is suitable for your business.
- You go back to the way things were, without the software, and the workload increases for your team. Instead of easing your work, it doubles the work and complicates operations.
- You adapt your business process to the software, and not the other way around, which can be highly unproductive.
So, let’s dive in.
What is ERP?
Enterprise Resource Planning (ERP) software streamlines business processes and helps track orders, transactions, and revenue.
It helps you organize and manage all aspects of your business, right from supply chain management to financial data tracking to payroll management.
Some of the primary reasons businesses opt for an ERP system are reducing costs, improving performance metrics and efficiency in business transactions.
Why do you need it?
1. Single data source for sales and marketing
The ERP system is like ‘yellow pages’ for all your vital business functions. ERP systems consolidate different processes within your business, such as supply chain, HR, manufacturing, warehousing, distribution, order fulfillment, and accounting into a single system.
2. Determines financial health
Since your entire cash management, including debits, credits, cash flow, loans, etc., are tracked in an ERP system, it helps determine the financial health of your business in the short term as well as in the long run. It helps you plan your cash flow, reduce costs, and increase revenue.
3. Track production process
ERP systems highly benefit manufacturing and product companies that stringently monitor product development, production, assembling, testing, and workflow management. Depending on the level of integration with production facilities, module-tracking manufacturing processes also provide real-time insight on the production timetable.
What is CRM
Let’s put a lens over your sales and marketing teams. It can be a 25-50 member team, or a 250-500 team. Are they tired of manually updating their daily activities in an Excel sheet, or are you tired of tracking metrics using a CRM software?
A CRM software helps
- Automate regular sales and marketing activities
- Capture leads
- Maintain prospect and customer databases
- Qualify leads
- Engage with them
- Follow up
- Visually tracking data
CRM stands for Customer Relationship Management software, and it does precisely that.
It helps improve relationships with your customers by consolidating their database and providing you with means to reach out to them, all within a single window.
It is also focused on bringing together all your sales-related activities and creating a unified customer experience that ultimately contributes to an increase in ROI and customer retention.
In short, A CRM software:
- Improves sales and retention by enabling quality conversations with prospects and customers.
- Tracks and analyzes sales activities.
Why do you need a CRM software?
1. Complete visibility of the customer:
A CRM software assimilates all the information that you have on your leads and customers, including their contact details, location, company, past engagement with your business, social profile, etc. It also captures the entire sales process from converting a prospect to a customer, giving visibility to all teams into the entire buyer journey. This enables your teams to contextually engage with customers and prospects at any given time.
2. Improves productivity
Most salespeople and managers spend their day in administrative tasks that take up most of their productive time. With a CRM system in place, most routine tasks like sending emails, updating databases, setting reminders, etc., can be automated using workflows. This will free up your time for revenue-driving activities and improve productivity of sales and marketing teams.
3. Visually tracks data
Often, your business collects a lot of prospect and customer data, but your teams are not sure about how to extract actionable insights from this data, and engage with customers. With a CRM software, you can track the engagement of prospects and customers on a regular basis, and deals that are stagnant. You can also track revenue-generating activities and much more with the help of analytics. For instance, with advanced reports and dashboards in Freshworks CRM, spanning both sales and marketing activities, teams can get actionable insights and make meaningful decisions.
ERP Vs. CRM: What’s the big difference?
Deciding between ERP Vs CRM can be a difficult choice to make. According to Brendan Mcadams, Co-Founder of Expertscape, “A CRM takes a very customer-centric approach to data, process and results, whereas an ERP is much more financially-centric. While both have a role inside an enterprise, I would argue that the system you prioritize says a lot about whether you’re customer- or finance-centric business.”
Let’s now take a look at some fundamental differences between ERP and CRM:
1. Who can use it?
Between ERP Vs CRM, given the nature of ERP being cost-saving and CRM being more profit oriented, ERP is more suited for enterprise businesses that are largely more established and generate steady profits.
Enterprise companies are looking to cut staggering operational costs, and ERP helps streamline and automate core business processes by using fewer resources.
A CRM is a more evolved product that helps sales and marketing engines run in your company.
It helps understand your customer base better, thereby targeting more prospects, and converting them into paying customers.
2. Which departments benefit from the software?
ERP benefits the back-end functions like finance, HR, production, manufacturing, supply chain, warehousing and order processing departments.
CRM benefits front-end functions like pre-sales, inbound and outbound sales, product marketing, growth marketing, and customer success teams.
ERP is a more complex product catering to multiple departments and hence is more expensive when compared to CRM.
There are plenty of affordable and free CRM software in the market for startups and small businesses.
Some CRMs offer pay-as-you-grow plans that really benefit growing as well as enterprise companies.
Factors that determine: ERP vs CRM system
1. Ability to Scale
A free version of a business software can work wonders for a startup with limited budgets, and is not the optimal choice for an enterprise company, which may require more features and have more users.
There may not be many bells and whistles in a free tool, but if the essential features are sufficient, it will help run and build your startup. Similarly, a CRM offers a free version that can be topped up with features as required, when the business grows, making it optimal for small and large businesses.
ERPs are even more difficult for startups as they drain a lot of capital and human resources available and might inhibit growth at the development stage.
According to Ilkka Taponen, a lean-oriented process developer, “Unlike a large corporation, a startup cannot commit enough resources to such a massive project as ERP. The limited resources are simply used better elsewhere. Depending on the startup, major development projects that are more beneficial to take on are for example production quantity scaling, supply chain development, expansion to new markets, product development, looking for new funding, and so on.”
2. Your industry
ERPs are more suited for companies that have multiple business processes that require a software to run it and also have the financial muscle to afford the added expense. ERP is lucrative for companies that are large in size, need economies of scale, and can see the long-term benefits of implementing a high cost hardware and software like ERP.
In fact, manufacturing companies are the No. 1 users of ERP software.
Internet-based companies, software companies, small businesses and freelancers have simpler accounting and manufacturing processes and don’t have production on-ground. These companies are best suited to get a CRM software that will cater to their needs of storing customer data, engaging with clients, and making sales.
For instance, Expertscape, co-founded by Brendan McAdams, identifies and objectively ranks medical expertise to help healthcare consumers and physicians find qualified medical specialists.
For his business, having a CRM is critical to staying connected with all constituencies: patients and consumers, physicians, academic medical centers, and pharmaceutical companies.
In Brendan McAdam’s opinion, “Traditional industries that rely extensively on ERPs have been large manufacturing and process-intensive businesses. And they tend to be more complex and challenging in terms of implementation efforts, so lend themselves to very large and well-established enterprises. CRMs, on the other hand, have a role in essentially any business as they are typically much easier to implement and operate because they focus on customer acquisition and retention, which is the lifeblood of enterprises of all sizes.”
The price of an ERP suite is determined mostly by a consultation basis, and it varies depending on the departments that need deployment and additional needs of the enterprise company.
CRMs are more flexible when it comes to costs. Even free CRMs that have basic features like contact management, email and call facility, website tracking, etc., are readily available in the market. The pay-as-you-go plans offered by several CRM companies benefit a lot of growing companies. The same CRMs are also nimble and can help cater to the complex needs of a mid-to-large enterprise company as well.
Taking the call between ERP Vs CRM
Brendan believes that it’s not a hard call between ERP vs CRM. According to him, “It’s arguably not a choice between systems, but rather where to start. And in my experience, that’s an easy call. While there are certainly a number of instances where a company should have both, almost all companies should start with a CRM. It’s simpler to implement, more customer-focused, has a faster ROI, and typically benefits the overall effectiveness of more employees. As the company matures, adding ERP functionality can be planned and implemented as needed.”
Both software we explored here offer real, concrete value for your business and your customers, primarily by streamlining your teams, organizing your data and improving productivity of your workforce.
You choice, ultimately, rests with picking a software that complements your growth plan, instead of inhibiting it and one that suits your workforce-specific requirements.
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