ERP vs CRM: Which do you need?

Strategy planning, resource management, and inventory monitoring used to be extremely time-consuming and error-prone tasks for business leaders. Data duplication, human mistakes, and miscommunication were daily obstacles managers had to deal with.

Fortunately, business software has evolved to make processes and communication inside companies clearer and more efficient. With the help of a centralized system that all your company’s departments can access, everybody can be on the same page and know what’s going on in the organization.

Enterprise resource planning (ERP) and customer relationship management (CRM) systems are both powerful tools that aim to boost a company’s efficiency, streamline business processes, and increase profitability. They are alike in many ways, but their core functions differ. To understand their true value and make an informed decision about which to adopt for your company, you should evaluate ERP and CRM as two separate systems.

ERP vs CRM

What is an ERP?

An enterprise resource planning system manages all elements of a company’s operations. It removes the need for handling paperwork and automates business processes. 

An ERP lets employees and managers enter standardized data into a system and swiftly share it across an organization’s departments, creating an enterprise-wide and up-to-date overview of processes. An ERP also visualizes all of a company’s information, which helps workers quickly detect issues and resolve them at an early stage before they get serious. 

Enterprise resource planning software performs the role of a central database for the entire company. It can contain information about finances, payroll, accounts payable and receivable, financial reporting, and so on. ERP software holds useful tools for managing multiple sectors of a business, such as tools for internal communication, data exchange, and customer-related operations.

What is ERP II and how is it different from ERP?

In some sources, current ERP systems can be called ERP II. This name has raised many questions and increased searches about the meaning and derivation of the term. 

Let’s unpack this.

ERP II is the successor of ERP. It’s the name given to ERP systems developed after 2000. The major difference between an ERP and ERP II system is that the latter is much more focused on web-based operations and the use of web-based technologies as well as customer relationship management, business intelligence, and supply chain management.

ERP II (an emerging version of ERP) provides greater flexibility and customization, meaning you can adapt an EPR system to your unique business needs. Additionally, this type of software can help you build a successful business strategy by identifying areas of improvement, uncovering efficiencies, and streamlining processes through real-time insights and data analysis.

What is a two-tier ERP system?

You may also be wondering what two-tier ERP is. Let’s break it down. A multinational company with subsidiaries may experience ERP implementation challenges because of the different resource planning needs the headquarter and subsidiary have. That’s why businesses such as this run two different ERP systems where the headquarters use a so-called Tier One ERP with the functionality to manage a large organization. Subsidiaries on the other hand use a Tier Two ERP which has the functionality just enough to address their local needs. Those two are often integrated with each other to improve operational efficiency.

What is a CRM?

Customer relationship management software handles all customer data. It manages all the ways in which customers, current or future, interact with a company. A CRM can improve an organization’s ability to build strong relationships with customers, keep customers and prospects engaged, close deals, and generate leads.

A CRM is a powerful customer lifecycle management (CLM) tool almost every business needs. Centralized communications, detailed analytics and customer insights, improved customer engagement, and a unified customer view – just to name a few. These are the major benefits a CRM can bring to your business, so let’s take a closer look at them:

• Centralized communication platform. Do you use multiple marketing and sales channels (e.x. emailing, messaging apps, social media platforms, and lead capture forms) to reach potential clients? We bet you do. Lead generation channels don’t work one way anymore. To get more clients, you have to adapt to their contact channel preferences. With omnichannel CRM features, it is not a problem! You can focus on different communication channels and control over all your chats in one spot. What an effective way to forge robust connections with your leads and customers and increase engagement levels!
• Comprehensive customer profile. A CRM system holds the personal details of customers and prospects, such as names, phone numbers, addresses, and purchase histories. It collects and analyzes customer data, which then can be used to provide clients with better recommendations. For instance, if a customer buys more than an average number of cargo pants, your system can use that information to make great suggestions of other items the customer might enjoy or be interested in.

You can go even further and integrate your CRM with a customer data platform (CDP). It will enrich your CRM data with some specific customer insights (both structured and unstructured) to make accurate predictions and create a single customer view (SCV).

• Effective lead nurturing. A customer relationship management system can help you build stronger relationships with leads, ensure stable high-quality services, and offer a smooth transition from leads to customers — and then to loyal customers — boosting your long-term profitability.
• Data-informed decisions. A CRM offers advanced analytics and reporting features based on sales data, customer behavior and preferences, and engagement patterns. With consumer insights, companies can identify target audiences and develop marketing strategies to stay in customers’ minds. Data-driven decision-making is much easier, faster, and of higher quality with a CRM!

ERP-CRM integration: Can those two walk together?

Sure. CRM systems can be integrated with ERP and other systems. You can also share data between an ERP and CRM — for instance, to make shipping dates or ERP data on invoices available to customers.

However, if you’re looking to go with an off-the-shelf solution, either CRM or ERP, you should be careful about integrations as not all of the ready-made solutions provide for integration capabilities you might be looking for. If your business needs to address very specific needs, your best-case scenario would be a custom software development.

Key similarities between ERP and CRM

What ERP and CRM have in common is that they both deal with contacts, orders, quotes, and forecasts. Another similarity is that they both control delivery schedules, line item configuration, and invoices. Enterprise resource planning and customer relationship management are both critical systems that enable your company to manage, execute, organize, and take action on various business functions. They’re both designed to automate and streamline your business processes and help you grow and increase your profits.

Many people confuse ERP with CRM in terms of what they are for and their core functionalities. Most ERP systems will have CRM components, however, these are often less robust than analogous components in a standalone specialized CRM platform. You also have the option to integrate a third-party CRM into your ERP. Usually, a CRM that’s built into an ERP provides sales and marketing automation but may lack such features as social media management and a customer support center. A lack of these features won’t cause very serious harm, but it can lead to a worse user experience.

Key difference between ERP and CRM

Software focus

The first key difference between these two systems is that an ERP mainly focuses on and helps you with internal processes and management, while a CRM focuses on external processes:  customer service and sales. 

A CRM system emphasizes customer management, customer satisfaction, and customer interactions, which leads to an improved marketing presence. An ERP envelops the entire business, aiming to improve back-office functionalities while automating and managing almost all considerable management activities. 

Methods of increasing profits

While CRMs and ERPs both work on increasing profits, they do so in different ways. An ERP strives to reduce overhead and cut costs through automation, while a CRM works to boost profits by generating higher sales volumes.

Performance indicators

The way in which companies measure success is also different depending on the system. An ERP’s success metrics extend across various business departments, from order procurement to vendor management. A CRM’s success metrics are clearer to calculate, as they revolve around the acquisition and retention of clients. Therefore, you can use metrics from a CRM to set transparent and measurable goals. For instance, you might aim to close 20% more sales than in the previous quarter or increase social media engagement by 30%. Your CRM then can start tracking and analyzing these goals and fuel your progress.

End users

Users of CRM and ERP systems are also different. ERP systems are typically used by decision-makers, such as department heads, to monitor business processes. CRM users are generally sales and support employees who deal with customer-related operations.

CRM vs ERP – Common features

Both ERP and CRM can have numerous modules and features depending on the vendor. Some vendors let you pick the modules you require, while some offer pre-packaged software. For the ultimate customizability, you can have your ERP, CRM, or both custom-built.

Here are the most common features to look for when evaluating ERP and CRM software.

ERP features

#1 Data analysis

Brainyard’s 2020 “The Future of Business” report demonstrates that using data is a major priority for business leaders. Thanks to data analysis, a wide assortment of information can be turned into actionable insights, new business opportunities, and chances to optimize current processes, provide better customer service, and reduce costs.

#2 Financial management

Financial management is one of the most crucial tools an ERP can offer. 

Financial management is the engine that drives various business processes. Organizing, planning, determining the best use of assets — all this and more is involved in financial management. Leaders of finance departments track data from all departments and analyze it to make informed decisions. 

An ERP system can help your finance team track, analyze, and report on high-priority business data. It can also assist with sticking to budgetary requirements. Other functions that can be found in this module include general ledger, accounts payable, accounts receivable, financial forecasting, tax calculations, and fixed asset management. Modern ERP systems offer financial leaders dashboards for quick and clear real-time overviews of a company’s finances. A good ERP solution also reduces wasted time by automating daily tasks and tracking capabilities.

#3 Customer relationship management

Vendors of top ERP systems understand the value of customer relationship management. Hence, many offer CRM functionalities inside their ERP packages. Such CRMs are not the most comprehensive or advanced, but they’re a good option for companies that do not require a robust CRM.

A CRM module displays all customer relationship details in an accessible database, such as order histories, purchase orders, contacts, addresses, and prospect statuses. It also automates various processes like generating accounts receivable reminders, sending notifications to follow up with a prospect, and filling out purchase orders.

#4 Human resources

A human resources module serves as a complete employee management platform, assisting with hiring, onboarding, payroll, timekeeping, and compensation management. ERP-connected HR software can automate processes like tax and benefits deductions, avoiding errors and saving time and money.

#5 Supply chain management

A supply chain management module offers a rich set of tools for inventory management, distribution, purchase order management, regulatory compliance, manufacturing, and quality monitoring.

An ERP provides helpful insights into a company’s supply chain management by tracking inventory, demand, manufacturing processes, distribution, and logistics. When fully integrated with business processes, an ERP can improve your operations by suggesting work, purchase, or transfer orders across locations. A supply chain management system assists with setting inventory goals and streamlining distribution resource planning. And thanks to real-time data, you can quickly notice errors or areas of inefficiency.

#6 Manufacturing

Modern ERP systems streamline manufacturing processes by helping with production monitoring, product planning, forecasting, and materials sourcing. A manufacturing module has multiple useful functions for manufacturing processes, such as product tracking, shop floor control, distribution planning,  and assembly management. In tandem with a manufacturing module, supply chain management tools enhance a company’s ability to handle and automate forecasting decisions and inventory planning.

CRM features

#1 Contact management

This CRM component enables users to divide their contacts into groups for improved organization and to provide better service. Thanks to contact management, you can efficiently collect all vital customer data to use during marketing campaigns or the introduction of new products. It can help you with personalization, which enhances the customer experience and increases customer satisfaction.

#2 Interaction tracking

An interaction tracking feature allows users to track client interaction histories to improve sales processes. This data can also be segregated according to buying behavior, purchase intention, and customer interests. An interaction tracking tool also allows for monitoring payments.

#3 Sales forecasting

A sales forecasting tool allows users to generate revenue predictions based on present and past trends and data. With the help of this tool, you can evaluate whether potential results justify your team’s efforts. This evaluation can be used to understand whether your current work is effective enough or whether you need a new direction.

#4 Marketing management

A marketing management tool allows you to find target groups for future campaigns and evaluate campaign performance and effectiveness. Depending on your vendor or if you’re building your CRM with developers, you can integrate email applications where you can upload contacts, allowing you to send email marketing communications more efficiently.

One of the next-gen CRM features is drip marketing. In short, it’s a series of pre-written emails you send to leads or customers on a set timing based on the specific action they take or status changes in your CRM system. Drip marketing is known by many other names including autoresponders, lifecycle emails, marketing automation, and automated email campaigns. The main idea behind it is to reach out to your potential and existing customers with a custom-designed message at the right moment – without doing the work every time. You just create a personalized journey by setting up triggers and actions. When your specified trigger is in place, the contact receives an email you tailored at a specified timing.

Examples of drip marketing can be lead nurturing campaigns, product recommendations, birthday/anniversary wishes, welcome messages, subscription renewals, onboarding emails, abandoned shopping carts, and order notifications.

#5 Lead management

This feature allows users to convert prospects to customers by identifying, evaluating, and shifting leads through the sales pipeline.

AI in ERP and CRM: Trends to watch in 2025 and beyond

Artificial intelligence (AI) is shaping the next normal. Platforms across different niches use AI and machine learning (ML) algorithms, data mining and advanced analytics, computer vision, natural language processing, and robotic process automation to address the next-generation development. ERP and CRM are not an exception here.

AI in ERP

AI in enterprise resource planning is the next wave of digital transformation software. Top ERP players like Oracle and Microsoft have successfully leveraged AI in their ERP products not only to automate routine tasks, analyze vast amounts of data and provide real-time analytics based on data trends, but also to improve demand forecasting, create personalized experiences, and enhance security.

Some of the most popular AI features in ERP software include:

• Automated tasks. AI has great potential to automate repetitive tasks such as invoice processing, account management, and service request management so you can free up time for employees to focus on other important tasks that need a human touch.
• Personalized experiences. Artificial intelligence is great at delivering a truly personalized user experience. For example, it can identify overdue invoice payments and prompt your account manager to take action. Inventory shortages are another great example. AI will analyze your past sales data and workflows to notify your sales team of any shortages.
• Optimized processes. With AI, your business can easily assess your supply/demand patterns, identify workflow inefficiencies, and run predictive insights. AI algorithms can even suggest improvements!
• Valuable insights in no time. AI is great at speeding up data analysis. It can process and analyze large datasets much faster than human specialists while extracting the valuable data on your business operations, market dynamics, and the supply/demand chain.
• Enhanced security. Software security is critical for businesses to comply with data protection regulations, prevent cyber attacks, protect sensitive information, and maintain a company’s reputation. AI mechanisms monitor user activity and identify unusual and suspicious patterns to recognize security threats and vulnerabilities.

AI in CRM

Now that you how ERPs use artificial intelligence, let’s take a closer look at some popular AI-powered features and benefits for customer relationship management:

• Reporting, predictive insights, and sentiment analysis. With AI algorithms, your CRM tool can effectively analyze historical data and customer behavior patterns, identify common characteristics among your target audience, and effectively define the most valuable target segments. In addition, AI can perform sentiment analysis where the system analyzes your customer conversations to identify if the emotional tone is positive, negative, or neutral.
• Even more personalization. With valuable customer data and insights, AI can make great product/service/content recommendations and suggest customized marketing messages and offers to improve customer interactions and engagement. Based on a customer’s history records, the system will be able to provide an actionable summary to make better decisions and avoid the same mistakes if any.
• Automation. AI enables businesses to automate customer relationship management processes like moving your leads down the sales funnel and automated marketing campaigns. Also, AI can speed up the writing process by generating tailored human-like texts, marketing materials, and even images.

Do you need an ERP, CRM, or both?

If you’re considering enhancing your company’s sales and marketing process and you’re pleased with the existing software you use for financial management or human resources, then you should just get a new CRM system.

On the other hand, if your current business processes are inefficient, your software tools do not communicate with each other properly, and you struggle to meet clients’ requests, you should consider investing in a comprehensive scalable ERP system.

There are multiple aspects you need to evaluate while choosing which software is best for your business. Preferably, companies should have both systems — a CRM for customer data management and an ERP for managing the entire business. 

CRM systems are a good first choice for small and medium-sized businesses. Until a business grows out of its CRM or wants to expand, it probably won’t need a robust ERP system. If you do reach this point and want to invest in ERP software, remember that many built-in CRM modules are quite basic and won’t be equal to a standalone CRM. Fortunately, many ERPs offer easy integration with third-party CRM systems, and if you’re going to develop a custom ERP, you can integrate any CRM with it.

Both ERP and CRM solutions strive to increase a company’s profits, albeit in different ways. Once you’re ready to choose your system, your judgment should be based on what your business currently requires and where you plan to go with it. If your current software becomes a factor that obstructs your growth and your ability to fulfill requests, then it’s time to invest in a new one.

We hope our ERP vs CRM guide has provided you with the information you’ve been looking for. If you still have some unanswered questions, don’t hesitate to contact us.

In the meantime, we suggest you check out the following blogs that might answer some of your other questions:

• What are common types of ERP systems? – In this article, you’ll learn more about and find the difference between on-premise and cloud ERP solutions; ready-made, custom-built, and hybrid ERP systems; generic vs industry-specific ERP tools. You’ll also get a fuller picture of how to choose the right ERP software.
• What are the best ERP tools? – Here, you’ll find out about the top ERP players and get advice on how to select the right one.
• What is CRM? – Learn more about what stands behind CRM, what types of CRM software there are, and when a custom CRM solution is your best-case scenario – and when it is not.