ERP vs CRM: Classic enterprise software in transition

The relationship between ERP and CRM has changed considerably in recent years. It is becoming increasingly difficult to identify generally valid functionalities and areas of responsibility. Instead, both resource planning and customer relations management are developing into highly differentiated corporate areas that require correspondingly versatile technological approaches. In this article, we decipher the classic distribution of roles between the two core systems and highlight trends that are increasingly dissolving this relationship.

ERP vs CRM - What are the differences?

ERP and CRM systems have been among the most important digitization drivers in companies for decades. So let's first take a look at what this concept looks like in concrete terms and what makes it so successful. Then it will be easier to contrast current developments with it.

ERP - Definition and basics

ERP stands for Enterprise Resource Planning and describes the planning and management of corporate resources. This includes all operational resources such as capital, material, personnel availability, technology, and much more. - In short, everything that a company needs in order to carry out its core business successfully. As a rule, however, we usually talk about ERP systems, because ERP is highly complex in most business cases and runs most efficiently digitally. Corresponding software is one of the most comprehensive core systems and must cover a large number of functional areas for the use of data. Here is a selection of the task areas of ERP software:

• Production data acquisition
• Controlling
• Accounting
• Needs assessment
• Production planning
• Enterprise Resource Planning
• Document management

Accordingly, an ERP system deals with almost the entire operational value chain. Meeting these diverse tasks requires the integration of diverse enterprise applications and data - at best in structured, relational form. Differences occur depending on the industry, scalability, functional scope and the technical implementation, e.g. with regard to content digitization, data processing and API management. As different as the individual approach may be, the predominantly consistent advantages of classic ERP systems should hardly come as a surprise:

• Profit maximization
• Error and risk minimization
• Process visualization
• Employee relief
• Efficiency increase
• Faster decision making processes

In a sense, an ERP system is the digital heart of a company. And this is precisely where one of the original greatest advantages lies: The central availability of all relevant operational data in a single location. On the other hand, there is another, but no less important core system:

CRM - Definition and basics

CRM stands for Customer Relationship Management and describes how companies deal with customer interactions. This approach to modern management can also be automated and optimized to a large extent using appropriate software. As a rule, this requires the integration of different application parts that deal with customer service, marketing, e-commerce and the management of customer data, among other things. The aim is to open up new sales channels and maintain relationships with existing customers in the best possible way through the well-founded use of information generated in this way.

The most important data that can be used for this purpose typically includes customer addresses, sales histories, contact data, and interaction histories. The center of classic CRM systems is a corresponding database in which this information is stored in as structured a form as possible. Added to this are analysis tools for calculating sales opportunities, integrated mail programs, various search options and tools for campaign planning. Functions for direct customer contact are among the operational tools in the front office; in the back office, a distinction is made between analytical and collaborative functionalities. Here, too, the advantages of this systematic approach are obvious:

• Relieving the burden on sales while increasing productivity at the same time
• Profit increase through expansion of distribution channels
• Improving customer relationships
• Generation of valuable data

Different approaches with similar goals

These characteristics of the two types of system thus have in common that productivity, efficiency and thus the economic success of a company are increased. However, the approaches differ significantly - and yet both are necessary. Classic ERP systems focus on the core business administration and related financial data, but can also contain modules for managing customers.

This relationship of ERP vs CRM is not originally based on reciprocity: CRM systems are typically tailored only to sales and the associated front end. However, both sides require a similar database to a large extent and need to interact not only with other applications, but also with each other.

What has changed?

The latest economic and technological developments are increasingly dissolving the classic relationship between ERP and CRM. In particular, requirements have increased to the extent that significantly greater flexibility is expected in terms of the scope of functions and data exchange. These and other changes can be seen in some key trends:

Market development

The market for such software has been developing from an oligopoly to a mass market for some time now. In the German ERP market, for example, there are currently around 600 ERP-providers are active. These now also include various German providers of ERP software for small and medium-sized enterprises. Early systems, on the other hand, were primarily tailored to large companies and statically oriented to the above functionalities. There were hardly any suitable and affordable solutions for SMEs. 

However, since SMEs account for over 99% of German companies, their demand quickly led to strong differentiation of the market. This now offers CRM and ERP systems with a variable range of functions for a wide variety of industries and company sizes. However, adapting small providers to technological trend shifts appears problematic and proves difficult to manage financially.

Cloud First

According to studies by the IT market researcher Gartner, the clear majority of companies are now relying on a cloud-first strategy. Wherever possible, the cloud is preferred for data migration and application integration. This leads to decentralized availability of business data and has a correspondingly large impact on ERP and CRM systems. Above all, this approach facilitates the API-based connection of external applications and thus the use of data. However, this also weakens the importance of classic centrally organized core systems.

Instead, space is freed up for corresponding substitute products that can be highly specialized for the respective area of application. By choosing such a cloud-based best-of-breed strategy, companies often achieve better results. However, a combination of cloud and on-prem can now also provide sufficient flexibility and high data security. Despite the continuing interest in the cloud, even a On-Premises Renaissance is certainly within the realm of possibility - we reported. For the individual decision, Tobi Schulz's summary in t3n can help. Advantages and disadvantages of cloud-based enterprise software be helpful.

Trend towards individual software

More and more companies are opting for customized software solutions instead of classic standard applications. According to a Techconsult study, more than 50% of companies have been using customized software for a long time. According to the study, almost three quarters of them attribute their economic success to this approach.

The corresponding demand also seems to be growing significantly in times of increasingly differentiated business cases: According to an IDC estimate, around 500 million individual applications will be developed between 2020 and 2025. However, the availability of corresponding specialists remains problematic: Germany currently lacks 137,000 of them, as a study by Bitkom shows.

Low-Code

To solve this problem prove Low-code and no-code platforms as an effective means. By developing software via drag-and-drop, programmers are relieved and technical staff can independently digitize familiar processes. In recent years, this approach has been extended to CRM and ERP systems. Companies benefit from significantly shorter development times and the ability to react quickly to changes in the economic situation.

In addition, the simultaneous function of the development platforms as cloud-based middleware facilitates the connection of third-party systems and thus the integration of ERP, CRM and any enterprise applications. Gartner estimates that by 2026, around three quarters of all new applications will be low-code.

Artificial intelligence

ERP and CRM are not unaffected by the far-reaching effects of artificial intelligence. The particularly forward-looking use of data opens up attractive opportunities for both sides. Automated text analysis has a particularly large effect here - for example, through techniques such as natural language processing or Optical Character Recognition. These make it possible to evaluate customer messages, e-mails, and sales data automatically and thus further increase the efficiency of a CRM system. In addition, text bots can be integrated into the frontend to relieve support via simple customer dialogs. Automatic translation tools can also be used to improve international sales.

For ERP systems, AI offers the possibility of ensuring even better fit resource planning through prognostic analytics. Probabilistic models that can calculate probable future scenarios based on historical training data help here. This leads to a significantly higher degree of automation and prevents errors. Particularly great added value is generated, for example, in the management of inventories or in the optimization of supply chains. All of this can now be tracked in real time.

The necessary data is usually available in a variety of different documents - for example, delivery notes, invoices or payment advices. With the AI-based document software Konfuzio, these can be read out automatically, even in heterogeneous and unstructured form. The extracted data can be easily utilized by almost any modern ERP or CRM system via API connection. The result is a well-founded gain in knowledge that prepares resource planning, management, marketing and sales for future changes in a targeted manner.

Selecting the right software for ERP and CRM

Conclusion

ERP vs CRM - This once clearly defined relationship has developed into an increasingly diffuse interaction due to modern changes. In the past, the distribution of tasks was still clearly defined and all resources were largely organized centrally. Consequently, classic ERP systems are standard solutions used mainly for business and financial planning. CRM systems handle customer management in a similar way.

However, due to the high demand and technological developments, both the market and the implementation options have become highly differentiated. It is therefore no longer possible to generalize which specific tasks fall to which application due to the many individual approaches to solutions. Cloud computing, low-code and artificial intelligence, for example, all contribute to this. Ultimately, these changes take the basic idea of ERP and CRM - namely increasing efficiency - to a new level in various respects.