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Author Vadim
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CRM vs ERP. In theory and in practice

Boundaries between the systems are blurred and even the experts it is difficult to classify the system. We will try to give the most accurate understanding of these systems.

Enterprise resources planning (ERP) and customer relationships management (CRM) are broadly similar, as they both are used to improve the overall profitability of the business. However, their basic functionalities are completely different. It is better for the business to consider them as separate autonomous systems.

What is CRM?

Customer Relationship Management is a software which stores and processes all aspects of customer relations. In other words, it is a modern, automated organizer which allows to implement all the operations of interaction with the client in time, at all stages to the close of deals.

Actually, the CRM system can be considered as any variant of control and accounting that will help improve interaction with customers. Even if you record calls history and contacts on paper or in Excel – this can be considered as CRM system. Of course, in the modern world it is difficult to imagine the work of any business without effective automation. Therefore, when someone talking about the CRM system, it usually means a special software.

The goal of any CRM solution is to provide a complete set of customer data that can be used to increase sales, improve customer retention and the efficiency of relationships with customers, namely:

  • Common standardized database of contacts for the company (clients, contractors).
  • –°ontrolling work quality of sales department at any time.
  • Statistics and Analytics of the effectiveness of leads (incoming calls, queries).
  • Improving the quality of work and development of strategies for business.

The company that introduces CRM system believes that the good customer relationships are relate to its assets. This means that the aim of the company is to maintain these relations also allocate funds to strengthen them and intends to evaluate the return  —  profit accumulated during the period of work with each particular customer.

What is ERP?

Enterprise resource planning (ERP) is a category of software for business management,  generally, a set of integrated applications which an organization can use to collect, store, manage and interpret data from various departments of the organization. The system combines the key areas of business such as buying, selling, manufacturing, human resources, services, inventory, etc.

ERP system focuses on the business. It makes easier the exchange of information between all departments and manages the relationships with external interested parties. ERP provides a method of optimization the business processes in all areas, allowing business to focus on data instead of manipulations.

All ERP systems, no matter who is the developer, share a common architecture that can be described as:

The basic opportunities and work environment for modules and components. Framework code can be modified only by the developer. Users and integrators do not have any access to this code.

Modules are the components connected to the platform whenever necessary. They all work with the same database and uses the basic functionality. The rest of the modules work independently from each other, can be easily connected and disconnected if the need for them disappeared.

The main difference of ERP from any similar software is that ERP is initially created in the form of constructor from platform and modules, that can be connected whenever necessary. Here a variety of opportunities are already provided. 

When this software implemented in the organization, all departments can gain an access to updated and general information. In addition to this, the company can analyze the profitability, efficiency and liquidity at any point in time.

Software for enterprise resource management (ERP) is designed to collect, organize, and interpret data from a variety of departments, such as:

  • Sales
  • Production
  • The Personnel Department
  • The Department of Finance
  • Engineering
  • Warehouse
  • Accounting

and others.

Without ERP, most of the data has no context, perspective or connection.

Almost all ERP systems are very powerful and multipurpose. They include opportunities for implementation of a large number of processes. Almost always during implementation, only a part of those possibilities are used. As the company grows and develops, more modules are connected or bought to implement new solutions, to involve a new division of the company. All this is realized with minimal losses of time and finances.

The real situation

All this is only in a theory, but in the reality, things are a little bit different - CRM systems slowly begin to enriched by the functions of its older brother, ERP.
Software developers often try to impose their vision of what can be called CRM system, simply by showing their product and saying: "this is the CRM system."

Taking into account the current competition in the market of such systems, each company-developer tries to supplement them with additional functionality:
contracts, billing, accounting, payment, warranty and post-warranty service... the list is endless.
All these operations can be controlled only by one CRM system. 

You need to understand that there are no common standards and a clear understanding of what is meant by the term “CRM system”.

This is the main reason for the whole confusion.


Which system is more important or better?

This question is asked by many businessmen when choosing a system. 

To decide which system is better just as stupid as:
“What is better Android or iOS?” or “Windows or Mac

Which system is more important is just like to decide 
“To have an engine or have a steering wheel in the car?” or  “To be without hands or without feet?”

All depends on the requirements of the business.

ERP and CRM systems are not competing products. They are the two sides of the same coin. Any product can work by itself although their real potential is opened only by reaching full integration.

CRM brings more income by increasing sales, whereas ERP system reduces overall operating expenses. These systems together help the business to grow more effectively empowering them in all directions.