When your startup is in its early days, managing its operations on basic free software – such as Excel spreadsheets for its financials or Outlook for customer-facing processes – might have been viable. But past a certain point of growth, its business operations will grow increasingly complex, and eventually beyond the capability of these basic tools to handle.
At this point, you might want to consider implementing a business software solution that helps you manage the growing complexities of your business processes. And when you did your research, you probably came across two distinct types of such software; the customer relationship management (CRM) software, and the enterprise resource planning (ERP) software.
Comparing ERP VS CRM; Source: NetSuite
But what’s the difference between CRM and ERP software, and which one would best suit your startup’s needs at the moment?
In this blog post, we will explore the differences between CRM and ERP software, go into more detail about their specific use cases, and discuss how they can complement each other. Through this, we hope to help you make an informed decision when the time comes to make a decision about which software to implement in your startup.
What Is The Definition For Each Type Of Software?
CRM Software
What's Customer Relationship Management (CRM) Software; Source: NetSuite
As indicated by its name, the CRM software offers a centralised platform to manage interactions with customers and prospects throughout their buyer’s journey. As such, it is designed to streamline and optimise the management of the relationships your business has with its customers.
As such, a CRM software facilitates the organisation, tracking, and analysis of customer interactions across various touchpoints, helping the business deliver personalised experiences and cultivate long-term customer loyalty. It does this with a range of features and functionalities, including;
- Customer data storage
- Lead management
- Sales automation
- Marketing tools
- Customer analytics
- Customer service
Some examples of CRM software include Salesforce, HubSpot CRM, and Freshworks CRM. Each of these have their individual strengths and unique features, but otherwise they serve the general purpose of helping businesses manage leads effectively, track customer interactions, personalise marketing campaigns, and improving customer satisfaction. This in turn leads to higher customer retention rates, greater insights into customer behaviour, and ultimately improved sales and revenue for the business.
ERP Software
What're ERP Software(s); Source: NetSuite
Where CRM software is focused on optimising the customer-facing front end of the business, ERP software is designed to manage and streamline core business processes at the back end. These include key business functions such as accounting, procurement, project management, human resources, and supply chain operations.
An ERP software does this by providing real-time insights into the business’s financial, inventory, and other key back-office data. They’re also designed to integrate with other business software systems, providing a unified platform that provides a single source of truth, facilitating data-driven decision-making.
They also come with key features for managing your business processes, such as;
- Automation of repetitive tasks
- Financial management
- Inventory management
- Reporting and analytics
There are numerous ERP software products available in the market today, catering to the needs of businesses of all sizes and industries. These include enterprise-grade solutions such as SAP S/4HANA and Microsoft Dynamics 365, to solutions better suited for startups and small- and medium-sized enterprises (SMEs) such as Oracle NetSuite and Microsoft Dynamics 365 Business Central.
Where CRM software is focused on the customer-facing front end of the business, ERP software is utilised for a greater variety of use cases across industries. Apart from financials and inventory, these can include project costing and business intelligence, and some even come with modules that extend the ERP software with CRM features.
The Key Differences Between CRM And ERP Software
What Is Each Type Of Software Focused On?
CRM software is geared towards supporting and connecting front-office business functions, including marketing, sales, advertising, and customer service, to facilitate customer-centric operations. The main distinction lies in the CRM software’s focus on customers and front-facing aspects of a business, making it essential for enhancing customer engagement and driving sales.
On the other hand, ERP software is designed to optimise overall business operations. It primarily handles internal operations such as accounting and finance, procurement, HR, and supply chain management, focusing on supporting and connecting back-office functions. This streamlines internal processes across the board, and is aimed at enhancing the overall operational efficiency of a business.
Who Are The Primary Users Of Each Type Of Software?
CRM software is generally used by sales, marketing, and customer service teams to interact with customers, nurture leads, and manage sales pipelines, with a primary focus on managing customer data used by the sales and customer service departments.
On the other hand, ERP software is utilised by finance, operations, and supply chain teams to streamline business processes, manage resources, and ensure operational efficiency. It plays a vital role in helping various functions across your business in streamlining and optimising the various internal operations of your business.
What Kind Of Data Do They Handle?
CRM software streamlines customer interactions, sales data, and related information to boost engagement and retention. It exclusively manages customer data and interactions, including contact management, marketing campaigns, sales pipeline monitoring, helpdesk support, workflows, automation, analytics, and reporting.
Acting as a repository for current and potential customer data, it automates processes along the customer journey. Additionally, it synchronizes interaction data among sales, marketing, and customer support teams for seamless collaboration and unified customer management.
In contrast, ERP software manages an extensive array of organisational data, including financial transactions, inventory, production, supply chain logistics, order tracking, HR management, and business intelligence amongst many others.
Where CRM software retain only your business’s customer data, ERP software serves as the repository for all other data that’s critical to the continued functioning of non customer-facing business processes.
What Are The Functions Of Each Type Of Software?
CRM software is dedicated to improving customer relationships, sales, and satisfaction by enabling the employment of targeted marketing and personalised interactions. Its primary purpose is to help the business increase revenues, acquire customers, and enhance customer relationships.
Understanding your leads and catering to their needs is crucial for driving sales, and CRM software facilitate this by gathering customer data, and generating helpful charts and reports to identify customer preferences for your sales and marketing teams.
On the other hand, ERP software focuses on streamlining business processes, optimising resource allocation, and enhancing operational efficiency organization-wide. They do so by centralising data, and are crucial in eliminating data silos; which greatly simplifies tasks, and improves communication between various teams and functions within your business.
With an ERP software, every function in your business inputs data into a single unified platform that presents a single source of truth to all of them, which fosters greater collaboration and more efficient operations processes in turn.
Which Should You Choose Between CRM And ERP Software?
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So now that you have a better idea of how CRM and ERP software differ from each other, the question now is; which should you choose to implement first in your startup? The answer to that question all depends on what you consider the immediate needs and priorities of your business to be at the moment.
The Case for CRM Software
For example, if your business is currently heavily focused on acquiring and retaining customers, it’s a good idea to implement an CRM software first to help you manage your business’s customer interactions, sales pipeline, and customer service. Doing so could also help you manage your customer data effectively early on, and set up a foundation for a long-term customer relationship.
Similarly, if you’re planning on driving sales, implementing a CRM software can be instrumental in driving lead capture, in turn making your sales team more efficient, as well as providing insights that’ll help you target the customer demographic you’re going for in your marketing efforts.
The Case for ERP Software
On the other hand, if your startup has already grown to the point where its operational needs are becoming noticeably more complex than in the early days, you might want to implement an ERP software for your business first instead.
That’s because with the way ERP software centralises business processes and data, it’s designed especially for the task of reducing the complexities building up in your operations, and helps your teams and functions collaborate more effectively with each other.
In addition, if your business’s priorities lay more in the need to manage its inventory, or streamline its procurement and production processes (amongst many other back-office business functions), implementing an ERP software with the requisite features is the way to go when it comes to managing your business’s resources.
Could I Integrate A CRM Software With An ERP Software?
NetSuite can integrates with other applications to provide a seamless operational experience; Source: NetSuite
In fact, if your startup already has an existing CRM or ERP software, and you’re thinking about integrating the other with your existing system, that’s one of the best choices you can make. This is because such an integration can offer numerous benefits for your business.
For example, integrating your CRM and ERP software ensures that your business is operating from a single data source instead of two separate ones, further eliminating the risk of data duplication and conflicting records. This facilitates the exchange of data between both your CRM and ERP software, ensuring that all departments across your business gets access to consistent and up-to-date information.
Such an integration also connects front-office customer interactions with back-office business operations, which further optimises processes and enables better resource allocation.
For example, one of your sales personnel might take advantage of this unified database to access a customer’s order history, credit status or outstanding payments before deciding to attempt an upsell or cross-sell campaign. On the other hand, your finance department might require access to your CRM software in order to calculate sales commissions when it comes time to run payroll, or in the case of bulk order discounts.
Therefore, it’s likely that at some point, your startup will grow to a point where it will need both a CRM and an ERP software, and thus should seriously consider an integration between both solutions at that point.
CRM And ERP Software Are Very Different, But Can Complement Each Other
In conclusion, understanding the key differences between CRM and ERP software is essential for businesses looking to streamline their operations and enhance customer relationships.
While CRM software focuses on customer-facing functions, ERP software is geared towards optimising internal processes. Depending on your business's immediate needs, choosing the right software to implement first can have a significant impact on your overall efficiency and growth.
Furthermore, integrating CRM and ERP software can provide even greater benefits by centralising data and improving collaboration across departments. Thus, it's worth considering how CRM and ERP software can work together to drive success in your business.
That said, it's not the only factor which should be considered when making the decision of which business software to implement first in your startup. You need a long-term plan for your investments, or risk getting trapped in a "hairball" of disparate systems. Click on the image below for an e-book from Oracle NetSuite, which covers how you can avoid this.
