The Beginner’s Guide to Digital Transformation
What are the 6 secrets to digital transformation that are helping organizations build competitive advantage?
The two software suites are often discussed concurrently, making it difficult to understand the difference between them. If your business is trying to decide whether to implement a standalone customer relationship management system or a full ERP system, it’s important to understand some of the main differences.
ERP vs CRM: A Real-world Analogy
A simple, non-technical analogy to describe the difference between enterprise resource planning (ERP) and customer relationship management (CRM) software is the contrast between a cruise and a traditional vacation. Let’s say you want to take a vacation to the Galapagos Islands.
On a cruise vacation, transportation to and from the Galapagos Islands is provided. Your comfy stateroom, mouth watering all-you-can-eat buffets, and dazzling nightly entertainment are all included. The cruise line has designed a fun-filled itenerary while onboard and has offered many off-shore activities. Choices seem almost endless; a guided kayak tour to Kicker Rock, snorkeling at Tagus Cove, or basking in the sun on white sandy beaches. You could say your vacation plans are managed end-to-end by the cruise line with all activities and timelines seamlessly integrated – just like an ERP software solution.
While your plans are easily managed by a single entity, you may feel like you’re not getting the most out of the onshore excursions. Maybe you’d like the chance to make your Galapagos experience even more unforgettable with a once-in-a-lifetime journey to Peru’s iconic Machu Picchu. Shrouded in mystery, this Lost City of the Incas awaits you with its beauty and its secrets with just a half day excursion from the cruise ship. A traditional destination-based vacation may be what you’re looking for. Adventure your way.
Like CRM software, specific tourist sights allow you to get the most out of your vacation. If you spend a good portion of your trip in the Galapagos Islands, you may want to seek out the best attractions and tour companies. This is similar to the specificity of a CRM system.
Some people’s ideal vacation would be a mix of both options. Here you have the best of both worlds – a specific destination where you can take extensive tours and a cruise line to show you multiple destinations for a single price.
What is CRM?
CRM software’s core functionalities involve managing potential and current customer relationships. Powerful marketing tools like social media management, online promotional campaigns and automated emails are part of the CRM suite that fuels lead generation.
Once leads become customers, CRM software also manages the sales order creation and support processes, like help desk and call center. Business analytics, such as purchasing trends and loyalty metrics, are other out-of-the-box features.
At a high-level, most CRM software contains the following feature sets:
- Automated marketing emails
- Online campaign management
- Social media management
- Lead management
- Sales support
- Call center
- Order confirmation
- Fulfillment inquiries
- Purchasing trends and analytics
- Loyalty management
What is ERP?
In contrast to CRM software, enterprise resource planning (ERP) software has a wide-ranging set of capabilities across all business operations. From managing payroll for your company’s employees, to creating a bill of materials for the goods you sell, this software system is designed to run your business from end to end without additional software packages.
This software is often used for its financial capabilities, including accounts receivable and payable as well as month, quarter and year-end reporting. ERP systems typically have the following modules:
- Accounts receivable
- Accounts payable
- Sales and marketing
- Human resources
- Inventory management
- Warehouse and transportation management
- Product management
- Planning and production
- ERP financial reporting
Some ERP software is more specialized for specific industries, such as manufacturing or retail, and may have richer capabilities in those areas. Therefore, a thorough comparison of several vendors is necessary during ERP selection, as each system has its own strengths and weaknesses.
What’s the Difference?
Because ERP applications also contain customer management and sales functionality, there are a few areas in which the two software suites overlap.
Most ERP software allows a business to maintain customer data, create marketing campaigns, build quotations and generate sales orders. However, when it comes to supporting the marketing campaigns or tracking sales trends, CRM software has much richer capabilities.
Should You Select ERP or CRM?
This answer depends on two factors: what are your current business requirements and IT capacity, and what are your needs in the future?
If you are looking to streamline all your processes and replace an existing suite of non-integrated applications, an ERP system might be the solution for you. On the other hand, if you need focused capabilities to handle marketing and customer management, a CRM system is probably your best bet.
For example, many CRM systems enable sales reps to use real time data to personalize customer interactions. This allows for customer experience transformation.
If neither of these scenarios describe your company, and you’re considering overhauling your entire IT landscape, then you may need both ERP and CRM software with an integration between the two.
To help you decide, ask yourself the following questions:
1. Where could you find the most benefit: operational efficiency or greater sales volume?
The primary way an ERP system increases your profits is by improving efficiency. It does this by streamlining business processes and cutting overhead costs.
Compared to ERP systems, CRM systems are not as concerned with lean process improvement. Instead, the primary way CRM software increases your profits is by increasing your sales volume. It does this by empowering employees with the tools to improve customer service and make bigger sales.
Could your company achieve a higher ROI by making your business processes more efficient than by increasing your sales volume? Then an ERP system may be a good choice for you – and vice versa.
2. Do you need a new financial system?
If your answer is yes, you probably need an ERP system. Unless your company is entirely made up of a sales and marketing model where all your requirements can be fulfilled by a CRM system, you likely need a financial system of record.
3. Does the ERP’s sales and customer management functionality meet your business needs?
If not, a deeper dive into your requirements is needed to determine which CRM vendor is best for you. If there is not a CRM vendor that seems to check all the boxes, an integration between both ERP and CRM systems may help bridge the gap.
We advise our clients that their software of choice must meet the majority of their business requirements to minimize the amount of custom code. For example, we’re currently helping a manufacturing company select an ERP system and CRM system, so we’re conducting onsite requirements gathering sessions. These sessions are identifying unique pain points, such as a manual sales and order management process. Insights like this will inform our software recommendations.
4. Is your business ready to tackle an ERP project?
5. Does your IT department have the capacity to develop integrations?
Having a CRM system isolated from your ERP defeats the purpose of having both. Luckily, many ERP vendors are starting to ship product with almost “plug and play” configurations to integrate with popular CRM suites. While this definitely helps expedite your ERP to CRM integration project, custom code often will be required to seamlessly integrate the two.
6. Is your project a digital transformation?
This is a good question to regularly ask yourself as it not only relates to the choice between ERP and CRM but your overall digital strategy.
Companies pursuing digital transformation intend to create new business models. These companies need a scalable ERP solution with a promising product roadmap. If this describes your company, it’s important to evaluate vendors’ product and company trajectory.
However, if you’re not pursing digital transformation, then a full ERP system with a significant number of modules may be overkill for your company. Instead, a CRM system may be a better fit. It might provide you with all the functionality you need, and you won’t have to pay for unused modules.
CRM Implementation and Integration Tips
CRM implementations entail the same level of organizational change, operational complexity, business risk and technical risk as traditional ERP projects. There are several factors that can increase this level of risk, including integration with existing systems, data cleansing and migration, system stability, demand on hardware and networks, system compatibility and deployment options.
Following are six tips for mitigating risk during a CRM implementation:
1. Focus on Organizational Change Management
Most CRM implementation challenges are related to process and change management issues. As such, your company should ensure that sales reps are committed to project goals and clearly understand new business processes.
In our experience, salespeople can be among the most change-resistant employees because of the extra work a CRM implementation creates and the temporary pull from their commission-generating activities. A change management plan is critical to mitigating this resistance.
2. Focus on Business Process Management
While today’s CRM software has more robust customer data insights than in the past, this fact alone does not increase organizations’ chances of achieving benefits. All the robust functionality in the world is useless without a plan for how to leverage it.
This is why business process management is essential. We recommend improving business processes within your customer journey to identify areas where you could create a more personalized customer experience.
3. Consider Your IT Strategy
Your CRM implementation should be part of a comprehensive IT strategy. In other words, consider how your CRM system will integrate with other systems now and in the future.
For example, it’s important to determine how the CRM system will interact with inventory management, financials, product configuration, manufacturing and other functional areas.
4. Remember That Your CRM System Doesn’t Need to Come From Your ERP Vendor
Many of our clients begin their software evaluation process with the expectation that one single vendor will provide most or all the functionality they need.
However, if CRM is critical to your business model and a source of competitive advantage, it may behoove you to consider a standalone CRM system to augment your core ERP software.
5. Understand the Integration Capabilities of Your CRM System
Simply because two systems integrate doesn’t mean they will integrate the way you want them to. For example, we have found that certain product configuration details desired by some sales teams do not integrate well without extensive customization and changes to CRM system architecture.
It’s important to understand how your CRM will integrate with other software, such as business intelligence, product lifecycle management, quality assurance and other point solutions.
6. Don’t Bite Off More Than You Can Chew
Even though you’ll want to make a decision that’s best for your long-term enterprise solution, you don’t necessarily need to implement or even purchase various solutions all at once.
For example, one of our clients worked with us to procure and implement a CRM system in a separate phase well before they began planning their ERP project. We were able to implement and integrate their chosen ERP system in a later phase because we had previously helped them define a long-term IT strategy.
How ERP and CRM can Transform the Customer Experience
Our clients often focus their process improvement efforts on the customer experience. We work with them to assess their current state and determine what is working and what isn’t.
Following are some opportunities for customer experience transformation we’ve found in several organizations:
- Using advanced analytics capabilities to enhance customer intelligence
- Leveraging new technology (mobile, eCommerce, etc.) to enhance sales
- Integrating customer touch points into a seamless experience
- Automating processes to allow workers to focus on innovation and creativity rather than repetitive efforts
- Using real-time data to improve performance management
- Augmenting physical products/services with digital products/services to share content across organizational silos
How CRM Helped Companies During the Recession
While the 2008 recession seems like a strange time to invest in expensive technology, CRM software actually helped many companies weather the storm during this tumultuous time.
For example, we were working with a company at the time that was really feeling the recession because their business was directly correlated to the health of the housing and construction industry.
In late 2008, they were planning on selecting and deploying an ERP system, but due to their drop-off in revenue, they determined that their greatest and most immediate need was a CRM system. They chose this path because they projected that CRM would help them sell more effectively and stop some of the hemorrhaging of revenues.
To save money, they decided to look at SaaS CRM systems. This allowed them to deploy CRM at a lower initial cost with a strong return on investment.
How does this apply to companies today? Well, maybe your company is struggling with revenue. If this is you, we’re here to tell you that it’s not completely crazy to implement a CRM or ERP system during this time. These systems can be an effective way to weather the storm and better position your company for long-term growth.
Selecting the Right Technology
Deciding between ERP and CRM software (or some combination of the two) can lead to some interesting discussions among executives and ERP project team members. It can be difficult to reach a consensus, or you may not feel confident in your decision.
Panorama’s expertise lies in understanding a company’s unique needs. Our ERP consultants will help you determine what type of technology aligns best with your business goals and digital strategy.