June 30 - July 06, 2003 




The objective of this article is to see the positioning of Enterprise Resource Planning (ERP) today and its role in relation to customer relationship management (CRM) by conducting an analytical comparative study of both the solutions and technologies.

Information that companies as a business decision maker have access to information such as CRM Intelligence where the customer information such as acquisition, retention, satisfaction etc. are provided along with Marketing intelligence where campaign ROI, forecasted revenue, budget information, sales intelligence is provided to companies among a host of other things such as finance sale information, supply chain intelligence. Companies have to be no wizard to identify that the entire arena of sales, marketing, service, contracts, E-commerce handled among other things can provide the one-shot solution that companies have always dreamed of but never got hands on! With the Business Intelligence companies have the perfect weapon to provide customer the dictum "Customer is GOD".

BUSINESS INTELLIGENCE: Normally describes the result of in-depth analysis of detailed business data. Includes database and application technologies, as well as analysis practices. Sometimes used synonymously with "decision support", though business intelligence is technically much broader, potentially encompassing knowledge management, enterprise resource planning, and data mining, among other practices.

INTEGRATING CRM WITH ERP: One has identified important business issues or opportunities within his organization, its customers and its competitive landscape, and has decided that a Customer Relationship Management (CRM) initiative will enable him to tackle them. Though it is known that CRM is a strategic initiative that extends far beyond the technical solution, one is also aware that technology is an instrumental driver of his final success. Moreover, one wants to fully leverage in this initiative his previous investments and his organization resources.

One may be dealing with dozens of software vendors and system integrators, each one praising the benefits of his solution. Among these proposals, one claims not only to manage efficiently the entire customer life cycle, but also to take full advantage of company's previous technology investments. Company's incumbent back-office system one vendor has also a CRM solution, and it is praising the benefits of the tight integration of both systems. The question is then, how does one know whether this solution is the best for him?

The best-fit solution for the company will depend on the strategic goals of the CRM initiative, as well as on how these goals fit with the drivers of competition within industry. Companies looking for efficiency and integration of demand and supply may find the CRM proposal of their Enterprise Resource Planning (ERP) vendor attractive. On the other hand, companies interested on strategic customer care through their CRM initiative, may not find ERP vendors proposal compelling and would prefer a best of breeds approach.

This topic outlines why different companies will or will not find back-office vendors CRM proposals valuable. We are including the strategic criteria management should use when evaluating these CRM solutions. One will find it especially useful when evaluating proposals from ERP vendors against "best of breed" approaches. Finally, best practices of CRM implementation is being presented, with an emphasis in the CRM-ERP integration.



COMPANIES LOOKING FOR EFFICIENCY WILL TURN TO ERP VENDORS: Risk-averse companies interested on operational effectiveness through the value chain are the most likely to select a CRM solution powered by their incumbent ERP vendor. These organizations will find ERP vendors' CRM solutions valuable not only because they tackle (or claim to tackle) those companies main driver of competition (efficiency), but also because ERP vendors are a "safe" alternative at a potential lower cost. Not surprisingly, most of these enterprises would be among ERP vendors current installed base.

When properly integrated, ERP and CRM technologies can provide an infrastructure that enables operational effectiveness. Obviously, ERP vendors claim to offer the best integration among their own front and back-office technologies, and therefore, the highest efficiency through the value chain.

TIGHT CRM-ERP INTEGRATION LEADS TO OPERATIONAL EFFECTIVENESS: Organizations can leverage the CRM-ERP integration to the enhancement of operational effectiveness. This integration affects the activities through the value chain. The value chain is a framework that helps us to identify the value-creation activities that a company performs in order to compete, and how they affect both company's costs and value delivered to customers. By linking front office, customer-facing systems (CRM) with back-office systems (ERP, HRM, and SCM), organizations can build an infrastructure that enables streamlined business processes, which in turn will lead to operational effectiveness enhancement. Additionally, the tight integration provides a consistent view of customer and back-office information for theoretically anybody who needs it, empowering the decision making across the enterprise.

ERP VENDORS OFFER A TIGHT CRM-ERP INTEGRATION: The benefits of a tight CRM-ERP integration are obvious. As one may expect, ERP vendors claim that they offer the best possible integration between both solutions. The natural question is then, whether a company looking for these benefits should embrace ERP vendors CRM solution. While the answer is not always yes, ERP vendors are ideally positioned to provide a tight integration between their own back-office and CRM solutions. Moreover, companies trying to achieve all the integrations benefits with a best of breeds approach may have to rely on extensive system integration and may not accomplish the most elaborate integration benefits, like real-time availability information. There is trade-off between the benefits from integration and the advantages of "best-of-breeds" sophisticated functionality. The best-fit solution for the organization will depend on the strategic goals of its CRM initiative.

ERP vendors are appealing to cost-conscious customers not only because they enable operative effectiveness but also because their solutions have lower implementation costs. They claim that implementing their CRM solutions over their own back-office systems requires less customization (i.e. system integration work) than implementing a "best-of-breeds" solution a very interesting argument since integration expenses account for more than 60% of the first-year costs in a typical CRM project. However, ERP vendors still have to give more evidence (i.e. references and success histories) on this point. If this claim proves to be true, ERP vendors will be offering not only lower implementation costs but also shorter time to market. Moreover, they have the ability to bundle their CRM software as part of a larger e-business deal, reinforcing their position as a less costly solution something not possible to match for most of their "best of breeds" competitors. For example, one very large German enterprise recently reported that SAP bid 50% less per seat than Siebel, winning the CRM deal even though they didn't have the best functionality.

This does not mean that ERP vendors have the lowest cost solutions this just means that they can under price Siebel and most of the "best of breeds" vendors, like Epiphany, Informatica, etc. However, customers looking for the lowest cost solution may not consider ERP vendors, since outsourcing providers like Salesforce.com and bom.com offer Web-enabled CRM for as low as $75 per seat, versus $ 3,500 average Siebel cost per seat.

On the other hand, it is important to point out that most of the cost-savings offered by ERP vendors are related to the upfront costs (implementation costs). As anybody who has ever bought Enterprise Software knows, in the long run, maintenance costs are a significant portion of the total technology investment and should be monitored closely. While ERP vendors would probably claim that their maintenance costs are also lower, companies should ask for evidence of this affirmation, like references and case studies.

ERP vendors are attractive to not only integration, efficiency-oriented customers. Cautious, risk-averse customers will also turn to them, especially in these post dot-com days, where companies investing in technology are concerned about the vendor long-term viability. This is definitely a strong point in favor of ERP vendors, i.e. SAP, PeopleSoft and Oracle, and, to a lesser extent, JD Edwards. They enjoy larger financial resources than most "best of breeds" CRM vendors in fact, of these "best of breeds" vendors, only Siebel can challenge ERP vendors' huge resources. Moreover, ERP vendors also have larger R&D resources as well as already-working partnerships that they can leverage to strength their position. Again, only Siebel has comparable resources actually, they have certified even more implementation partners than SAP and Oracle.



This does not mean that the other CRM vendors are not economically feasible. There are a good number of them that have developed interesting niche positions and have both a good installed customer base and an appealing product. However, companies dealing with them may need some degree of risk-tolerance, depending on the specific vendor. Those not risk-tolerant companies will turn to ERP vendors and Siebel, regardless whether they provide or don't provide the functionality required.

DIFFERENCE BETWEEN CRM AND ERP: In today's highly competitive environment, almost all of today's driving changes in the business landscape reveal the full scale of dependency of enterprises from their direct and indirect customers. Not even two companies in the same market sector are alike. They have different customer profiles which in turn leads to unique relationships with their clientele; relationships that may grow further or shrink with time, depending on each company's good, bad or no response to a CRM initiative.

Since the company next door is now offering the same or similar products at competitive or the same prices, it is getting clearer that the only competitive advantage that may exist can only occur at the services level. Companies realize once again that satisfied customers are their valuable asset and try to use current technology to approach consumers in a more appealing way. Especially, the enabling information technology (e.g. internet) offers unimaginable potentials for drastic improvements in the area.

The company needs not only to identify who its customers are, but also to "think" of ways to retain them and, if possible, to make them buy again and again: make them more profitable. This is the loyalty game, the theoretical backbone of every CRM strategy.

However, many things are left to be done from that point on. Existed processes must be re-visited, new communication channels must be adopted along with the old ones, customers approaching and campaigning must be revamped, even operational structures must be re-organized to a certain extend. Everything must be re-aligned towards fostering a new company profile that will attract customers.

Quite often companies think of all the above as a new wave of change threatening the already vulnerable existence and investment budgeting. With never-ending lists of still open issues and a rather traumatic experience from their ERP implementation that only recently reached its stability point, many of them face CRM implementation with great skepticism and fear.

Many of them reject completely even the idea of getting involved in a new implementation adventure with high risk and dubious results. It is the main intent here to focus on certain aspects dealing with the subject and showing that things may not necessarily be as perilous as they seem to be. CRM is definitely not identical to ERP.



THE TWO INITIATIVES ARE DIFFERENT IN SEVERAL CENTRAL FEATURES: While ERP implementations were trying to build the basic informational kernel for the support of almost all of the operational and financial corporate processes (thus affecting customers indirectly through response and quality improvements), CRM is mainly focused on the ways customers can be contacted in a direct fashion. With CRM companies do not have to wait for their customers to pass the doorstep of their stores anymore and buy.

They can rather move pro-actively towards identifying, obtain better knowledge of requirements and needs and successfully respond to their customers' preferences. In this sense CRM can be considered as complementary to ERP, rather than merely a substitution, although part of the traditional functionality of the ERP systems appear also in CRM systems. However, CRM implementations still assume in most cases and rely heavily upon the existence of working and robust ERP systems.

Secondly, by definition CRM is a business strategy supported by numerous systems, rather than a system itself like ERP. New departments like Marketing and Customer Interaction Centers, never touched before by any central system, now come into play. Automation remains a target, but the center of the stage is now taken over by Customers and Profitability.

Thirdly, change in corporate processes and culture is dominantly present in CRM as well. This may sound quite discouraging especially to those who have already experienced long-scale changes during ERP implementations. It is true that change tends to become an integral part of every IT project. Companies must realize and accept that change is and will always be a part of their everyday business life and have certain processes in place to deal with it successfully. However, change in CRM, as opposed to ERP and to any BPR initiative has a definite Customer orientation and can be as extended or as restricted as it is defined by the main business goals.

Step-wise implementation, but with a finer granularity, than in ERP, is another major difference between the two initiatives. Far from the monolithic modular fashion of the ERP systems, even the implementation of an additional communication channel with the customers, or the activation of one more service in an Interaction Center (e.g. cross-selling) can become a separate business scenario and can be implemented separately at a later time-frame. This can lead to better controlled implementations and more accurate calculation of the ROI before the start of the project.

Finally CRM projects can be easier tailored to the priorities and needs of the enterprises. This is directly related to (4), tremendously improves visibility and facilitates monitoring of CRM projects. In conclusion, it is believed that developing a consistent and bold CRM strategy is an essential and definite step for every company towards its survival in a demanding and highly competitive business world. CRM, like ERP implementations, are far from being risk-free, but have stronger business incentives and can be handled in a more efficient way. Companies should seriously consider further elevating customer relationships through CRM and proceeding without fear, but gradually with caution and careful planning of all their steps. There are certain techniques that can provide within acceptable accuracy insights of the expected ROI of a CRM implementation. As far as the system selection is concerned, a detailed and consistently updated cost-benefit analysis should always be the guiding line along with an extensive evaluation of all vendors based on quality, supporting services and system functionality criteria.


The Business Intelligence is being achieved through CRM based ERP products. Business Intelligence refers to analysis performed by DSS, EIS, data mining, and intelligent systems. Analytical CRM is contributing a lot, providing Business Intelligence. The technologies were introduced in isolation but now their integration is also covering the whole SCM activities.

In summary, ERP is the foundation of present and future success of Electronic Commerce Business to Business. The success factors to this point in time, i.e. at the outset of the project implementation, often dictated whether the project would ultimately be in line with budget costs, delays and expectations. To use the concrete metaphor already cited, the errors made at this stage would be difficult to correct (remold) later on.

Investment in technology supporting the Customer Information Platform (analytical CRM) is justified based on the value of the information Investment in technology supporting the Customer Interaction Platform (transactional CRM) is justified based on operational efficiencies. Once this has been established, two types of technologies provide the best value to an organisation. It is analytical CRM rather than transactional CRM (Customer Information Platform rather than the Customer Interaction Platform) which brings the most value to an organization.