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
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
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
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
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
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
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
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