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Integrating CRM and ERP
Why it makes sense to unify now.
Posted Nov 20, 2007
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There's a lot of talk about CRM and ERP integration among businesses today. Is it necessary? In many cases, these systems have been implemented separately and have functioned well that way for years. Why take on the added cost and risk of bringing them together?

For many businesses, it is more than worth the investment and effort: Since businesses use ERP systems for functions such as managing receivables, inventory, and finance, and CRM systems are used to manage relationships, cross-sells, and upsells, imagine the information-sharing and visibility a company could leverage by integrating these disparate systems.

In fact, there are a number of reasons why businesses should integrate their CRM and ERP solutions. Companies with high volumes of sales transactions see almost immediate benefits in the order-to-cash process. Specifically, the cost savings come from reducing errors in order entry, implementing approval workflows for discounts, and reducing the manual labor required to enter orders in both CRM and ERP. Even organizations with relatively low order volumes can experience significant cost reductions through improved order accuracy (reduced returns lead to lower overall shipping costs).

There are several marketing benefits associated with integrating CRM and ERP, such as greater insight into the customer base. ERP systems store customers' financial relationship with the company; CRM solutions store their buying patterns and marketing demographics. Unifying these two stores of customer data can help organizations ensure that their sales, marketing, and service expenditures are targeting their most valuable customers and prospects.

The Reason Is Simple: Money
At the end of the day, the only reason to integrate any of your systems is to provide a financial return on the investment. Traditionally, it was difficult to integrate the systems because of the vastly different architectures in the solutions and the lack of standards for exchanging data between the systems. This is still the case with many upper-midmarket and enterprise customers who have implemented best-of-breed CRM solutions that are tied to, but not sufficiently integrated with, state-of-the-art ERP applications -- such as those from Oracle, Lawson, SAP, Microsoft, and Epicor.

These solutions can be quite complex. One of our clients had four distinct sales models with a complex series of pricing-configuration options and rules governing discounts, product qualification, and product availability. With models this complex, it became important to evaluate which system provided the optimal functionality for each core function. Because of the nature of the integration, changes in pricing -- and even changed orders -- became visible for the first time to CRM users without requiring access to ERP or a phone call to finance. Service and support users were also better able to support customer questions regarding pricing, orders, and add-on component solutions.

Evaluating Your Options
In order for integration to be successful, it is important to work with a business-solutions expert who will provide the company with the insight needed to select an integration architecture and development plan based upon functional needs and technical suitability.

There are four key areas that every company should consider when integrating CRM and ERP systems, and these are areas an effective consultant will be able to address with you to ensure proper integration:

  • 1) Contact Integration
    While Organizations, Contacts, and Addresses (Billing/Shipping) are maintained in both the CRM and ERP applications, each is the master database of record for a specific type of account. The CRM application is typically the master for prospects and sales/support contacts while the ERP application is typically the master for billing and shipping contacts. The integration will need to support the business rules regarding how organizations, contacts, and address data is synchronized between CRM and ERP applications as changes are made in either system.
  • 2) ERP Product Integration: Products in the ERP application will need to be replicated in the CRM application. This is especially critical for sales quotes that become orders -- those require replication to the ERP application, since the product part numbers in the quote will need to match the items ordered. Some organizations have created mappings between high-level sales products used for forecasts and specific line items used in actual customer orders; other organizations have implemented more complex product configuration solutions in CRM that allow reps to order from complex bills of materials and optional items that are configured in the ERP application.
  • 3) Quote and Order Management: Order management is only critical if users need to be able to upgrade existing quotes or forecasts to orders. Typically, organizations that leverage this type of integration use the CRM solution to drive revenue forecasts and generate customer quotes and proposals directly from within sales opportunities. Implementing order management in the CRM application requires that product integration be in place, and some customization to the standard quoting and forecasting tools, especially if complex product configuration is required.
  • 4) Product/Order/Invoice Repository: Once an order has been completed, the order and invoice information can be replicated to the CRM application. Typically, this integration is used to create a repository of installed or purchased products which are linked to the corresponding orders and invoices.


Now Is the Best Time to Evaluate Your Options
Does CRM and ERP integration make sense for your business? You can start to answer that question by evaluating key metrics like sales order volume, returns volume, calls to finance or accounting regarding client orders, or even the number of order-entry personnel in your organization. This type of integration can be a significant investment in both infrastructure and training, but if done correctly the rewards -- in terms of both profitability and productivity -- can far outweigh the costs.


About the Author
Richard R. Smith is vice president, CRM strategy for Watertown, Mass.--based Green Beacon Solutions.

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