Integrating ERP can overcome CRM limits

Software Magazine, Spring, 2002 by Alan Robert Earls

No magic bullets, but effort to tie back-office ERP systems to customer--facing CRM apps is gaining: Web services standards potentially lower integration costs.

ERP and CRM are buzzwords with both a past and a future. ERP, enterprise resource planning, got on everyone's radar screen as a way to provide companies with an integrated suite of applications to tie together a wide range of disparate back-office functions and information. It was the corporate "killer app" of the early to mid-1990s. Customer relationship management, which evolved over many years from less capable and more narrowly focused sales automation and customer service applications, emerged more recently as a killer app in its own right--by some accounts the fastest growing software category today. Indeed, some pundits see it as not merely a category of software but as a business philosophy--a commitment to better link organizations with the source of their income. In fact, the reach being granted CRM is one factor impelling a matching rush to connect and integrate CRM functions with all the power latent in information living within established ERP? systems.

But that lofty goal for CRM increasingly hinges on an ability to link CRM functions successfully with those traditional ERP strengths--a task that is often highly complex. However, without such connections, "customer-facing" functions won't be able to accurately represent things like delivery date for a product or service, order status or the state of a problem resolution activity. Likewise, ERP systems may miss out on the potential predictive capacity of CRM--or the longer term potential to gather and use needed market or field information.

To maximize the potential of both ERP and CRM, customers are now demanding--and getting--new levels of integration and interconnection. But depending upon the organization, the ambitiousness of the goals and the specific vendor products, integration can range from merely challenging to well-nigh daunting. But make no mistake, that's the direction the market is moving--at full speed.

"CRM is of the same scale as the ERP initiatives that firms spent tens of millions of dollars on and needs--and deserves--the same level of attention. After all, this is how a firm expresses its personality to its customers," noted Bob Chatham, principal analyst at Forrester Research, Cambridge Mass.

The intimacy of the ERP-CRM relationship was underscored in a recently released report on CRM-related technologies authored by analysts Rod Johnson and Joanie Rufo of Boston-based AMR Research. The report acknowledged the obvious, namely that CRM giant "Siebel is still the market share and functional leader." However, heralding the new importance of integration, the authors noted that traditional ERP players are now CRM players too. "In numerous customer implementations, Oracle, PeopleSoft, and SAP have made significant strides in the last 18 months to close the functional gap with Siebel and reorder the competitive landscape of the CRM market," they said.

"Traditional CRM approaches have been limited in that they have addressed information flow from only a portion of the value chain," said Karen E. Smith, senior analyst of Aberdeen Group in Boston. Smith said that CRM applications have done a good job tracking customers and opportunities, and tracing problems to resolution, and they have helped vendors more accurately forecast demand. But, she points out, these are largely benefits for the vendor not the customer and many decisions are being made based on an incomplete view of the customers and their needs.

While most CRM and back-office ERP and SCM (supply chain management) vendors still offer products that address only some facets of their specific domains, this trend is rapidly changing, said Smith. As the CRM market continues to mature, many software vendors are now focusing on developing new products that enable organizations to easily access important front- and back-office applications in one integrated system. Furthermore, management teams are starting to map out what system architecture, inputs and outputs, and business processes of their front-office systems will best integrate with other back-office processes, Smith noted.

However, she pointed out, "Despite rising interest and awareness in the benefits of connecting these two domains [ERP and GRIM] many companies remain crippled by the complex maze of software that runs in and out of their existing enterprise systems without any central control or management."

"The challenges associated with maintaining a single, consolidated view of customer interactions has only increased with the growth of the Internet as an additional medium for communication, which has significantly augmented the interaction and volume of activity a customer has with a company," said Smith.

With these sometimes daunting goals before them--in some cases nothing less than nearly total integration of virtually all systems--vendors, integrators, consultants and their customers have been rushing headlong toward a brave new world where CRM and ERP speak the same language and support the same set of corporate goals.