Benefits of ERP-CRM integration

CRM integration is a major challenge for organizations of all sizes. In this new series, SearchCRM.com will explore best practices for integration between CRM and other systems. If you have suggestions or comments about this series, please contact us at editor@searchcrm.com.

Don't miss the other installments in this CRM integration series
* CRM application integration with Web services
* Integrating Software as a Service (SaaS) CRM and ERP applications
* Integrating CRM with business intelligence tools
* Four steps for an effective mobile CRM implementation

Optimizing the business process as a whole, rather than individual parts, is the surest path to a successful integration project, experts say.

"The benefits of ERP-CRM integration are huge," said Ray Wang, an analyst with Cambridge, Mass.-based Forrester Research. "ERP systems provide much-needed internal information that can be shared with new stakeholders. CRM systems provide the entry point for stakeholders to engage with an organization. You can't really have one without the other and be successful in the marketplace."

Wang added, however, that many organizations have a difficult time with CRM-ERP integration because they have created workarounds and customizations for the applications.

"Traditional ERP and CRM have been deployed as a patchwork of different applications," said Isher Kaila, research director at Stamford, Conn.-based Gartner Inc. "The CRM space is focused on the contact center, campaign management, help desk, and self-service. But it is not in itself supporting one end-to-end business process. One of the big shifts we are seeing is to make the end-to-end orientation front and center and then integrate from that perspective."

Proper ERP and CRM integration projects have proven they can provide clear business benefits. For example, Richard Smith, vice president of CRM strategy at Green Beacon Solutions, a systems integrator based in Watertown, Mass., spoke of one client that took 45 days to send out an invoice because of the various approval processes within the organization. Once they integrated their CRM and ERP systems together, Smith said, they were able to reduce that to only one day.

More on CRM integration Read advice from expert Paul Greenberg about integrating CRM with legacy systems Listen to a podcast with NetSuite's Zach Nelson about CRM and ERP integration. Browse a CRM integration special report to get tips on integrating and managing customer data.

"Ultimately, the reason to do this integration is [that] there will be some measurable benefit either through a streamlined order process that will let the business process orders more quickly, or so that the organization can offload some processes from the order department," Smith said.

Here are some tips from experts to help ensure a successful ERP-CRM integration project:

Take a business process view of ERP-CRM integration

One of the first steps in ERP-CRM integration is to start with an enterprise process view. Organizations need to think about how integration will improve the business as a whole rather than just a particular business process, according to Wang.

While this might sound intuitive, organizations frequently start looking at this from an IT-centric perspective or from a departmental perspective. A recent Forrester poll of 57 organizations found that only one had identified a single business process owner for the complete order process. This led to short-sighted innovations and inadequate enterprise-wide process improvements. Wang recommends that organizations assign a single process owner for the entire order management cycle.

Without this wider scope, improvements in one area can result in deterioration in others. For example, one company interviewed by Forrester reduced inventory in its supply chain by 75% and then lost three key partners and 5% of its market share in one month. Another increased overall orders by 37% in one month, and then sales dropped 45% the next month because the order system could not handle the increased sales.

Determine how ERP-CRM integration can benefit end users

What is good for the company is not necessarily good for the individual employee.

"In order for these integrations to work, everyone has to see a measurable benefit," Smith said. "For the sales reps, it cannot go from five minutes to take an order to a day. If the order goes in more correctly and there are fewer issues with the order being shipped, it means the sales reps can get paid their commission more quickly."

That means, as part of the integration process, the sales reps must be able to see how it benefits them personally.

Reduce fears around loss of control

While improved integration can mean better access to financial data for sales reps -- thereby eliminating repeated phone calls and emails to Accounting when processing an order -- organizations must take care over the data they make available. The finance team might be reluctant to allow greater access to accounting systems if the new process opens a door to unapproved transactions. For example, increased access to ERP could enable salespeople to bend the rules to rush a sale through. In the worst cases, access could open a gate for a larger body of employees to engage in financial impropriety.

"Finance is generally fine with letting order information be shared back and forth between Accounting and Sales," Smith said. "There is a benefit for Finance in making this information available by reducing the frequency [with which] salespeople call in with order questions. But they do want a barrier so that the rep is not coming into the ERP and finance system."

Companies can reduce these risks by deploying one-way integrations, in which the CRM can query financial data and change it only through approved business processes.

Cultivating the right ERP-CRM integration team

One of the biggest questions with integration is who should be brought in to help plan the integration. By having too many people involved, the project risks getting mired in endless debates that are likely to reduce the efficiency of the enterprise-wide process. With too few people, it risks being sabotaged by departments that weren't involved and resent the changes.

The number of people to bring in is very much dependent on the size of the organization, Smith said. In a smaller organization, you might just bring in one person from Finance, one from Sales, and a consulting team. In a larger organization with many participants, you might involve six to eight people. Even if the CRM and ERP systems already come with integration capabilities built in, it generally requires some kind of technical assistance to manage the exceptions and the tweaks that need to be made, he said.

In order to provide the governance for a successful integration, projects require a strong leader.

"There will be many hard decisions to make that will impact business models," Wang said. "This is a business process problem that requires both business and IT. There's process integration and technical integration. Both require assistance in not only the planning and design, but sometimes the implementation."

Assigning process ownership for an ERP-CRM integration project

As the organization begins to evaluate the project, the planning team needs to look at which systems manage the different kinds of data.

"You don't want to put everything in both systems," Smith said. "You want to use each system for what it is best suited for. For example, the product master should live in the ERP system, which can be replicated in the CRM system."

Customer information is the only data typically synchronized across CRM and ERP systems, Smith noted. The contact information is typically entered in the CRM system and, over time, customer account status information is added in the ERP system.

This leads to the question of whether the integration should be organized around the ERP or the CRM system. Is the ERP solution going to define how to implement the CRM system or vice versa?

There is also an issue of single versus multiple instance strategies, according to Kaila. For example, a lot of organizations have six instances of Oracle or SAP deployed across the enterprise. One of the problems is that they want to define one global model to engage the customer. But different lines of business in different geographical regions use a variety of business processes, which makes standardizing on ERP difficult.

In these cases, Kaila recommends using the CRM system to create a consistent experience for customers that do business around the world.

"CRM is one way I can get a 360-degree view of customers globally," he said. "But when you look closely, the CRM models in different markets will mirror how ERP is deployed globally."

Don't miss the other installments in this CRM integration series
* CRM application integration with Web services
* Integrating Software as a Service (SaaS) CRM and ERP applications
* Integrating CRM with business intelligence tools
* Four steps for an effective mobile CRM implementation

About the author

George Lawton, Contributor George Lawton is a journalist based near San Francisco, California. Over the last fifteen years he has written over two thousand stories for publications about computers, communications, knowledge management, business, health, and other areas which interest him. George is currently editing the E/E Letter, a newsletter dedicated to providing balanced coverage on the research, regulation, and business of suspected endocrine disruptors.