Could CRM platforms make ERP irrelevant?

CRM platforms could connect traditionally back-office applications such as ERP systems, HR and so on. Could CRM make ERP irrelevant?

Historically, customer relationship management systems have been widely described as enterprise resource planning

software for the front office, but the two software types have taken significantly different paths to the present; even today, Wikipedia lists CRM as a subset of ERP. Interestingly, though, and in the ultimate irony, CRM could subsume ERP in the near future, making ERP a subset of CRM.

Enterprise resource planning (ERP) has always been considered a suite of applications based on a single vendor's data model and applications, while customer relationship management (CRM) has had a career of best-of-breed integrations.

That has been an understandable situation, but it was based on deep-seated issues. As any IT pro who participated in an ERP deployment when businesses had to adjust to four-digit dates at the end of the last century can tell you, installing ERP was a painful, traumatic process. No one wants to install ERP again, because the pain of those implementations is still fresh. As a result, ERP continues to loom as a monolith and a painful memory.

The era of shared platforms

But things have changed. A new school of thought has emerged that says that what has conventionally been viewed as back-office software -- including general ledger, accounts payable, billing, order management, human resources and other functions -- is really a set of applications connected through a platform shared by multiple vendors.

CRM vendors such as Salesforce.com and Microsoft have positioned their offerings as applications on general-purpose platforms and Salesforce has arguably taken the platform idea furthest. Today, the company's AppExchange ecosystem includes hundreds of partners and thousands of applications that have been pre-integrated or built directly on top of Salesforce's CRM application. This has yielded a potent library of plug-and-play applications that work well together out of the box for the front and back office.

In the ultimate irony, CRM could subsume ERP in the near future.

Companies like Zuora now deliver subscription finance offerings; Apttus, BigMachines, SteelBrick and others offer configuration, pricing and quotes (and some also offer billing); and Workday and others provide HR and finance. These apps and many others are based on one or more popular platforms. They all pick off ERP application areas because they can deliver quality functionality charged by the month rather than as one-time licenses. And cloud vendors don't charge the annual 20% or more in maintenance fees that conventional ERP providers do.

Meanwhile, ERP has, for the most part, remained a closed architecture. But this has not dampened the appetites of many CRM platform-based software houses determined to build ERP functionality. The interesting result is that ERP is not the monolith it once was. Platform vendors are beginning to pick off some of the major ERP applications, delivering them from the cloud with many perceivable benefits in what amounts to a piecemeal approach to a changeover.

With the rapid evolution of the platform, the back office is beginning to look more like the front office, where the front office has been a hotbed of best-of-breed technologies for some time. As more back-office vendors enter the fray with easy and low-cost alternatives to expensive legacy back-office functionality, we can expect a changing of the guard with new names replacing many incumbents.

More important, perhaps we will even see a shift in the role of back-office applications as more organizations seek to position the back-office data from their "systems of record" to positions closer to the customer. For example, from an accounting perspective, it's nice to know what your customer bought previously. But this information can also be put to good use in helping the front office to calculate customer lifetime value, cross- and up-sell opportunities, and so on. If the data remains locked in a back office, those connections might not happen.

Of course, there is still a role for the functions represented by conventional ERP. No one would suggest that billing and financial accounting are unnecessary. But it is becoming clear that modern technologies are making it possible to re-imagine the back office and, along with it, provide lower-cost technologies for modern business functions.

If things keep going on this path, traditional definitions for ERP like Wikipedia's might need to be rewritten.

Next Steps

Benefits of ERP-CRM integration

Mobile ERP and CRM offered by SaaS vendors

Explaining SAP CRM and ERP integration techniques

This was first published in June 2014

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