Does CRM eat ERP for breakfast?

Juha Leppänen

Juha is one of the founders of Kaksio Labs and currently serves as Chairman of the Board. Juha's long experience in CRM systems development and business design, have created a strong ability to build and prioritize big strategic directions into concrete and easy to adopt measures.

The CRM market is heating up. As a superior customer experience becomes a key competitive advantage for companies, systems are turning their attention from ERP to the customer. What about IT architecture? Will CRM become the master of all operations and focus on managing business on the customer's terms?

Statistics show that the CRM market is already larger than the ERP market. The size of the CRM market is predicted to be $88.19 billion in 2024 (*from Statista), compared to $65.25 billion for ERP (**Mordor Intelligence). Growth is also forecast to be higher in the CRM market. According to Statista, the CRM market will grow by 10.59% (CAGR, or compound annual growth rate) between 2024 and 2028, and according to Mordor Intelligence, the ERP market will grow by 9.76% (CAGR) by 2029.

I have been working with both CRM and ERP systems since the beginning of the millennium, both as a "super user" and on the vendor side as a vendor and consultant. I first wrote about the emergence of modern CRM in 2016, at the time my main thesis was that "In modern sales and marketing, CRM should not be just a tool, but an ideology that supports customer-centricity across the organisation. As a term, it should be forgotten, at least if we want to talk about a customer-first modern business culture."

The position of CRM in businesses in 2024 and predictions for the future

My findings on the use of CRM in enterprises are very heterogeneous. I am surprised, even shocked, by the number of companies in which I come across situations where there are no sales processes at all. Even in listed companies, CRM is driven by Excel and web pages. On the other hand, one should be envious of how these companies are coping in the current market situation. Whether this is a threat or an opportunity - that is the question. At the same time, many companies (especially start-ups and growth companies) have built their entire customer journey management to a premium, creating a customer experience that gives them a competitive advantage.     

The CRM market growth is therefore strong, supported by, among other things, a high level of innovation around customer relationship management***, including AI, multi-channel marketing, big data analytics and the extension of CRM solutions to all customer interfaces. 

Among those currently riding the wave of Gartner's legendary (Digital Workplace) Hype Cycle**** are "Everyday AI" and meeting management applications. These have been part of modern CRM solutions for some time now, and are no longer the hottest hype. Of the former, of course, we have only just had a taste of the more advanced aspects of predicting customer buying behaviour and churn and the automated actions derived from this. In terms of content production (e-mail, customer service and websites), the use of AI within CRM is also becoming the norm. 

One of the major trends affecting the technology sector is "Precision Marketing and Sales". In layman's terms, this is the idea that the fastest developing technologies, such as generative AI, digital buying and metaverse, are radically changing the way we market and sell (Gartner). The new way is based on precise targeting and personalisation, which aims to reach a well-defined audience and provide them with tailored products and services. Those who do not adopt these new approaches will experience a decline in sales quality and growth. It is only natural that these technology trends are spearheading CRM product development.  

So what does CRM mean in the first place?

The same Gartner defines the CRM tool and, more broadly, customer relationship strategy as follows: "Customer relationship management (CRM) is a business strategy that optimizes revenue and profitability through customer satisfaction and loyalty. CRM technologies enable strategy execution and customer relationship management, both in person and virtually. CRM systems offer functionality in four segments: sales, marketing, customer service and e-commerce." 

The concept of CRM and the scope of its functions have therefore grown significantly. In particular, with customer service, e-commerce and content management systems (CMS), it is about managing and controlling the entire customer lifecycle. Just over ten years ago, CRM was mainly seen as a static customer register and a database of offers. However, with the advent of the SaaS model and industry-changing pioneers such as Salesforce and HubSpot, the focus began to shift to the customer. For a long time, CRM also had a negative reputation in sales organisations. This was mainly due to the fact that the tool was used by management to 'stalk' sales and for internal reporting. The usability of the tools was poor and implementation projects have been heavy and unsuccessful. Unfortunately, all is still not so rosy.

Usability and employee experience

As noted, CRM and ERP systems have not previously been known for their high usability. However, the change in this respect has been quite positive over the last few years. Consequently, employee experience and the resulting tangible benefits of the system are also key objectives for the adoption of tools. As obvious as it may seem, apart from usability, the key enablers of the 'rise' of CRM have been the benefits that the tool brings to its users. There is hardly an easier way to motivate salespeople than to help them close deals with less effort. Show me the money!

Although there have been challenges in implementing tools, a study back in 2014 found that investing in a CRM system was a very good business decision. Every dollar invested was returned 8.71 times over through improved sales results and more effective marketing, among other things.

This may not be the biggest news, but the single biggest change in CRM systems has been a complete shift in focus from internal to customer-driven. You track what the customer or prospect is doing (or not doing) and take action based on that. The role of automation and customer experience with "AI flavours" is radically intensifying. The winners will be those who can combine this with timely human encounters.

Well, how about the traditional ERP (Enterprise Resource Planning)? Will CRM replace ERP? In short, no!

ERP is all about planning and managing your company's resources so that they are used as and when you need them. This includes finance and accounting, production, logistics and materials management. Of course, there are differences between industries. For example, in the service and professional sectors, the role of ERP (PSA = Professional Service Automation) has for some time been focused mainly on financial control and project management. In contrast, the manufacturing, logistics, grocery and wholesale industries still rely critically on ERP for their operations. 

In simple terms, ERP is responsible for internal management and CRM for customer and external visibility. CRM is already able to track customer behaviour across multiple digital channels and communication between the company and the customer (email, phone calls, meetings). Its potential to improve the customer experience is therefore significant. 

Integrations with other business systems will become even deeper. For example, links to ERP systems in particular can provide a seamless link between internal and external business processes, promoting efficiency and data consistency.

CRM already includes sales and marketing automation and customer service. With AI and data, we can anticipate many actions and deliver personalised content and services to meet customer needs.

The playing field

So what are the CRM systems of today and tomorrow? There is still room for new players on the playing field, but traditional players are also doing well, especially for large-scale customers. Whereas in the past, systems were based on reporting, customer registers and offer management, new players in particular are approaching customer management from a different revenue angle. 

These include marketing, customer service, process automation and project management. G2 is a popular online service that ranks systems based on user reviews. Currently, more than 2.5 million reviews have already been given. Based on user reviews, the "G2 Grid quadrilateral" classifies CRM applications according to market position and user satisfaction. In terms of market position, the top CRM systems (all customer sizes) are dominated by the familiar names Salesforce, Oracle, HubSpot, SAP and Microsoft******. 

If we look at the playing field from the point of view of user satisfaction, the new contenders are strong. Salesforce and HubSpot are in the top five, but also ClickUp, Close and ActiveCampaign, among others, make the list. Monday, which has become popular in the past as a project management application, is also on the rise. An honourable mention goes to Less Annoying CRM for its very apt name!

Summary

The transformation of CRM systems from static customer records to an automated buying and selling path is a major change in the way companies do business. CRM systems are becoming more and more strategic tools that not only store customer data, but also drive business and processes efficiently, support decision making and enable true customer centricity in all business processes.

Automated buying and selling paths are strongly based on customer data and customer behaviour. Data collection and analysis helps companies to better understand their customers' needs and wants. This in turn enables them to provide personalised and timely services to customers.

Despite the rise of automation and AI, the role of humans in this transformation remains central. Sales, marketing and customer service will use the information provided by CRM systems to make more effective decisions. Sales and marketing can focus more on building relationships and creating value, while customer service can provide faster and more personalised support. CRM has therefore become the brain and heart of the customer experience.

RESOURCES:

1. Grand View Research: CRM Market Analysis

2. Statista: CRM Market

• Revenue in the Customer Relationship Management Software market is projected to reach US$88.19bn in 2024.
• Revenue is expected to show an annual growth rate (CAGR 2024-2028) of 10.59%, resulting in a market volume of US$131.90bn by 2028.
• The average spend per employee in the Customer Relationship Management Software market is projected to reach US$25.14 in 2024.

3. Mordor Intelligence: ERP Market Analysis

• The Enterprise Resource Planning Market size is estimated at USD 65.25 billion in 2024, and is expected to reach USD 103.95 billion by 2029, growing at a CAGR of 9.76% during the forecast period (2024-2029).

4. Gartner: Top Trends Impacting Technology Providers in 2024
5. Gartner Glossary: Customer Relationship Management (CRM)
6. G2: CRM Software
7. Nucleus Research: CRM Pays Back