ERP vs CRM vs PSA: Which Should You Choose for Your Services Business?

A Look at ERP vs CRM vs PSA

When it comes to deciding between an ERP vs CRM vs PSA system, the best software solution for your professional services organization will be the one that meets your business needs, fits your budget, and solves the problems you’re looking to solve. It should make it easy to communicate with customers, partners and employees, and improve your business operations and outcomes going forward. The software should also automate many of the day-to-day tasks associated with running a professional services business so you can spend more time on other things that matter most—like delivering great projects.

Much the way PSA software (professional services automation) sits in the center of service delivery, ERP software (enterprise resource planning) sits at the center of operations, and CRM software (customer relationship management) sits at the center of customer data. In this post, we will take a look at the benefits and drawbacks of ERP vs CRM vs PSA for your professional services organization to help you determine which option will be better suited to help your business grow and thrive.

What is ERP Software?

ERP stands for enterprise resource planning and, as the name suggests, ERP software is a business management solution designed to allow enterprises to plan and manage resources. These resources can be financial, human, or natural resources or some combination of these.

ERP software helps to streamline business and improve productivity by serving as a central source of data for all departmental processes, enterprise-wide. The goal of an ERP system is to help companies run more efficiently by reducing manual tasks, automating processes, creating better visibility into data across multiple departments (including financials), and improving customer service with better communication among internal and external teams.

While ERP software is accompanied by a significant amount of capabilities on both the macro and micro level, it’s not typically the first choice for professional services organizations.  The reasoning for this is that, from a focus perspective, ERP software solutions were built with manufacturing, supply chain, and inventory in mind. They weren’t necessarily purpose-built to control the time and expense entry and management inherent in a people-centric delivery organization.

The feature list and streamlining functionality, however, does still result in a large variety of benefits, especially if you’re aspiring to be a Fortune 500 company or a massive professional services organization. ERP solutions support significant scalability, can standardize business processes and bring improved and effective reporting and visibility.

What Are the Benefits of Using an ERP vs CRM System?

  • More Focused Administrative and Operational Costs – Improve efficiency of operations with all business data residing in one central system.

  • Flexible Modularity – Choose what elements you need to meet your organization’s goals.

  • Simplify Accounting – An ERP accounting system can automate a variety of financial functions to minimize the amount of time spent on time-consuming accounting processes.

  • Superior Scalability – Manage increases in projects, employees, customers, and data within the same system.

  • Improved Reporting and Planning – Connect data from across the organization with enhanced reporting capabilities to allow you to proactively plan ahead versus just being reactive when an issue arises.

  • Standardized and Automated Business Processes – Automation and standardization allows more work to be completed in less time, requiring the utilization of less resources and helping to cut costs.

What Are the Disadvantages of ERP Software?

  • Cost Prohibitive – Small and mid-sized business ERP costs can easily go upwards of hundreds of thousands of dollars depending on the level of customizations required, implementation and deployment strategies, training, user count, and ongoing maintenance.

  • Long Implementation Times – According to some estimates, the average ERP implementation can take anywhere from 6 months to 2 years, even smaller companies may find timelines extending as customization and requirements expand.

  • Requires Deep Customization – Implementation teams within the organization will likely need extensive technical and product knowledge in order to customize the system to fit the organization’s initial and ongoing needs.

  • Not Specialized for Professional Services – ERP solutions were initially built with manufacturing, supply chain, and inventory in mind, not necessarily purpose-built to manage the nuances of people, projects and time.

What is CRM Software?

CRM software stands for customer relationship management, and is a type of business application that helps you manage your sales process and customer data. It can help you keep track of prospects, customers and leads, automate your marketing campaigns, track your sales team’s performance, and improve customer satisfaction.

CRM software helps organizations manage the entire sales cycle from lead generation to closing a deal to customer retention and upsell. Most CRMs offer features like email marketing automation, lead tracking, and reporting. Some even include automatic create/reply forms for email communications with customers or prospects to eliminate manual data entry into the system. This sort of functionality cuts down on mistakes while also saving time overall by eliminating repetitive tasks and ensuring data integrity.

Another function of a CRM is to give organizations the ability to automate their marketing efforts through activities such as trigger-based automated emails, customer-lifecycle tracking, contract management and even customer support tracking. Larger CRM tools may even have modules for PSA or other functions outside of pure sales activity.

And while there are drawbacks to using a single platform for CRM and other related technologies, the reality is that most if not all companies of a certain size find themselves needing and implementing a CRM platform.

ERP vs CRM

What Are the Benefits of Using CRM Software?

  • Increased Customer Satisfaction/Retention – The ability to optimize how you handle customer relationships is improved with tools to track interactions, identify new opportunities, and create more customer-friendly sales processes.

  • Streamlined Operations – Automate repetitive activities, such as manual reporting and emails, reduce data errors and create synergies with other systems such as marketing automation tools.

  • Better-Managed Customers – Get accurate data about each individual customer that allows you to make informed decisions about what products and services to offer, when to contact customers, and how to communicate with them.

  • Sales Boost – Manage customer relationships more effectively as well as track sales leads and provide reports on how campaigns are performing.

  • Improved Marketing Efficiencies – Reduce duplicate emails and automate follow up tasks such as sending reminders and scheduling meetings.

What Are the Disadvantages of CRM Software?

  • High Cost – Due to extensive feature sets and ongoing cost of ownership CRM can be more expensive than other business management tools.

  • Complex – It requires disciplined processes, training, and support following a thorough implementation.

  • Security – Storing customer information in a centralized database increases risk of security and data protection issues.

  • Customer Experience – If employees try over-automating processes, they can diminish the customer experience.

  • Required Integration(s) – Some CRM functionality requires integration(s) with other systems. If it doesn’t work well with your existing tech stack, the effectiveness of the software won’t be realized.

What is PSA Software?

Now that we’ve looked at ERP vs CRM, what is PSA software? PSA software, which stands for professional services automation, is a solution designed for professional services organizations that tracks your business processes and helps you make better business decisions.  It combines the often separate systems and tools for time tracking, project management, resource management, invoice processing, and business intelligence into one automated delivery platform.

PSA solutions are purpose-built for managing the nuances of the professional services industry. It provides a unified source of truth for the people, projects and finances within an organization, with all core operational data in one place. There are four sub-categories of a PSA: project accounting, resource scheduling, project management and advanced analytics. A significant benefit is that you get a project accounting subledger that scales your current accounting technology while providing project-level financial analysis.

The impact that a PSA solution can have on the performance of a professional services organization is evident in studies performed by SPI Research (Service Performance Insight), a global research, consulting and training organization dedicated to helping professional services organizations improve productivity and profit.  

In its Professional Services Maturity Benchmark, it notes that services organizations using a PSA versus not using a PSA have 36% higher year-over year change in revenue, 11% more billable utilization, 6% more revenue per consultant, and 13% higher profit margin. The research indicates that even organizations with as few as 20 employees can reap the benefits of a PSA tool and that PSA solutions were used by 85% of the top-performing service firms in their survey. 

benefits of psa software

The downside is that not all PSA applications are created equal or represent the same thing. For instance, there are point solutions that are specific for individual business problems (time tracking software, expense tracking software, project management tools), project collaboration PSAs (focused on project management), operational-focused PSAs (performance and KPI-driven), and single platform or enterprise solutions (all-in-one vendors such as Oracle or SalesForce and designed for large enterprises). As a result, the landscape is a bit blurry.

PSA systems, however, support sustainable growth that is derived from a balance of differentiated service delivery coupled with operational efficiency. If your organization is out of balance, you get a “leaky bucket” that stifles your growth potential. PSA software helps teams deliver quality work AND fully optimize business operations. Real-time data visibility that extends into forecasts, and access to information that flows across departments, allows services teams to make quick, fact-based decisions.

PSA Software Pros and Benefits
Caption: Executive real-time visibility coincides with higher billable utilization, more on-time projects, less project overruns, more referenceable clients, more projects delivered on-time, less revenue leakage and more efficient resource management processes.

What Are the Benefits of PSA Software?

  • Project Accounting Subledger – Purpose-built project accounting subledger seamlessly integrates with existing financial systems while extending the lifespan of your general ledger.

  • Fast Deployment – Generally designed to be easily configurable, quickly integrated and readily learned by employees who will use it. According to G2.com, the average PSA implementation goes live in 4.08 months.

  • Low Implementation Cost – PSA end user surveys have shown a breakeven time of well under a one-year period, with SPI Research’s recent study noting, “These systems pay for themselves with substantially higher consultant revenue yields, better project margins and more bottom-line EBITDA profit.”

  • Extends the Capability of Accounting Systems Drive considerable business growth by extending the useful life of your accounting technology instead of replacing the total system.

  • Unifies People, Projects, and Financial Data – It is the only software specifically designed to help delivery organizations operate more efficiently, establishing a unified source of truth and visibility throughout the organization.

  • Drives Performance and Growth – 85% of top-performing service firms use a PSA system, with SPI Research indicating that firms should consider it once they have 20 or more employees.

What Are the Disadvantages of PSA Software?

  • Not All PSAs Are Created Equal – The landscape is noisy and ranges from point solutions and project collaboration PSAs to operational-focused PSAs and single platform or enterprise solutions.

  • Needs to Be Configured and Implemented – Organizations will need a strategy for what will be required to integrate into other applications within your unique technology ecosystem.

  • Requires Disciplined People, Process and Technology Approach – You’ll need a culture that supports the right combination of systems and processes to provide the human part of your business with the tools needed to do their jobs and meet expectations.

ERP vs CRM vs PSA: Selecting the Best Option for Your Organization

In order to select the best option for your services business when it comes to ERP vs CRM vs PSA, it’s important to know what all of your options are, what problems you’re looking to solve, and how your available options will help you achieve your future goals. And often the answer isn’t one system, but a combination of two or more for a professional services integration strategy that enables seamless data flow. One example of this would be PSA integrated with CRM, which allows visibility into pipeline revenue and staffing needs.

Regardless of what you finally choose, here are some things to consider when choosing between ERP vs CRM vs PSA:

Your Goals: What are your company’s current and future goals, and what are the hurdles that stand in the way of achieving those goals? Once your pain points and goals are clearly articulated, you’ll be in a better position to evaluate your software options and identify the best solution to support the objectives of your service organization now and in the future.  

Your Team: Is it large or small? Do you have people with different skill sets who will be using the software? How disciplined are they when it comes to process-based approaches? Will there be resistance to a large-scale, complex implementation? Is leadership strong enough to lead the process from implementation through execution, with the ability to shift the culture as needed depending on the breadth of the software?

Your Budget: How much money do you have available for purchasing software and funding a subscription service? Consider what features are must-haves and which ones would be nice-to-haves. In some cases, you might be spending more for added features that you might not use; others, you might be spending less but finding yourself with your initial issues unresolved due to restricted functionality. And consider the ongoing effort to support the solution you choose, factor in not just time spent by dedicated support staff, but also the impact on billable resources using the system.

Your Industry: What industry are you in and how does this affect the type of data you need to collect and the professional services KPIs you need to focus on to ensure the successful delivery of your projects? And will your business model need to change or adapt to factors in your industry. Whether choosing ERP vs CRM vs PSA, the investment is substantial enough that you’ll want to avoid replacing it in the future. So be sure your solution scales and grows with your organization.

In Summary

When it comes to ERP vs CRM vs PSA solutions for your professional services organization, there are a variety of options available to consider depending on your business goals and objectives, available resources, budget, and maturity level to name a few factors. If you’re struggling with unanswered questions or need more information or clarification, please contact one of our professional services development specialists today. We’d be happy to help!

A Guide to PSA Integrations and Customizable Solutions

This introductory guide explains PSA software integration options with premier CRM, project management, and general ledger accounting platforms.

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Frequently Asked Questions About ERP vs CRM vs PSA

What’s the difference between ERP vs CRM vs PSA?

Much the way PSA software (professional services automation) sits in the center of service delivery, ERP software (enterprise resource planning) sits at the center of operations, and CRM software (customer relationship management) sits at the center of customer data.

What’s the difference between ERP and PSA?

From a focus perspective, ERP software solutions were built with manufacturing, supply chain, and inventory in mind. They weren’t necessarily purpose-built to manage the time and expense entry and management inherent in a people-centric delivery organization the way a PSA system can.

What is CRM PSA?

CRM software integrated with a PSA system empowers organizations by effectively forecasting the investment required to win and maintain business. PSA solutions sit as the glue between the “front office” (customer-facing operations/CRM) and the “back office” (administrative duties/GL accounting).

What are the advantages of ERP software?

When combined with a PSA, ERP software is a very effective tool for larger companies with more complex needs. The advantages and benefits include:

• Flexible Modularity – Choose what elements you need to meet your organization’s goals.
• Scalability – Manage increases in projects, employees, customers, and data within the same system.
• Improved Reporting and Planning – Connect data from across the organization with enhanced reporting capabilities to allow you to proactively plan ahead versus just being reactive when an issue arises.
• Standardized and Automated Business Processes – Automation and standardization allows more work to be completed in less time, requiring the utilization of less resources and helping to cut costs.

Who are the primary users of ERP systems?

While ERP systems can be used by small- to medium-sized businesses, it is more commonly used for large, multi-department enterprises to streamline all operational processes through one system. The primary industry users of ERP systems include:

• Manufacturing
• Construction
• Healthcare
• Retail
• Government
• Finance
• Education

What is better CRM or ERP?

ERP and CRM are two different software solutions that work together to help companies run their businesses more effectively. ERP refers to an enterprise resource planning system, while CRM stands for customer relationship management. When combined with a PSA, each of these are very effective tools for larger-sized organizations that have more complex needs.

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