In a global economy that’s more-demanding and faster-paced than ever, many businesses are facing an enormous strategic decision: should they recommit to their primary enterprise-software supplier, or should they switch to a competitor offering not only different products but a different strategy, a different philosophy, and a different value?
It’s a momentous decision, because enterprise software is no longer confined to back-office and process-driven applications but instead has become the means by which companies in every industry engage with customers, monitor and adapt to marketplace changes, push knowledge out to sales teams and customers, and optimize operations.
The decision takes on additional gravity because of the stories we’ve all heard about the complexity, expense, and upheaval that can accompany a switch from one enterprise software vendor to another. Are such headaches inevitable, or are some software vendors able to offer you ongoing innovation without disruption?
For most of the businesses evaluating whether a switch is in order, the core question comes down to this: of the two leading enterprise-applications suppliers, which is the better choice to help me take my business where it needs to go—SAP or Oracle?
That big central question—which is the better choice?—encompasses a range of strategic issues about more than just automating core business processes and keeping the trains running on time. While those requirements remain vital, they’ve become table stakes and will not be the determining factor.
Rather, many customers will be basing their choice on which company does the best job at addressing the business requirements of today’s dynamic global economy, in which speed, flexibility, mobility, predictability, industry knowledge, customer engagement, and freedom of choice are indispensable.
On top of those tangible issues, businesses also have to consider other qualities that are less tangible but no less vital: does the alternative I’m considering inspire trust? Have they done this before—and done it successfully? If I’m going to essentially bet my business on this new software partner, can I trust that they’ll quickly switch over to being a business partner who understands my business, my customers, my challenges, and my opportunities? Will they share my intensity for minimizing uncertainty and risk, and for maximizing clarity and transparency every step of the way?
And given those drivers, I think that customers will use some or all of the following questions to determine whether SAP or Oracle is the better choice:
1) Which company will give me faster time to value?
2) Which company will give me better TCO?
3) Which company will help me move into the cloud as aggressively as I want?
4) Which company has the mobile expertise to help me not only make my sales force more productive, but also allow my customers be more successful by letting them engage with consumers in the ways those consumers prefer?
5) Which company has committed to a long-term technology roadmap and maintenance policy that gives me predictability and transparency so I can confidently plan my own strategies for the next several years?
6) Which company’s approach to the market will give me maximum openness, choice, and innovation?
7) Which company offers the deepest industry-specific knowledge, including benchmarks relevant to my industry and my region and my competitive set?
A striking example of the new growth-oriented corporate mindset regarding IT is offered in this excerpt from a recent Wall Street Journal blog post, CIOs Face Tough Year With Demand Up, Budget Down, about a Gartner study of CIO priorities :
Overall, CIOs rank growth as their top priority, despite tough economic conditions and future uncertainties. They are particularly attentive to attracting and retaining customers and to creating products and services, according to the 2012 Gartner CIO Agenda report.
“Technology is very much back on the agenda despite the economic situation,” said Dave Aron, vice president and Gartner Fellow. . . .
“In earlier years, technology had gone off the agenda and it was just about running a tight ship. But with all the drivers in social, and mobile in particular, a lot of companies see technology as a way to drive growth,” Mr. Aron said. . . .
“In the past, everyone promised that BI would save the world, and it didn’t. Now there is more mature BI and much more data. There is a big opportunity in analytics and BI to help a company pick up weak signals about market quicker, to specialize more on what is generating value,” he said. . . .
“In the last few years, CIOs have been in thrall to business process but there is a recognition that in these fast-changing times business process is not such a useful lens. It often gives quite incremental improvement, just tuning the way things are done,” Mr. Aron said. (End of excerpt.)
Those comments from Gartner’s Aron underscore the fundamental reality that the business-technology strategies that helped businesses succeed in the past will not be enough to help them continue to grow and succeed into the future. (A great book detailing this upheaval is Marshall Goldsmith’s “What Got You Here Won’t Get You There”.)
New opportunities in exploiting analytics, cloud computing, mobility, Big Data, and customer engagement are forcing corporate buyers of technology to reassess assumptions—and choices—that have worked for them in the past.
SAP’s contention is that Oracle customers are at a critical decision point as Oracle begins to roll out its new Fusion Applications, and that the arrival of those brand-new apps presents Oracle customers with three alternatives from which to choose (and in the interest of full disclosure, I’m an SAP employee):
1) Stick with their current generation of Oracle applications. This approach offers ongoing stability because the massive upgrade and rip-and-replace changes are avoided, but it also means those customers will be stuck with a lame-duck platform for which Oracle has already announced higher annual support costs (in some cases) and in which Oracle will have little incentive to invest. As InformationWeek’s Doug Henschen recently wrote about Oracle, “The coexistence strategy surely appeals to customers that want to avoid the chaos of rip-and-replace software deployments. But it also presents the dilemma of when to choose stability and when to opt for Fusion features including services-based delivery, role-based interfaces and embedded business intelligence.”
2) Adhere yourself to Fusion. This approach boasts better performance with the untested new apps, but it also forces customers making this choice to serve as canaries in the brand-new Fusion Applications coalmine as they go where no customers have ever gone before. Oracle promises that customers can move at their own pace and that all the new stuff will work very smoothly with the old stuff, but analyst Josh Greenbaum, in an article called The Customer Comes Second….Oracle’s Engineered for Investors Software Stack, argues that customers going down this path will be required to bear a huge integration burden.
3) Switch to other vendors, including SAP. For those of you who are considering a switch, you’re not limited to alternative solutions from your same supplier. For example, the enterprise market is loaded with relatively small cloud-based suppliers offering point solutions. As for SAP as an alternative, you’re got complete flexibility: you don’t have to replace everything with SAP—just the pieces you want to replace. And SAP works fine with Oracle. Also, in two of the key categories highlighted by Gartner’s Aron in the Wall Street Journal excerpt above—analytics and mobile—SAP is the undisputed market leader worldwide.
One of the top financial analysts covering enterprise software recently said “Fusion may be confusion” for enterprise customers, and suggested that was the primary reason behind Oracle’s recent widely-reported miss of its revenue numbers for Q4. Rick Sherlund of Nomura Securities offered this analysis :
It still puzzles us, how could Oracle go from showing 16% new software license growth in the August quarter to 2.5% in the November quarter versus Street estimates of 11%; and what are the implications for all the enterprise software and hardware companies about to report December quarter results? It just did not make sense to us, so we checked in with a number of our industry contacts over the Holiday period for their perspective.
Fusion may be confusion for the market: Contacts tell us that Fusion may be freezing Oracle out of the final stages of some apps deals as customers resist buying the old product but are not convinced the new Fusion suite is ready for prime time. The Applications Unlimited program intended to help in the transition may no longer be effective now that Fusion is shipping. Now that Oracle has missed the quarter, the field complaints begin to surface. (End of excerpt.)
In contrast to such problems of Oracle’s own making, SAP feels its overall strategy and new-product pipeline offer customers a better choice when it comes to innovative new technologies such as the HANA in-memory database and platform; mobile solutions for security, management, and applications; Rapid Deployment Solutions that begin delivering value in several weeks; and cloud computing, where SAP’s pending acquisition of SuccessFactors will give SAP more than 15 million paid seats in the enterprise cloud.
In addition, SAP has committed to a clear and predictable roadmap for its core applications through 2020, providing customers with clarity and certainty as they devise their own strategies into the future.
Here’s another industry-expert perspective on SAP and Oracle, this one from InformationWeek’s Doug Henschen’s Jan. 17 article headlined SAP Leads, Oracle Lags In Enterprise Apps:
SAP on Friday released preliminary numbers for its fourth quarter ended Dec. 31, 2011, that showed software revenue increased 16% over the year-earlier period (17% in constant currencies) to 1.74 billion Euros ($2.2 billion). Software and software-related services revenue were up 12% over Q4 2010 to 3.72 billion euros ($4.7 billion), handily beating analyst’s estimates of 3.6 billion Euros.
By contrast, Oracle’s software sales for its fiscal second quarter ended Nov. 30 were up just 2% compared with the year-earlier quarter, whereas analysts expected at least a 7% increase.
The contrast is even sharper if you separate software revenues by type. Oracle’s new-license revenues for databases and middleware were up 4% while applications revenue–primarily ERP and CRM–actually declined by 2%. Oracle blamed the overall shortfall on purchase delays tied to new internal approval requirements at customer firms . . . .
Oracle and SAP are both selling the same idea: Keep the legacy core of software we’ve sold you, and buy our innovative new software that goes with it. SAP calls it “innovation on top of a stable core.” The core is the single application code base of Business Suite 7, which SAP has committed to support with maintenance through 2020. In the latest quarter at least, it appears SAP’s brand of innovation is winning. (Emphasis added.)
For all of you confronting these strategically crucial decisions, SAP says it offers a better choice. It might be worth a look—after all, you’ve always got alternatives.
(Follow me on Twitter at bobevansSAP.)