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SAP vs. Oracle: Which ERP system is right for your company?

The choice often comes down to flexibility vs. standardization. Here are the key differentiators between the two vendors and advice on how to match their strengths with your needs.

Many CIOs looking to implement a new ERP system will, no doubt, end up considering the industry's two biggest behemoths: SAP and Oracle. While both vendors are clear market share leaders and have well-established product lines, the strengths, weaknesses, risks and product roadmaps of these two vendors couldn't be more different.

It may be easy to get caught up in functions, features, bells and whistles, and demo scores of these two vendors, but there are better ways to focus your ERP evaluation process. At the end of the day, your comparison of SAP vs. Oracle should come down to these relatively simple differentiators between the two products.

The team at my consulting firm has been learning about these two leading ERP vendors through our research and experience over the years. The analysis below is based on our 2019 ERP Report, which details findings from our study of SAP, Oracle and other ERP systems over the years.

Flexibility vs. scalability

There are two schools of thought in the SAP vs. Oracle debate. One would suggest that the purpose of an enterprise-wide ERP system is to standardize processes and technologies for scale and growth. The other would suggest that an ERP product can add the most value by offering maximum flexibility.

If your goal is to standardize processes and operations across multiple business units, SAP may be your best bet. In general, SAP excels in situations where standardization and consolidation of business processes are the priority. This is largely due to the relatively rigid nature of the product, which can enable a certain amount of consistency throughout an organization.

On the other hand, if you are a nimbler organization with diverse customer needs, Oracle is generally going to provide more flexibility. This is because the ERP system provides more tools and ease of customization to better accommodate your evolving needs. We have seen many organizations take advantage of an Oracle ERP system to meet a variety of needs over time.

It is also important to note that each option has a dark side as well. The higher degree of standardization afforded by SAP can limit flexibility and box your operational needs into a corner. On the flip side, the flexibility of Oracle can provide a smoke screen for resistance to change. Just because you can change the software doesn't mean you should.

Technology maturity

The leading ERP vendors are all struggling with product maturity. For decades now, these companies have invested millions of dollars in product development and R&D for their flagship on-premises products. But those investments are largely obsolete now that the leading ERP software vendors have all been migrating their products to the cloud in recent years.

The good news is that this change in deployment models brings a certain amount of excitement about the advanced technologies that are enabled by flagship cloud ERP offerings. For example, AI, machine learning and IoT are all emerging technologies that are largely enabled by SAP S/4HANA Cloud, Oracle ERP Cloud and other newer offerings.

The bad news is that these technologies are relatively immature, untested and unproven. While the long-term upside potential is high, the short-term pain of being an early adopter on the bleeding edge of technology can be significant. While both SAP and Oracle have the same problem in this regard, SAP has a slight edge because its next-generation ERP product, S/4HANA, was largely rewritten for the cloud from the ground up -- and augmented by SAP's acquisitions of cloud-based vendors SuccessFactors and Ariba -- whereas Oracle has employed more of a lift-and-shift strategy to move on-premises functionality to the cloud.

In-memory technology: SAP vs. Oracle

Over the past year, we have seen SAP and Oracle boast about how their in-memory database systems are going to change the future of ERP. SAP is making great headway with its in-memory database, SAP HANA, which differentiates itself as a highly functional, all-in-memory system. While having a single platform can be a great advantage, it also has drawbacks, such as the cost of deployment and compatibility limitations.

In response to SAP's success with HANA, Oracle has also made great strides with its new in-memory Oracle database by differentiating the system as functional and easy to integrate with compatible databases and applications. While this is a cost advantage -- especially to organizations already running compatible databases -- this system may not provide the convenience and breadth of a centralized system.

Putting the vast technical differences between these two database technologies aside, the end result for the business customer is nearly the same. In-memory technology will enable customers to run essential ERP applications and analytics faster, ultimately providing for greater productivity and insight.

SAP vs. Oracle: Which is the right ERP system for me?

But these are broad generalizations based on our client experience. Each organization may come to different conclusions, depending on its unique needs.

In general, SAP and Oracle ERP products each have their own strengths, weaknesses and tradeoffs. I can't give a good recommendation of one over the other without understanding an organization's unique needs, priorities and culture. These criteria are just a few of the ways that you will be able to differentiate the two as you evaluate the many ERP products in the marketplace.

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