As Oracle pushes ahead with its Fusion Applications, it now has a better strategy than SAP, which is still focused
on getting its customers onto a two-year-old release of its ERP software, according to a new Forrester Research report.
Two years ago, Forrester ranked SAP's application strategy ahead of Oracle 's because of the momentum SAP had built around its NetWeaver platform. Since then, SAP got ahead of itself under former SAP exec Shai Agassi , who abruptly resigned last year, Forrester analyst John Rymer said. SAP released a new version of its flagship ERP software, SAP ERP 6.0, in 2006, but customers have been slow to upgrade because it was expensive and they didn't yet need it. As of August, about 30% of SAP's 27,000 enterprise customers had adopted ERP 6.0, according to the report.
As a result, SAP is now focusing on getting everyone on the newest release before it introduces -- or even reveals plans for -- anything else, Forrester said.
"SAP has basically decided, 'We've got to get everybody onto the current release. That's job No. 1. And we're not going to talk about anything in the future,' " said Rymer, vice president, principal analyst at Cambridge, Mass.-based Forrester Research. "SAP has dropped any mention of a next generation from all of its communications."
That said, if Oracle fails to deliver Fusion Applications, as promised, by 2010, SAP will maintain a significant advantage over Oracle. Yet demos and briefings with Oracle have convinced Forrester analysts that Oracle's Fusion Applications are right on track , Rymer said.
SAP denied the report's findings, and said its domination in market share is evidence that it has the better strategy. It has maintained that adoption rates of ERP 6.0 are the fastest in history, with uptake akin to what the vendor saw with R/3 4.6c.
"SAP, not Oracle, continues to be the world's leader in business management software. The acid test and strength of a company's offering and its vision is customer adoption and success in the marketplace, not an analyst's report," SAP spokesman Andy Kendzie said. "If you look at the adoption of SAP applications by thousands of customers, I think that speaks to the soundness and effectiveness of our strategy."
SAP still has a greater share of the enterprise application market, with $4 billion more in annual revenue than Oracle, the report said. It also has a better partnership strategy and SMB strategy.
But Oracle's Fusion Applications mark a better vision for the next generation of applications and present a better path to dynamic business applications, according to the report. They incorporate key concepts like role-based workplaces, embedded business intelligence, customization through configuration and business services at the core.
Also, Oracle's Fusion middleware was boosted by the company's BEA Systems acquisition and has a broader set of tools than NetWeaver, the report says. Oracle also has better support for openness and standards.
SAP is now pitching enhancement packages -- downloadable upgrades with new functionality -- as a major innovation for its customers because they mark the end of traditional upgrades, the vendor claims.
It's important to understand that these aren't just for updates around the edges, but changes to the core -- including new application modules, versions of existing modules and new runtime technologies, according to Rymer. And while SAP is billing it as "innovation without disruption," it could pose software configuration complexities, performance uncertainties, flexibility limitations and unpredictable migration costs.
"Our biggest worry is about the enhancement packs that address the core," Rymer said. "This is hard to do … without costs and without disruption."
Whether SAP customers on older releases should consider Oracle Fusion Applications is a decision each customer will have to make individually – weighing whether it's worth the pain of migration and provides value, Rymer said. Customers should consider the upgrade to ERP 6.0 as a catalyst for consolidating instances or delay the upgrade until the installations can be rationalized.
But Rymer can see some SAP customers defecting if Fusion is delivered as promised.
"If the Oracle apps are as dynamics and as flexible as they seem to be, they pick off a lot of customers on older SAP environments," he said.
SAP customers already running ERP 6.0 should consider SAP NetWeaver 7.1, Rymer said. A side-by-side configuration employing ERP 6.0 and NetWeaver 7.1 allows customers to leave the core applications alone and innovate in the separate environment provided by NetWeaver 7.1.
In turn, the two vendors are still competing for spoils in vertical applications , and Rymer said customers of both should consider best-of-breed vendors for front-office and industry-specific applications.
Maintaining a mix of application suppliers will help preserve freedom of choice as customers evolve applications portfolios, according to the report.
A mix of applications is important, he said, because both vendors have become increasingly complex, and their multiple paths to upgrades and innovation aren't necessarily a good thing for customers.
"Both companies are now quite complex to deal with, and that's a problem," Rymer said. "It makes them expensive, and it makes the decision-making very difficult."