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Oracle finance application customers more likely to leave for another vendor than SAP's – analyst

Forrester research sheds new light on dynamic Larry Ellison says is going in Big Red's favour

New figures from global research group Forrester suggest Oracle ERP users are more likely to look for systems from alternative vendors than arch-rival SAP. More than a quarter of users of its finance applications are looking to switch, the study showed.

The findings shed light on the market dynamic as ERP vendors try to convince users to adopt their cloud migration strategies in the face of so-called cloud-native business application vendors and an intransigent userbase with long-term investments in on-prem systems.

Forrester focused on finance and accounting software – the heart of ERP – and surveyed companies with over 1,000 employees. The sample included around 250 companies each for Oracle and SAP.

Forrester asked: "Which of the following best describes the current status with your finance and accounting software vendor?" Of Oracle customers, 28 per cent answered: "We are evaluating or plan to replace with product from a different vendor."

In the same sample, only 3 per cent of Oracle customers and 4 per cent of SAP's said they were "evaluating or plan to replace with another product from the same vendor."

"Of course, when they do a more detailed evaluation, many of those may decide to stay where they are or move to their current vendor's latest product, but the data still suggests that Oracle will lose more customers to other vendors than it gains by SAP customers defecting to Fusion," said Forrester's Duncan Jones, vice president and principal analyst.

The findings follow Oracle's latest results, in which sales increased nearly 6 per cent to hit $10.4bn.

During a conference call to investors, Oracle founder and CTO Larry Ellison claimed 35,500 cloud ERP customers were new to Oracle. "Only 1,000 of our on-premise install base has migrated so far."

Cloud ERP would grow by 30 per cent a year, he predicted.

"We're taking customers from SAP's installed base. They're still winning – holding on to more of their base than we're taking, but we're making inroads," he said.

Forrester's Jones said Oracle was doing well with Fusion, its cloud-based group of business applications, and Netsuite, the scaled-back ERP suite for SMEs.

However that did not mean Big Red was making gains at the expense of rival vendors in the way that Ellison described, he said.

"There is no such thing as cloud ERP, for a start. They have got a portfolio under Fusion but… it is more of a digital operations platform containing products that sell well. It's not one whole thing as ERP once was," Jones said.

He said SAP, too, "still obsesses with the old thing" in terms of the singular "intelligent enterprise" vision of ERP.

For example, users could swap out aspects of ERP such as Human Capital Management and choose an alternative vendor. This means it can both be true that Oracle is gaining at SAP's expense and SAP is gaining from Oracle. Meanwhile, Microsoft and Workday were also making inroads, Jones argued.

"Mr Ellison can describe the wins, but he doesn't list the customers dropping maintenance on the legacy brands because they have moved or plan to move away from them. Oracle doesn't report its results in enough detail to reveal if the growth in Fusion subscriptions is bigger than the loss of maintenance revenue on the legacy products," he said.

Users should pay attention to what type of business they work for as much as the vendors' claims, Jones continued.

"When we've helped clients with product selections the choice often rests on which industry the client is in, and also on how centralised and homogeneous it is. Oracle tends to do better in companies that are highly centralised like Oracle is itself. We also advise clients to be very selective about which modules they buy, because both vendors have patchy portfolios with some good products and some mediocre ones.

"Smart CIOs will avoid the mistakes of the ERP omni-suite era, when their predecessors often bought everything the vendor had to sell, in order to get a good discount, which usually resulted in them owning dozens of products that they would never implement."

In Oracle's Q3 results earlier this year, Ellison took the opportunity to trash talk rivals, reeling off a long list of ERP customers he said Oracle had won from SAP.

The Register chose not to burden its readers with the details at the time, but it turns out not all of the implementations are going so well in any case. After enjoying a brief moment in Ellison's spotlight, West Sussex County Council is finding implementation a struggle and is two years behind, in part down to its "increased understanding of the Oracle product." ®

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