Below is a concise, practical comparison of SAP Business One and Microsoft Dynamics 365 for small‑and‑medium enterprises (SMEs). I cover product focus, core capabilities, deployment & integrations, extensibility and ecosystem, reporting/AI, pricing & licensing, implementation/TCO, strengths/weaknesses, and quick guidance on which to choose.

Summary (one‑line)

• SAP Business One: ERP built specifically for SMEs with deep inventory/warehouse and industry templates, strong on on‑premise and partner‑driven deployments. (SAP.com)
• Microsoft Dynamics 365 (Business Central, the SME offering): cloud‑first, Microsoft‑ecosystem native ERP with strong Office/Power Platform integration and growing built‑in AI/Copilot capabilities. (learn.Microsoft.com)

1. Target customers and positioning

• SAP Business One: Designed and sold primarily via SAP partners for small to mid‑sized businesses that need a full ERP (finance, inventory, MRP-lite, CRM, service) and often require on‑premise options or industry‑specific templates. Strong in distribution, manufacturing and multi‑entity scenarios for SMEs. (SAP.com)
• Dynamics 365 Business Central: Targets SMBs looking for cloud SaaS ERP tightly integrated with Microsoft 365, Azure, Power Platform and other Dynamics apps; positioned for businesses wanting rapid cloud deployments and strong productivity/analytics integration. (learn.Microsoft.com)

2. Core functionality (finance, inventory, manufacturing, CRM, service)

• Finance: Both offer full accounting, AR/AP, multi‑currency and localized tax capabilities. Business Central emphasizes modern bank reconciliation, AI‑assisted finance tasks and deep integration with Microsoft Financial stack; SAP B1 offers robust accounting, fixed asset and reconciliation features tailored for SME operations. (learn.Microsoft.com)
• Inventory & warehouse: SAP Business One has long strengths in inventory control, bin locations, batch/serial tracking and industry workflows. Business Central covers inventory/warehouse well and is improving advanced warehousing and manufacturing capabilities via ongoing releases. Choice depends on specific warehouse/process complexity. (SAP.com)
• Manufacturing: SAP B1 provides MRP and production management suitable for light-to-mid manufacturing. Business Central is investing in manufacturing and subcontracting enhancements in recent release waves (2025), bringing stronger capabilities and AI assistance for order and production workflows. (SAP.com)
• CRM & service: SAP B1 includes built‑in CRM and service modules; Business Central integrates with Microsoft’s CRM/service stack (Dynamics 365 Sales/Field Service) and leverages Microsoft 365 for collaboration. If you need enterprise CRM features, Business Central + Dynamics Sales may be preferable. (SAP.com)

3. Deployment, architecture & hosting

• SAP Business One: Offers both on‑premise and cloud/web client options; SAP has been expanding the web client and cloud deployments to improve accessibility and update cadence. Many SAP B1 customers still use partner‑managed on‑premise or private cloud. (SAP.com)
• Business Central: Cloud‑first SaaS on Microsoft’s platform (also offers on‑premises NAV‑based options historically), with frequent release waves and Microsoft‑managed updates. Strong multi‑tenant cloud governance and integrations with Azure services. (learn.Microsoft.com)

4. Integrations & ecosystem

• SAP Business One: Large partner ecosystem with many vertical add‑ons and localizations. Integrations are typically partner‑enabled; good for companies that need packaged vertical solutions. (SAP.com)
• Business Central: Deep, native integration with Microsoft 365, Teams, Power BI, Power Automate and Azure — a major advantage if your organization already relies on Microsoft productivity and cloud services. AppSource and partners provide vertical extensions. (learn.Microsoft.com)

5. Extensibility & customization

• SAP B1: Customizations mainly through SAP SDKs and partner extensions; many vertical ISVs offer off‑the‑shelf modules. Custom work typically goes through partners. (SAP.com)
• Business Central: Extensible via AL language, extensions, and Power Platform (Power Apps, Power Automate). Easier for organizations with Microsoft development skills or who want low‑code automation. (learn.Microsoft.com)

6. Reporting, analytics & AI

• SAP B1: Embedded analytics, dashboards and predefined KPIs; web client improvements have enhanced visualization and real‑time reporting. AI capabilities are being added but depend on SAP roadmap/partner solutions. (SAP.com)
• Business Central: Strong emphasis on embedding Copilot/AI agents (2025 release waves) to automate bookkeeping tasks, order creation from emails/PDFs, reconciliations and provide Copilot experiences out of the box. Power BI integration is seamless for advanced analytics. (learn.Microsoft.com)

7. Pricing & licensing (high‑level)

• SAP Business One: Offers perpetual and subscription licensing; on‑premise typically has higher upfront costs (license + maintenance), cloud option moves to subscription. Total cost depends heavily on partner, number/type of users and add‑ons. (emerging-alliance.com)
• Business Central: Primarily subscription per user (seats), with tiers for essentials/ premium and additional costs for related Dynamics apps. Microsoft announced pricing updates and ongoing packaging changes — expect transparent per‑user SaaS pricing but plan for integration/customization costs. (Microsoft.com)

8. Implementation, partners & TCO

• SAP B1: Implementation is partner‑centric; time and cost vary by scope and degree of customization. Good for businesses that need packaged verticals from experienced SAP B1 partners. TCO can be competitive long‑term if heavy industry functionality is required. (SAP.com)
• Business Central: Faster cloud deployments possible, especially for standard processes with low customization. Strong Microsoft partner network and many ISVs. TCO is attractive if you already use Microsoft 365/Azure because of integration efficiencies. (learn.Microsoft.com)

9. Strengths and tradeoffs (quick)

• Choose SAP Business One if:
  • You need a mature SME ERP with strong inventory/warehouse and industry templates.
  • You want on‑premise or partner‑managed deployments or specific vertical ISV solutions. (SAP.com)
• Choose Dynamics 365 Business Central if:
  • You want cloud‑first SaaS with deep Microsoft 365/Power Platform integration, fast deployments, and built‑in AI/Copilot helpers.
  • Your organization relies heavily on Microsoft apps and wants seamless productivity + analytics integration. (learn.Microsoft.com)

10. Risks / things to validate in your selection process

• Customization needs: heavy custom coding favors strong partner capabilities — check partner experience and references.
• Integrations: map required integrations (e.g., ecommerce, POS, 3PL, industry tools) and validate prebuilt connectors.
• Localizations & compliance: confirm tax/localization support for each operating country.
• Upgrade & support model: SaaS vs. on‑premise upgrade cadence and who manages downtime/updates.
• Total cost over 3–5 years including licenses, hosting, partner services, training and maintenance.

Recommended evaluation approach (practical)

1. Document 6–8 “must‑have” processes (e.g., lot tracking, multicompany consolidation, revenue recognition, ecommerce sync).
2. Run two short, focused demos or proof‑of‑concepts using your real data and those must‑have processes.
3. Ask partners for references in your industry and region and get detailed TCO estimates (3–5 years).
4. Validate integrations to Microsoft 365 (if that matters) and any vertical ISVs you need.

Key sources (examples)

• Microsoft Dynamics 365 Business Central release plans and AI/Copilot features (2025 release waves). (learn.Microsoft.com)
• SAP Business One features and web client / roadmap pages and partner writeups describing 2024–2025 web client improvements. (SAP.com)

If you want, I can:

• Create a two‑column feature checklist tailored to your business (inventory, manufacturing, multi‑company, CRM, ecommerce, integrations) so you can score each product, or
• Draft a short RFP template you can send to local partners for both SAP B1 and Business Central to get comparable proposals.

Which of those would you like next?