For quick results and faster testing, SEM is better than SEO. However, for scalability and increased profitability, SEO is better. That said, pitting SEO and SEM services against one another is not a fair race. Even though the results of your work both appear on search engines, the strategies behind both SEO and SEM are vastly different and are often used to solve different needs.
For example, SEM or PPC is used to drive hard and fast enquiries at a larger cost per lead than SEO. Your business gets off the ground faster, however, each sale or enquiry you receive does not make as much profit as SEO.
Therefore, a lot of businesses will opt to use both SEO and SEM to drive different outcomes. SEO will reach far more people for less budget, however SEM is faster and will generate an ROI quickly.