From Computer Business Review, a sister publication.
For more than two decades, Jim Goodnight, founder and president of SAS Institute, has defied most of the conventions of the fiercely competitive corporate software market. His statistical analysis and decision support software company, SAS Institute, spends a colossal 32% of revenues on research and development; it markets a sprawling – and by some accounts expensive – product range as a single entity – the SAS System; it operates an employee care culture from its 200 acre campus site in Cary, North Carolina that puts it high in the list of the 100 best US companies to work for; and it has never, ever had anything to do with Wall Street’s capital markets. In fact, relatively few outside of its loyal band of customers even know that SAS exists or what its products do. Yet this is a company that has grown year after year by 15% to 20%, most recently reporting revenues for 1996 of $653m, a 16% rise. Annual customer attrition is only 2%, and employee turnover is negligible. But SAS is at a crossroads. Having made a series of strategic leaps over its 21 year history – from mainframe statistical analysis software to executive information systems and to personal computer-based decision support – it needs to capitalize on its move into the new, booming and highly-competitive markets for data warehousing software, data mining, OLAP online analytical processing, as well as corporate-wide web-based decision support.
By Claire Bulbrook
But analysts question if its idiosyncratic business model is up to that challenge. Over the past year, SAS has rolled out a two- phase program of upgrades to the SAS System, codenamed Orlando and Orlando II, designed to address these new areas. It has introduced a multidimensional database system and an OLAP engine that takes it into competition with companies such as Arbor Software Corp and Business Objects SA. But technical assessments of the products suggest the SAP products are positioned to appeal to professional data analysis users, falling short of the kind of mass deployment products that rivals offer. The company has other strong cards to play. Its data mining software has had good reviews for its impressive range of statistical methods and visualization tools as well as its use of neural networking techniques. As Robin Bloor at software product consultancy Bloor Research points out: In the statistical analysis field their technology is unmatched. They have a very strong product because they are technically good. But they are not best of breed in other areas and in the crowded data warehousing market they are only one of many players. Nevertheless, when these newer data warehousing tools are added to some of SAS’s earlier products, the company can claim data warehousing software now accounts for half its revenues. In fact, SAS executives say the company’s hottest product of the day is Warehouse Administrator, a tool for managing multiple warehouses and data marts. The software picked up the 1997 data warehousing Product of the Year award at Datamation magazine. This, somewhat unusual headlining of an individual product is part of the changes underway at SAS. Outside of the data warehousing area, the company is molding products that are targeted at specific industries, and others for corporate operational functions. Another product that, according to Goodnight, is really taking off is CFO Vision, a financial consolidation package aimed at chief financial officers. The chief competition here is Hyperion Software Corp which Goodnight admits has had this market to itself. Our goal is simply to take it away from them. The company is also packaging up products for specific industries: it has attacked the pharmaceutical market. Next will come tailored software for human resources executives and geoscientists. Despite these fresh moves, SAS still has a lack of focus, says the market research firm Ovum. The company says SAS feels comfortable with its broad base of 200 products and lives in fear of being pigeon-ho
led. SAS’s approach of a tool for every task in the rather wide-ranging area of ‘information delivery’ contributes to a lack of focus in its marketing message and generally little awareness of SAS among people who do not use it.
To counter that, SAS has subdivided its operations into four: enterprise applications, which includes EIS, OLAP and data warehousing; analysis and quality, where the focus is on the traditional statistical analysis market as well as data mining, visualization and quality control; systems, a computer performance evaluation specialist unit; and pharmaceuticals, a division dedicated to this vertical market where SAS is extremely strong. What some analysts suggest, though, is that SAS is unlikely to solve its market profile problem unless it abandons its much-coveted private status. Being private damages them. Neither they nor their products get talked about so much and they have to work far harder than rival companies to be heard, says research analyst Bloor. The lack of standalone identity for almost all of the company’s products also means they fail to show up in many sector market share figures. But Goodnight does little to hide his disdain for both Wall Street and analysts. My main interest in life right now is programming… and golf. I would rather be doing that than talking to dumb analysts and the press, says Goodnight. That sentiment should ensure that his budget for overseeing the crafting of new software stays high. If it went public, Goodnight knows, the company could not sustain anything much above the software industry average of 10% to 15% of revenues.