SASs Goodnight Comes Out Swinging

The company's chairman says SAS is going vertical, and will take on i2, Manugistics in supply chain market.

Though its the worlds largest privately-held software company, SAS Institute Inc. doesnt command the same high-profile attention as a Microsoft Corp., Oracle Corp. or SAP AG. Maybe thats because a lot of its analytical software goes into targeted solutions sold by value-added resellers and other partners. That may be about to change. Recently SAS founder and chairman James Goodnight sat down with eWeek Executive Managing Editor Jeff Moad at SAS headquarters in Cary, N.C., for a wide-ranging interview in which Goodnight said, among other things, that he reinforced his companys commitment to compete directly in the supply chain management market against dominant providers i2 Technologies and Manugistics. Goodnight also said SAS will build its software into other industry-specific solutions, first targeting the financial services and pharmaceuticals markets. Goodnight also declared hes now glad SAS never went public as it planned to do before the tech downturn.

eWeek: Describe your approach to partnering with companies that are more on the operational side of markets youve concentrated on, like CRM and supply chain management?

Goodnight: We would have a very natural fit with Seibel. And we negotiated probably for three of four years [with them] we had a lot of negotiations, and that sort of fell through. We had some recent negotiations. Now theyve gone their own way of buying their own little piece of analytical [software]. (Siebel acquired analytics company nQuire last year.) …But they bought it to be their analytical side. That would have been a nice fit for us. Were partnering right now with Brooks Automation on the semiconductor business. Weve been involved in quality control for all the semiconductor manufacuturers for a number of years…Brooks Automation is a company that makes all the machines that make the wafers and make the chips. Theyve built into that signaling and reading capabilities for measuring the process. And they take the data feeds into SAS and work on quality control

eWeek: Tom Seibel was recently quoted in eWeek saying CRM is dead. By that he meant that doesnt see much future in CRM as a broad platform. But rather his focus is on solutions that target specific industries. Do you agree with him?

Goodnight:…Right now the banking area is one area where were doing a whole lot of work to bring more intelligence into that community. Retail banks have had money laundering detection systems in place for along time, but now its being expanded into the brokerage side… And theres not a lot of understanding of how money-laundering occurs in a brokerage situation. But yet the federal government will tell them, "Youre required to check for it." But they dont tell them how. So theyre trying to scramble to come up with ideas about [how to do that.] The whole banking area is growing hugely right now. Ive just started a group that were targeting to grow to 50 people that thats all they do. SAS has been used for this stuff for years. Almost all of them use it for fraud detection and credit card risk. And yet, we dont know much about it other than just documenting the fact that they have done this with SAS. What I want us to be able to do is to walk in and deliver a final solution that not only has anti-money laundering but also fraud detection, brokerage surveillance…

eWeek: Is that focus on solution selling new for SAS, and will it take you closer to the consulting side of the business?

Goodnight: We want to do this in such as way that we can avoid as much consulting as possible. We want to make it very repeatable so we can explain to the sales person what it is that we have, how to sell it, and we can explain to a Deloitte and Touche or a KPMG, heres how you go out and install this thing…Weve realized that there is a growing need for us to zero in on some particular industries…

eWeek: Are there other industries besides banking where you see potential for this kind of concentration going forward?

Goodnight: Ive got a group of about 15 people that weve just started to look on the supply chain side and expand our presence there. We have been used for supply chain optimization by a number of different companies, but weve never really made a business out of it. Weve got several thousand sites that use our operations research tools [for supply chain analysis]…Weve got a very powerful new time series algorithm that allows us to do massive forecasts. So, lets say some nationwide department store wants to forecast how many of every single sku item in every store are they going to sell every day for the rest of the week, we can help forecast that, and use that information to be the demand into the supply chain [system]. The biggest problem with supply chain stuff right now is the poorness of inputs for demand, and we think we have that problem pretty well solved.

eWeek: Could that lead to partnering on the operational side with companies like Manugistics and i2?

Goodnight: I dont know. We look at both Manugistics and i2 as very weak right now and we think, well, maybe they need some competition.

eWeek: What does that mean?

Goodnight: Well, I think were going to be moving into that space pretty soon.

eWeek: How soon?

Goodnight: We havent made an announcement about that yet…

eWeek: Explain your focus on marketing campaign management. Is it meeting your expectations?

Goodnight: We have the perfect end-to-end solution…Thats one of our hottest selling things right now. It certainly is meeting our expectations. Major competitors there would be companies like Epiphany. Weve got them on the ropes. There are about three or four others that are all hurting right now because of us…Thats an example of [us] going from zero to first place in 18 months. I love that. It was against a whole host of competitors as well. And, in this anti-money laundering space, there are four or five small companies that specialize in that as well. Too bad. Im very confident. Ive told a number of investment houses in New York. "Im going to be number one in this space in 18 months. You can mess around with these little guys if you want to, but were the ones who are going to own this market." Because Im going to put the resources in it to make sure we do. There are so many companies little companies that are using SAS and wrapping some domain expertise around SAS, then going out and selling the product for a million dollars. Its time for us to get into some of those markets, especially banking and finance. We are going totally vertical on our sales force next year. People that are in the financial sales force, thats all theyll do. They will not sell to any other type of organization…Weve been shifting more and more toward an industry focus…starting with pharmaceutical and finance.

eWeek: What are you doing right now to create that vertical focus?

Goodnight: Weve been trying to build our sales force over the last year and a half. Weve been hiring when everybody else has been laying off…As a private company, I didnt have to worry about the fact that profits were going to be down a little last year. I said, "I recognize theyre going to be down. But I want to hire because there are so many good people out on the street right now looking for jobs…" If we had been public--and we talked about going public a couple of years ago--I just remind people, "If we had gone public last year, all of your options would be under water. They would be worthless. We would have gone through this process for not one thing."

eWeek: Is going public still in your plans?

Goodnight: Id say its totally on hold. Were not making any plans to any time soon. The PE multiples right now for tech stocks right now are terrible. I noticed my Forbes listing Ive gone from 36th to 57th, so even Forbes values my stock at a lot less than they used to. And theyre exactly right because…our profits went down, about 10-15 percent down. And the PE rations have gone way down to about 31 or 32. They used to be 34-35 for a company like Oracle… Im glad were not public because I didnt have to lay off anyone. And I didnt have to lay off people to maintain my profitability. I said, "Ok, were going to take a hit in profitability. Im going to use this time to build this company, make is stronger for the long run." And thats what we are going to do.

eWeek: Do you foresee a significant turn in the market overall?

Goodnight: We are going to be up probably at least 10 per cent at the end of this year in revenue.

eWeek: When you talked to us last in May, you were critical of Microsofts .NET diretion. Have you seen anything in the last few months to change your mind?

Goodnight: They have adopted some basic standards that we agree with and that we are adhering to. My thing about .NET is that, in the broadest sense, as a marketing thing that they are doing, I dont want to see the world go totally proprietary. And I think thats what Microsoft would like. They say [its based on] open standards. But if the only vendor you can get it from is Microsoft then thats what I call proprietary. I hate the fact that they tried to squash and are still trying to squash the Java initiative that Sun started…I think they are just trying to use their muscle in the marketplace to make their overall solution the only viable solution. That hasnt changed. Theyre a damn monopoly.

Related News: