Feeling SASsy

BI leader set to expand into middle market

In an era when the much-coveted IPO takes companies from rags to riches and back again in the blink of an eye, SAS Institute is an anomaly. In 24 years of operation, the Cary, N.C., business intelligence company has an unbroken record of double-digit growth, and while others announce massive layoffs, SAS is in hiring mode, recently picking up about 200 new sales employees.

"While the market is unpredictable and many tech companies are being hit hard, we are finding that accelerating our hiring and aggressively increasing visibility in the marketplace makes a positive statement to the fortitude of SAS," says Jim Goodnight, CEO of SAS.

Nearly a quarter-century ago, Goodnight and co-founder John Sall turned a North Carolina State University grant to do statistical analysis on agricultural yields for the government into what has become a $1.12 billion software firm that provides soup-to-nuts data analysis. While other "data" companies such as Oracle and Sybase are more high-profile, SAS software has infiltrated the majority of enterprise operations behind the scenes; the company boasts more than 3.5 million users.

"Everybody uses SAS, but it is so below the radar," says Mike Boyd, director of customer relationship management (CRM) at retailer Eddie Bauer in Seattle. "SAS users are a highly skilled specialty bunch, and every enterprise has them."

The company has remained below the radar screen because its "more on the back end," says Russ Holmes, chairman and vice president at Synteract, a research services firm in San Diego that has used SAS to develop an application for biotechnology company VitaGen.

Yet as information has swelled to become a corporations most valuable asset, SAS profile is on the rise. The company has proved flexible enough to broaden its statistical prowess to include a wide variety of data management tools. It credits the same flexibility and rock-solid statistical platform for its ability to easily embrace new technologies such as wireless — SAS is putting its weight behind the Wireless Application Protocol — and the Web.

SAS product line has grown to include applications in data warehousing, data mining, online analytical processing, collaborative technologies, integration technologies and CRM. Along the way, SAS has earned the respect of tech bigwigs such as Hewlett-Packard, IBM, Intel and Sun Microsystems that serve as the companys business partners. Now, SAS is making a push into the middle market, dedicating many of its 200 recently hired salespeople to that space.

The company has also been aggressively advertising in computer and business magazines, trying to make its name synonymous with "e-Intelligence." The business intelligence market for midsize companies is highly competitive and crowded, with more than a dozen vendors vying for a piece of the action. But Goodnight thinks SAS reputation, particularly during an economic downturn, gives it instant clout. "Our strength is in our history," Goodnight says. "We arent a start-up trying to sell some kooky idea. But rather, were a company that has listened to its customers and has always tried to."

According to Goodnight — who spends a lot of time on the road staying in touch with customers and who can still be found personally providing support to the companys customer base — users have learned that they can depend on SAS. "Our focus is on meeting our customers needs for the long haul, and our products reflect that commitment to the future," he says.

Take, for example, Eddie Bauer, which uses the SAS Solution for CRM to blend its data warehousing and data mining projects in an attempt to get closer to its customers. The retailer has 15 million to 20 million buying histories to manage, and figures that the average customer buys 80 items over a five-year period — adding up to more than 1 terabyte of data.

Eddie Bauer has found multiple uses for SAS software, notes Boyd, who praises SAS for always adding "value with its customers."

"We use SAS as a statistical tool for exploratory data analysis, data mining and developing statistical models," Boyd says. "We can develop statistical models and predict which customer is likely to be responsive to which offers."

Boyd is responsible for multiple channels — catalog, Web, retail facilities — at Eddie Bauer, and his "personal favorite" way to use SAS is faking production. "I dream something up and create it on a test scale," he says. "I can make observations of how it works and use [the results] to make a case."

The retailer also uses SAS for what Boyd calls "data wrangling." Eddie Bauer has "lots of data on products and customers, stored in lots of different systems, and they dont talk to each other," he says. "SAS facilitates the merger of data from different sources."

Customer Confidence

Customers are so confident of where SAS will lead them that Goodnights knighting of Andre Boisvert as his replacement as president last fall caused little more than a ripple in the market. It was not seen, as similar moves in other companies often are, as a prelude to early retirement by the man who built SAS. And when Boisvert suddenly left the job in January, barely six months after his appointment, the news once again failed to cause a stir. Little is being said about Boisverts departure, but industry watchers speculate that he and the SAS management team were on different timetables for SAS proposed IPO. The offering is now not expected until some time in 2002.

The fact that the company remains private despite a desire to offer employees stock options and other benefits of a publicly held entity shows a steadiness and attention to the long term. After all, SAS has a lot to protect. In addition to phenomenal growth rates and prosperity, it has no debt. Thats not something many of its competitors can boast.

Cognos, the leader in the midtier space, issued an earnings warning earlier in the year, and last month announced it was cutting 300 jobs. Hyperion Solutions announced last month that it was cutting close to 400 employees, or about 15 percent of its work force, in the face of a revenue shortfall. And MicroStrategy, another midtier vendor, has had a particularly bumpy year, losing 99 percent of its market value and getting hit with shareholder lawsuits. MicroStrategy has managed to get its finances under control, but not before being forced to lay off 600 employees in April.

Peter Urban, an analyst at market research firm AMR Research of Newton, Mass., acknowledges that market conditions are to blame for much of the turmoil, but also argues that many vendors were slow to make the shift to an Internet-enabled thin-client model and got caught with their pants down. "Some of these guys have had a hard time going to the Web," Urban says. And users have been more inclined to turn to companies such as SAS that have a complete thin-client strategy in place, he says.

Thats where having a visionary such as Goodnight on board pays off. SAS client is so thin and trim that the company has made the move to the Web with little more than a polite burp. In fact, SAS recently picked up the APICS Technology Partnership Award of Excellence — APICS is the Educational Society for Resource Management — for the data warehouse/Internet access solution it developed for the BMG Direct Record Club.

The record club, already a SAS user, needed a way to assess the music tastes of its customers so it could market music choices more directly to them. SAS was able to build a Java/HTML interface to the companys SAS data warehouse, so that company analysts and marketers could get to the data.

At VitaGen in La Jolla, Calif., a Synteract clinical application is being used in concert with SAS e-Intelligence software to analyze and get access to data, and to assign random identification markers to critically ill patients participating in clinical trials of an artificial liver, the Extracorporeal Liver Assist Device. Using a Palm VII, VitaGen workers can access data no matter where they are, says Pat Maguire, a former surgeon who is now vice president of medical affairs at VitaGen. He notes that the application looks the same on a laptop, desktop or Palm unit, and that it frees VitaGen workers from being chained to their desks, without compromising the trials and excluding desperately ill patients.

SAS pricing model is also designed to keep it focused on customer needs. Instead of buying a software license outright from the company, customers pay a yearly "subscription" fee. That means a lower cost of entry for customers. "They dont have to pay $5 million up front," Urban says.

But it also means customers could bolt, because theyre not locked in. SAS "needs to make sure its customers get value throughout the year, because each year its going to bill companies," Eddie Bauers Boyd says. "Its not a one-shot event."

SAS currently enjoys a 98 percent renewal rate, and can attribute the wayward 2 percent almost entirely to mergers and acquisitions or people vacating their positions, rather than to any real dissatisfaction with its products. Part of its success comes from the fact that SAS itself has an extremely low turnover rate, meaning customers know from year to year exactly with whom theyll be dealing.

In fact, SAS reputation for catering to its employees is legendary in business and technology circles. It regularly appears on top of Best Companies to Work For lists, including Interactive Weeks. In addition to 35-hour work weeks, Goodnight has provided employees on the Cary campus with pools, a gym, a cafeteria subsidized by the company with a piano player to soothe them during lunch, and mounds of M&M candies. The campus is located on considerable acreage that is also home to a working farm and the Cary Academy, a high school started by Goodnight and Sall. And talk about hands-on: The companys two founders still reside in homes on the property.

The companys goal is to maintain its stellar reputation as it expands into the midmarket, and to capitalize on the current upheaval.

"Business intelligence is the one area of IT [information technology] that can add value to a company and its bottom line," Goodnight says.