A word with the good doctor

Interview with James Goodnight, SAS Institute

SAS Institute is the huge software company many have never heard of. Since opening its doors in 1976, the company has been privately held and infrequently in the news. Employee turnover is amongst the lowest in the industry and perks go far beyond the free M&Ms found throughout corporate headquarters. James Goodnight, president and CEO of SAS, recently spoke with ComputerWorld Canada staff writer Chris Conrath at the company’s Cary, N. C., office about keeping employees happy and the much-talked-about IPO.

CWC: Why is SAS launching an IPO?

Goodnight: The main reason is to share a little of the wealth with the employees. We also want to have stock options to use to make sure our retention stays as high as it is right now. We want to mainly be able to use those as leverage to make sure people don’t leave. We have lost a few to some of the start-ups, our turnover is still around four per cent…which is very good. We have lost a few in sales and marketing and the sales people are the ones who are really pushing for [the IPO]…I think it is sort of a double-edged sword because I think some of the people you can attract with stock options are probably not the kind of people you really want.

The second reason we are going public is actually to get more publicity. We are in a growth mode right now. We believe we can racket up our growth rate from 17 to about 20 per cent. The additional press coverage that we get by going public, by having quarterly reports, by being in the news more often, will certainly help.

CWC: Have you decided how much you will offer, if this is a one-time offering and when it will occur?

Goodnight: Well, we’ll probably offer about 10 per cent. I am telling investment bankers that our evaluations should be about US$22 billion and we will be looking to sell about 10 per cent of that and we will set aside another five per cent to cover options for employees. That’s the idea (a one time deal). It will be about this time next year. We want to get through at least the first quarter of next year and see the financials for that.

CWC: SAS is known for the amount of money it puts back into research and development. Is going public, with stock holders and analysts to answer to, going to influence this?

Goodnight: I don’t see anything changing really. We will have to be a little careful. Like this afternoon I will be showing you some financial numbers. Well, I won’t be able to do that any more because that will be unfair disclosure. So, more than anything else, we’ll just have to be a little more discreet.

CWC: SAS’ strength is knowledge management – how has the Internet changed the market?

Goodnight: Basically things like the clickstream analysis that we are doing is nothing more than analysing data from a new source. We have been analysing computer logs, networking logs, telephone switch logs for years. The type of analytics we do with Web log data is no different than we do with medical data and data from computer performance.

We are focusing very heavily right now on all the dot-coms, trying to get them to use SAS to do their analytics, to help them improve their Web site, to help them create predictive models. A funny thing we have discovered is that the sales life of the dot-com is only about six weeks where as it might be six months for a big company. Because they’ve got the money and a time-to-death element, they’ve got to get going.

CWC: How do you keep employees from jumping ship?

Goodnight: One of the things I have always tried to do is create a work environment that lets people be creative. We won’t put a lot of rules or restrictions in people’s way. If you walk around you’ll see just about everybody has a private office. We try to avoid [cubicles]. We have to use them on occasion when we are in a space crunch, while we are waiting on another building to be finished, but by and large we try to avoid them. We have break stations on every floor. The break station has Cokes and fountain drinks, coffee, juices. All that is free.

CWC: Was this way of treating employees something you planned from the beginning or developed over the years?

Goodnight: When SAS started there were just the four owners and so naturally we said “Let the company buy the stuff.” There was no point in us having to chip in out of our own pockets, besides it was a [tax] write-off. A lot of the things that we have done over the years, we have looked at the fact that “Gosh, I rather give this money to employees than give it to the government.” We tried to have as many benefits as we can that provide benefit to the employee. That is one of the reasons, but the other is that it just makes sense.

I think the recent Harvard Business Review said that we saved US$65 million a year because of our retention – the cost of recruiting, headhunters, training, lost opportunity while the employee is out after he has quit and until he has been replaced. That would cost about US$65 million a year and we save that. If you add up all of the benefits, I don’t think we spend that much on little things.

So you have a choice as a company: if you want 17 per cent turnover and spend millions of dollars on recruiting, or if you want to take that same amount of money and apply it to benefits so that the people enjoy working here and are creative and productive. I think it is a no brainer which one you should do.

CWC: Are there any employee areas that need addressing at SAS?

Goodnight: I guess the one weak area we have is (not enough) females in the highest levels of management. Based on our EEOC (employment equal opportunity commission) counts we are under-represented there. The problem is that historically the people that are in those positions have been with the company for 20, 24 years because they are the most senior people. When we started the company there were almost no women in computer science, in the 1970s, so over the next five or 10 years as some of these people retire we will see some females (in senior management positions).

CWC: What has been the key strategy to your success?

Goodnight: Our history has been one of always listening to our customers. We have user group meetings annually here in the US, we had 3,500 at the last one. Next month we will have about 3,000 in Dublin at our European conference. We go to these conferences and talk to our users and listen to their ideas. We also have what we call our SASware Ballot that we mail out in November to all users around the world, with all of the suggestions and ideas that have been collected by our tech support people, and these suggestions and ideas are sent out and people vote on which ones they would like to see us work on.

CWC: Where will SAS be going in the next three to five years?

Goodnight: Of course our data mining and data warehousing software is still going to continue to be very strong. We have got a lot of IT shops that have postponed setting up data warehouses until after Y2K and we are seeing an increased vigour in the data warehousing area. We are also moving into some new technology with trying to create JSP (Java Server Pages) classes so that people can easily develop their own Web sites using our software.

Every touch point that you have with the customer, you need to be able to collect information. We are well positioned to really do well, I think, over the next few years because of the amounts of data that are being generated. ATM machines, Web logs, grocery store checkout systems, all of the data that is being generated right now is just an enormous wealth of data. They need to use our analytical tools to help learn more about their customers.