SAS Institute Inc. held its annual Global Forum in Washington, D.C. this year, where the Cary, N.C.-based software vendor touted business analytics as the new differentiator for businesses.
ComputerWorld Canada spoke with CEO and co-founder Jim Goodnight on the company’s strategy for remaining competitive in the tough economy, the advantages of remaining a private company, and why Cognos Inc. and BusinessObjects SA are hardly better off post-acquisition.
ComputerWorld Canada: SAS had its 33rd year of consecutive growth in 2008. What’s the company’s strategy for remaining competitive in this tough economy?
Jim Goodnight: We continue to try to build products that our customers need. We are working with a number of customers right now on new fraud products, like welfare fraud, insurance and casualty fraud, health-care fraud, and banking fraud … we are trying to really become experts in the fraud area.
CWC: Can you speak to the value of analytics during the tough economic climate?
JG: I think companies realize that it’s time to streamline and optimize their business, procedures and processes that they have been doing the same way for years. It’s time to see if they can be optimized. So we are doing a very healthy business in the optimization market. We’ve spent hundreds of millions of dollars over the years developing our entire operations research.
We’re seeing huge growth interest in retail as they realize they must do a better job of optimizing prices. Especially for promotional pricing, they’ve got to use that as a major tool to bring customers into the business … If you’ve got 1,500 to 2,000 stores and each store has got 200,000 or 300,000 items in it that you could put on sale. How do you choose the right ones? How do you price them to entice people to come in and purchase? It’s not so much the sale item you’re selling, it’s the fact that you’re getting traffic through the store and other items will be sold, so you’re helping optimize the pricing algorithms.
JG: It’s something our employees have certainly approved of. There was a survey a couple of years ago that asked how many felt SAS should stay private and how many felt it should go public. And 85 per cent said, “Stay private,” because they recognize the benefits. If you’re a public company, you’re under so much pressure to try to keep the profits up at the same level or improve. If you’re a manager and a lot of your compensation is based on your stock value, you just don’t hesitate to terminate thousands of people just to keep your stock price because you’re going to benefit personally. I think we saw that with SAP (which purchased Business Objects). I was extremely disappointed. SAP announced 3,000 people to be laid off. Their stock went up six per cent.
CWC: But what of the backing that a large company can provide like its large customer base and R&D funds?
JG: I don’t think either Cognos or Business Objects have benefited very much from joining a larger company. I think Cognos’ salaries have been frozen now for a number of years. I think SAP recently announced they had layoffs, quite heavily. There are very few large mergers that really increase shareholder value over the history, and they certainly don’t do a lot for the employees. Look at what happened to EDS, for example. I think three-fourths of their entire staff has been laid off.
CWC: In terms of SAS’ growth strategy, the company has placed much importance on growing organically. Will we see that continue?
JG: We made two acquisitions last year with Teragram and IDeaS. We are discussing some acquisitions right now. We have no problem doing acquisitions as long as they are of a strategic nature, something that brings us expertise in an area that we don’t have, something that extends our marketplace. That’s why when we acquire companies, we generally build them up, and not lay off people.
CWC: Many companies are talking about taking advantage of emerging markets like China and India. What is SAS’s strategy for targeting those markets?
JG: We’ve done well in both India and China, especially in India, where we have been doubling revenue year after year for the last four or five years. We did very well last year. We’re seeing a little slow start in all of Asia this year. We’re very pleased we’ve got three or four offices in India, and three or four in China. (Growth in India is driven by) more and more businesses relocating their data centres there, either through themselves or through outsourcing arrangements. It’s just a more economical place to do business, and there are lots of smart people there.