Brent Leary interviews Dr Jim Goodnight, founder and CEO of SAS, about how social media has changed the role of analytics, whether the cloud is as important as the hype suggests, and how SAS was set up to begin with.
Brent Leary: Talk a little bit about when you got started with SAS. What was the goal? What were the objectives that you had for the company when you first got started?
Dr. Jim Goodnight: Back in 1976, it was about the first of July, SAS had actually started at NC State University and after about eight or nine years of working there, we realized that we could no longer grow in the university environment because we were running a company. The university realized the same thing and we made and arrangement with them to leave the university. We were quite fortunate when we started that we had about a 120 customers, which I would recommend that for anybody starting a new company that they have customers.
Brent Leary: That's a good recommendation.
Dr. Jim Goodnight: I think if you don't have customers, at least make sure that the product or service that you are planning to develop, make sure there are some customers that want it. That is still part of what we do today is to go out and work with customers to understand the problems. Then if they are interested in working with us on a solution then we will propose some type of a partnership, what we call a development partnership. They help us in some of the domain expertise. We are great programmers, we can program anything, but you've got to find a company that's going to have faith in you, that's believes that because you are in there talking about some business process, we can't talk that business process language that the customer is talking. Often a customer believes that if you can't understand and talk the problem, that there's no way you can do it. That is something that is very difficult to overcome.
Of course, through the years, one of the ways that we have done it is to hire domain experts. If we want to really convince a bank that we really understand risk computations and how to compute the value or risk, we have to hire somebody that is an expert from a bank that talks their talk. Then we can teach them a little bit about what he need to understand about what we do.
Brent Leary: It's 2010, you started back in the 1970's.
Dr. Jim Goodnight: 1976
Brent Leary: 1976. Do you think entrepreneurs and start-ups are facing the same types of challenges that you faced back then? Or are have the challenges become a little different because of all of the technology and the social that is around us today?
Dr. Jim Goodnight: I think there are new companies that are being started every day. That is the nature of America. We have people that are willing to go out and take a risk and go out on their own and try to build a company. It's a little tough right now with the economy, especially in the technology area, the entry costs are extremely low. You can buy a pretty good computer for $500-600 and wham you are in business and you can be now into the IT business. That wasn't the case back in my day, because the computers that we run on were costing millions of dollars.
Brent Leary: Bigger then this room, probably.
Dr. Jim Goodnight: Yeah, we had to rent a small slice of time on them to do our software.
Brent Leary: Looking back to when you guys started and to where you are today, what are the things that maybe surprise you about were SAS is today, thinking back to when you got started?
Dr. Jim Goodnight: Certainly at the time we started, we didn't have any vision that the company would grow as much as it is. Yet, at the same time we knew that we had a good thing when we started and as we began to grow and realize this now, it was time to add more sales staff, marketing staff, people to get the word out. It's just a gradual process, that we grew to this size.
Brent Leary: Mmhmm.
Dr. Jim Goodnight: The fact that we have always tried to have a company that was one of the best places to work and this past year SAS was named as Fortunes number one place to work in America. I think that same philosophy has been with us all the time. We have always wanted to have a great place to work and we've bent over backwards to provide really great facilities for people to work in and really good benefits. We have the respect of the people that work there. I always said that if you treat people like they make a difference, then they will make a difference.
Brent Leary: Mmhmm.
Dr. Jim Goodnight: Accept that area of trust. Trusted employees really make a huge difference in the morale of the company.
Brent Leary: You also put a lot of stock in being a good corporate citizen of the community that you live in. How has that played a role in the company that SAS is today?
Dr. Jim Goodnight: Are number one social responsibility is to look after the people, that has to come first. Now, people in the knowledge business as our workers are, all feel a sense of need to make contribution to the community as a whole and to be a good social citizen. That might not be true if you work for a sanitation department or something else like that, but for this particular industry, everybody has a college degree, masters degree, PhDs. There is a greater expectation that the company that they work for should be a good social citizen.
We funnel most of our charitable contributions into education programs to try to improve education. I am still deeply disappointed in the United States with a 30% drop out rate in high school. It's just unforgivable that we cannot do a better job of graduating our kids from high school. Today, even a high school degree is not going to get you very far.
Brent Leary: Right.
Dr. Jim Goodnight: You have got to have a college degree of Masters or higher to really make a difference. A lot of these degrees need to be in the STEM areas, science and math because, to me, that is the area that innovation comes from - the kind of innovation that creates new jobs and industries. It has to come from somebody that is really well and deeply trained in nano-technology or bio-pharmaceutical areas; remote developments of heart machines and internal medicine done remotely. All sorts of things like that are not going to come from somebody that doesn't have a PhD or an MD degree.
We need a larger percent of those kind of people in the US.
Dr. Jim Goodnight: We need a well educated work force.
Brent Leary: I think I saw on the website, a little over eleven thousand, almost twelve thousand employees.
Dr. Jim Goodnight: I think 11.3 the last time I looked.
Brent Leary: 11.3 and a little north of $2 billion in annual revenues. A lot of companies would be saying; "Hey, we should go public." You haven't, I am wondering if that was a tough decision not to? What were the reasons that you decided to keep things private?
Dr. Jim Goodnight: SAS has been profitable ever since the very first year.
Dr. Jim Goodnight: We are very well positioned financially. We have no debt; all of the buildings we occupy are paid for. We have got a goodly amount of money in the bank. There has never been a reason for us to go public. Being public is a real hassle. I know a lot of public CEOs that have to go through life being very careful about what they say. If they say the wrong thing they are going to get in trouble with the SEC. I freely tell people what our numbers look like for the year and I don't have to worry about it.
Brent Leary: Was there ever a consideration or you like it the way it is?
Dr. Jim Goodnight: There was a brief discussion about it, back in the year 2000 when the dot com level was exploding. Everybody felt like if they could go public and get some stock options, everybody in the company would be a millionaire. That’s obviously not the case for most dot coms. It went bomb.
Brent Leary: You touched on the importance of having a really happy employee force and having an atmosphere and culture that makes people not want to leave. How important was that to the success of the growth of putting of the company, as opposed to the churn that you see at a lot of other companies?
Dr. Jim Goodnight: I think the attitude that we are going to respect our employees and treat them well, give them good benefits, has been very instrumental in the growth of SAS. If you go into our tech support group, the average time that people work there is about fifteen years.
Dr. Jim Goodnight: Just about every question that has ever been asked, these people have already answered. They know the answer and they can help the customer almost instantly and move on to the next problem. Having that depth of knowledge for people that have been there for so long. We went into a lot of Java development a few years back and had a lot of young kids out of college and just let them write java, turns out, none of these people had ever really written enterprise software, they just learned Java in class and it turned out to be a big mess.
Millions of lines of code, everybody was writing code left and right, not reusing in classes, writing their own class for everything because this other person’s class wasn’t any good.
Dr. Jim Goodnight: We ended up having to redo an awful lot of that because the people who were running R&D at the time did not believe that should impose these standards that we do for our C-Based development on the big servers.
Brent Leary: I am going to switch up just a little bit and ask you; social media, is at the forefront of everything it seems these days. How has social media changed the role of analytics in a company?
Dr. Jim Goodnight: We are seeing a lot of interest now in doing sentiment analysis on social media. It gives a company some instantaneous view of what people are thinking about them by going out and scraping all of the blogs and tweets looking for a particular brand name. You can fairly quickly come up with a sentiment analysis. We build these taxonomies that define what words are good and what words are bad in describing a company and we can put together a fairly comprehensive list of things that people are saying.
Also, there is a lot of companies that have joined Facebook and spend a lot of time building their Facebook pages. It's almost like a do-it-yourself webpage where you don't have to have a lot of web people working on it. Customers can punch their opinions and it is almost like an interactive web experience. Everybody can make changes.
Brent Leary: Is analytics more important today because of all of the data that is being created by customers as they use Facebook and Twitter and gives you some of the potential for more customer insights?
Dr. Jim Goodnight: Today there is just more data period. Every device in the world spits off data. Every server, router, web server. Every time you type something on a webpage, that URL stuff that you see up there at the top, that is being sent to the server to tell the server what to do next. Web servers are stateless, they don't know what state they are in. They are waiting for instructions for you to tell them what to do next. That is what those URL strings with the question marks and all the strange characters after it, it's telling it what to do next.
Dr. Jim Goodnight: Those are all saved, almost all of them are saved so that they can be analyzed later. That's billions a day of these URL strings. Every time we use a cell phone, the number you call and duration is saved plus some other stuff. There is just huge amounts of data. All of the stores all trying to make use of their points of sale data. They have been collecting it for a number of years. Only recently have they really gone into understanding what they can do with all of that massive amounts of data that is personalized to each individual that uses that loyalty card. There is lots of things that can be done with that.
Brent Leary: Are your customers asking you to provide them with as much of that as possible to make sense of all of that information?
Dr. Jim Goodnight: Companies that collect large amounts of data began realizing just a few years ago that there's a lot of value in all of this data. We ought to take advantage of it. It's a strategic asset. If we don't bring as much of a competitive edge as we can out of this data, then it's just doing harm to the company.
Brent Leary: If you were to start SAS today, as opposed to when you did, what things do you think would need to be different in your approach? As opposed to when you actually did it back in 1976?
Dr. Jim Goodnight: That is a tough one because things have changed a lot.
Dr. Jim Goodnight: Back in 1976, most people didn't know what software even was.
Dr. Jim Goodnight: Somebody asked my wife and she told them I was in the software business and they thought it was some kind of an undergarment.
Dr. Jim Goodnight: At least I think everybody today knows what software is.
Brent Leary: What do you think about the cloud? There is a lot of talk about the cloud. How important is it for a startup or any kind of company to leverage the cloud today, as opposed to do the traditional software install?
Dr. Jim Goodnight: The cloud, you not only have to install the software, but you have to also install the operating system. It's got to be packaged up just right. It is probably much easier to just buy a $500 PC and go to work vs. using the cloud. The cloud has been overhyped a lot. We use them internally and I think a lot of companies have applications that they use in a virtual machine that makes a lot of sense. We do a lot of testing on a virtual machine so that we don't have to stay in a particular environment to test, we can create it virtual. Then once it is finished we just save it and the next time that we need to do testing for that particular machine combination, we just reload that machine into the virtual machine.
We also do lots of demo work where our account exec's and software engineers will develop a demo and then they will ask that it be available at a certain time when they are going to be demoing it and about twenty minutes ahead of time, one of our engineers will load it. It takes about fifteen to twenty minutes to load up your application in your machine. When it is time to do that demo, the machine that person has requested is online and ready to use. There are some good applications. The applications that require large amounts of data, especially sensitive data, are not something you want to send out to run on someone else's cloud. Also, remember that virtualization is taking up about thirty percent overhead, so it's not free. You are losing some cycles.
Brent Leary: What kind of advice or pieces of insight would you offer to somebody who is thinking about starting a company today? About how they can actually build it and grow it, maybe not the point of where SAS is, but maybe to grow it to a respectable size and a comfortable size for them.
Dr. Jim Goodnight: I would have to say that the most important thing again is to treat the people that work for you with respect. Don't expect them to be there all night working for you. People have families, they need to get home to be with their families. You'll find that these people are much more productive the next day. I have had sessions when I have stayed up late. I wanted to finish a project and then I come in the next morning and I spend most of the day rewriting it because it was garbage. All of these tales of people spending eighty hours weeks, probably half of that is spent trying to fix all of the problems of many of us staying up late. Let people go home at night and be with their families.
Brent Leary: I appreciate your time Sir.
Brent Leary is a CRM industry analyst, advisor, author, speaker and award winning blogger. He is co-founder and Partner of CRM Essentials LLC, an Atlanta based CRM advisory firm covering tools and strategies for improving business relationships. In 2009 he co-authored Barack 2.0: Social Media Lessons for Small Business. Recognised by InsideCRM as one of the 25 most influential industry leaders, Leary also is a past recipient of CRM Magazine's Most Influential Leader Award. He serves on the national board of the CRM Association, on the advisory board of the University of Toronto's CRM Center of Excellence, and on the editorial advisory board for The Atlanta Tribune. Leary writes a regular online column for Inc. magazine, and blogs at BrentLeary.com. He can be found on Twitter at http://twitter.com/BrentLeary.