Just as the world used to be a simpler place in our minds, so it was that SAS used to seem a simpler software company, conveniently categorised as a statistics software company. It’s a definition which brings a smile to the lips of Jim Davis, chief marketing officer of what is the world’s largest privately held software company and one of the often unsung heroes of the applications market.
“A lot has changed,” says Davis. “Unlike a lot of companies, we saw growth last year, we’ve seen growth this year. We’ve added to our headcount when others have been cutting it. We grew 7 per cent last year, we’ll increase headcount by 7-8 per cent this year. We saw a profitable year last year, we’ll see another profitable year this year which will mean 26 straight years of profit.
“We talked a lot about going public over the years, but we’re very happy being privately-held right now. We don’t believe there’s a good marriage today between the technology companies and the market,” he adds. “The markets also demand too much in terms of quarterly expectations. The business we’re in which is to provide fairly broad business solutions is one in which I don’t believe you can innovate on a quarterly basis. A lot of other companies suffer from those expectations from the market.”
OK, but what is it that SAS actually does? How does the company define itself in the 21st century? “SAS is some 90 or so products,” says Davis. “What we’ve done is make an assumption that the market is not interested in products any more because it’s difficult to define a return on investment on a product. We see products as a component to a solution. Initially these are horizontal solutions, like CRM or Human Capital Management.
“That’s been successful so now we’re looking at being more vertically focused. So we ask what does CRM mean for financial services or for telecommunications and so on. Anything we offer today must be able to show some form of return on investment in terms of business benefit and in months, not in years. The multi-year call centre projects are not around. I don’t believe organisations are going to tolerate the multi-year projects any more.
“It’s not about the technology. We’re seeing IT budgets capped and they will be for the next couple of years. It becomes an issue of IT portfolio management and treating that portfolio as a stock fund as it were, examining the value of each supplier in that portfolio. The budget is in the business community so it’s about solving the business problem. You need to convince the marketing director that there’s something here that can help them solve a CRM problem. But you can’t ignore the IT director because they will always have veto.”
SAS operates on a subscription basis which means that some 80 per cent of annual revenues comes in from existing customers. This, according to Davis, has proved to be a benefit as it means the company has had to get used to demonstrating value from investing in its software. “For the Oracles and Microsofts, the 80 per cent of revenue comes from first year fees,” he argues. “If we don’t provide value, then we’re out of business. We licence software , then we have to make sure that we keep the renewal rate high by providing value, or we’re out.”
The company points to market research from analyst firm International Data Corporation which places them as the market leader in analytic CRM in Europe with 26. 7 per cent market share and 62.1 per cent year on year growth rates. IDC goes on to predict that spending on analytic CRM is set to double by the end of 2004 from its base number in 2000. SAS sees itself mopping up a healthy amount of that additional revenue.
“There’s a far wider acceptance of analytics in organisations,” says Davis. :”The current world economy has shown the importance of analytics in providing focus. It’s becoming more strategic. The problem we face is an awareness problems. A number of other companies who’ve been in operational CRM are seeing their revenues dry up, so they’re trying to redefine analytics and dumb it down. But their focus is historical analytics rather than predictive.”
“When you talk about predictive analytics, you’re talking about data mining and seeing previously unseen patterns of data. The Cognos, Business Objects and Microsofts talk about analytics as reports on top of predefined data. That doesn’t help tell you where you are going. You need an environment that tells you where you are going, not where you’ve been.
“If you have three organisations and each one has a state of the art Siebel CRM system, then what you have is three organisations with state of the art systems for processing customer data. Where we come in is we differentiate one company from the others by analysing the data. We can apply that modelling back in the Siebel system and all of a sudden my operation is different to you. You have to distinguish between the operational and analytical CRM approaches.”
SAS has a history of being an enterprise player and insists that the blue chip client base still has business to be taken, but in common with the rest of the applications industry is now eyeing up the SME space. “We can accommodate the SME market because we are platform independent,” says Davis. “But it’s a question of a channel strategy. SME problems are the same as the enterprise, but they’re not going to pay the same money and rightly so. We’ve done some experimentation in some markets in Europe.”
In the SME space, SAS will also face the new threat of Microsoft making a push into the applications business, but Davis is entirely phlegmatic at the prospect. “Microsoft is always coming into markets,” he shrugs. “Everything they do is about positioning SQL Server. They’re trying to push the database out into the market. It’s like Oracle and IBM. At this point, I don’t see their entry to CRM as anything other than hype to attract attention. They tried to do the same thing with data mining but the enterprise didn’t take them seriously. Microsoft’s model is one that is a shrink-wrapped commodity model that works very well. It doesn’t work for solutions. I just don’t see Microsoft as being a threat next year.”
Davis concludes by reflecting that the fact that SAS has been around for so long is becoming a major benefits. “Two or three years ago when we stood up and said we’d been around for 25 years or so, it didn’t matter because we didn’t have dot com after our name,” he recalls. “Our longevity is now one of the key selling points.”
About Jim Davis: As Senior Vice President and Chief Marketing Officer at SAS Jim Davis is charged with driving marketing initiatives and industry-based solutions for the world’s largest privately owned software company. His main responsibility is to support the efforts of more than 1,400 sales and marketing personnel throughout 156 offices in 53 countries, and co-ordinating market driven R&D direction. He can be contacted at firstname.lastname@example.org.