Q&A with SAS: The State of the BI Industry

Look for continuing consolidation (including a possible acquisition by SAS). The President and CEO of SAS also sheds light on packaged analytic applications, the convergence of production and analytic reporting tools, and the company's next version of its BI suite.

For all of its 27 years, SAS Institute Inc. has been led by Dr. Jim Goodnight. The company's President and CEO has been responsible for growing the company from a small startup into a business intelligence (BI) powerhouse with $1.3 billion in annual revenue and international operations.

We spoke this week with Dr. Goodnight about SAS and the state of the BI industry. Like most industry watchers, Dr. Goodnight feels that more consolidation is in store, and says that SAS is eyeing a potential acquisition of its own. Elsewhere, we talked about overcoming customer resistance to packaged analytic applications—he says that SAS has been very successful in this regard—the convergence of production and analytic reporting tools, and, of course, SAS’ forthcoming version 9 BI suite, which it plans to unveil later this month.

There was a lot of tumult in the business intelligence space last summer [in 2003], and some industry watchers are predicting more to come. What factors do you think have contributed to the consolidation craze, and do you agree that we’ll probably see additional consolidation in 2004?

I suspect we will, no question about it. As a matter of fact, the rumor right now is that Siebel is looking to buy either Hyperion or Cognos. Siebel needs someone in the BI space to improve their analytical capabilities.

With regard to the BI area, of course, Crystal was being shopped. We looked at Brio and decided not to mess with them, and then we saw too much product overlap with Crystal with some of the reporting stuff that we did. We do acquisitions mainly to expand our own technologies, such as with our latest retail purchase with Marketmax [a provider of retail planning and merchandising software]. We were already in the retail space and so were they, and I swear our products did not overlap a bit.

Is this—the Marketmax acquisition and others—part of a strategy at SAS to target specific vertical markets such as retail?

That’s one of the things that we’re doing—moving into different verticals, yes. We did pharmaceuticals quite a few years ago, where we developed products exclusively for pharmaceuticals. Then, about a year and a half ago, we decided to verticalize our financial services offerings. This actually represented 35 percent of our worldwide revenue, and we’re saying, "This is crazy. Why aren’t we paying a lot of attention to this biggest vertical?" This would be things like anti-money-laundering software, operational risk, and then across all industries, Sarbanes-Oxley has put some requirements on companies to keep track of all of the procedures they have put together. The first release of SAS Corporate Compliance [a Sarbanes-Oxley compliance solution] went out the first of January—that’s across all industry segments—and right now Merrill Lynch is running it to help with [operational risk] and Sarbanes-Oxley.

SAS itself isn’t a stranger to BI acquisitions – [you] picked up DataFlux nearly four years ago, for example, and you’ve acquired other, smaller players over the same period. But you sat out this summer’s BI acquisition frenzy. Are there any vendors out there with technology that interest you, and is it possible that SAS could make an acquisition or two in 2004?

Well, we made a few acquisitions. This fall we bought Marketmax, and we made three other acquisitions last year. Right now, we’re looking at one that we’re working with right now, but I can’t say much more about that.

On a related note, you’ve moved into the analytic applications space by making a couple of acquisitions over the past few years. During that same period, at least one prominent vendor—Informatica—has abandoned the analytic applications space, and TDWI’s own internal data shows that companies are more apt to build their own analytic applications than buy packaged offerings from a third party. How has this move worked out for SAS? What qualities do you bring to the table that allow you to succeed where other vendors have failed?

SAS itself is just one huge analytical application that people in fact do use to build other applications in-house. They’ve been doing it for years. We’ve put together some applications that sit on top of SAS that can take advantage of all of the power of SAS. One of those that we’ve finally got completely integrated is marketing automation, and that’s been doing extremely well for us.

There’s a report coming out pretty soon, by the end of the month from Forrester, that ranks us pretty near the top as far as marketing automation is concerned—that and our financial management software. So we haven’t experienced the problems there [selling analytic applications]. Our applications have done well. Last year they represented about 20 percent of our business, of our new sales. This year they represent about 30 percent of our new sales.

I’m not sure how closely you follow the reporting space, but one trend seems to be for a convergence of production reporting and analytic functionality in the same tool. We’ve seen it with Business Objects, which picked up production reporting specialist Crystal; we’ve seen it with Cognos, MicroStrategy, and, even Actuate. How does SAS feel that it's positioned in this regard?

That’s pretty much the market we’ve been in for the last 27 years is analytical reporting. That’s what we do with [SAS] version 8 is to allow all of our reports to be sent directly to the Web in the form of HTTP, so that’s an output selection that you can make if you want everything in hypertext. We released about three years ago a product called Enterprise Guide that was very easy to use. In [SAS] version 9, we’ve got something called Web Report Studio, which is designed to be a very easy-to-use query and reporting tool. That’s what just about all of the BI vendors are doing right now [query and reporting]. That’s what they call business intelligence. That’s sending a query off to the database and printing off the results. With [Web Report Studio], we're going to be taking a look at the sort of low-end user, the ordinary business user, and we’re going to be making it easier for them [to create and view reports.]

I keep hearing from users and vendors alike that data quality and data profiling have become essential technologies, and you have what many industry watchers describe as a very good set of data quality and data profiling technologies in your DataFlux subsidiary. What trends or factors do you think have contributed to the emergence of data quality as an essential BI technology?

One is certainly compliance and regulation. We’re getting more and more requirements, especially through some of the regulatory agencies, to really understand and know who your customers are, especially trying to look up terrorists in banking agencies, for example. [As] part of our anti-money-laundering software, we’re out looking at all of the watch lists put out by various government watch lists. You might have a strange name that can be spelled several different ways, and all of that information is built into Dataflux’s name recognition logic.

Some of it is [companies] just trying to get more out of their data. There are things like marketing lists, where you need to go in there and do de-duping. That’s where you pull together several different lists and identify duplicate data. Sometimes the names aren’t exact matches, sometimes the middle initial might be a “B” and in others it’ might be spelled out (like "Baker"). But these are all important uses for DataFlux.

To the casual observer DataFlux might appear like a separate company. There’s the “a SAS company” banner on its Web page, but other than that, it looks like it’s its own entity.

Well, I can explain that. [DataFlux has] primarily an OEM model that they’re pursuing, so there are a number of our competitors that actually use DataFlux, and the competitors would not talk to them at all if they knew that they were part of SAS. We sell SAS Data Quality as part of SAS, and it’s the version of DataFlux that’s been integrated completely into SAS.

You have a reputation as a techie, and you’ve obviously done a lot of low-level programming of this stuff. Do you miss it?

I use all of the SAS reporting capabilities on my desktop, but I don’t program much of them anymore. Instead, I’ll go down the hall and tell someone I need a new feature and it’ll be there in a day or two. I really do miss programming. I miss the escape. It’s a really mental thing and it’s a great exercise.

You have the SAS version 9 unveiling planned for later on this month. I realize that you can’t give too much away, but what can we expect to see?

What we’re planning for this whole year is a phased launch of version 9. We’ll be talking primarily at the end of the month about the basic new platform, with the framework for all of the analytics capability, new data mining, new metadata repository for use with the ETL areas, and the Web Report Studio.