At a Software Powerhouse, the Good Life Is Under Siege (Part 2)
by admin on Nov.14, 2009, under News
He and his colleagues at SAS developed their own programming language and software tools, and designed them for eggheads like themselves. Users were analysts with Ph.D.’s, working with programmers and employed by the largest companies at the forefront of using computing in their businesses, including banks, national retailers, insurers and drug companies.
SAS invested heavily in research and development, and even today allocates 22 percent of the company’s revenue to research. The formula has paid off in steady growth, year after year. Revenue reached $2.26 billion in 2008, up from $1.34 billion five years earlier.
Yet the cocktail dresses with sleeves company also faces the classic challenge of being the innovative pioneer — enjoying rich profit margins but facing new competition from rivals seeking to gain market share with lower prices and substitute technology.
In the last two years, the major software companies have scooped up companies in the business intelligence market. Among the larger moves, SAP bought Business Objects for $6.8 billion, I.B.M. bought Cognos for $4.9 billion and Oracle picked up Hyperion for $3.3 billion.
Still, those companies compete in the broad swath of the business intelligence market for reporting and analysis products. Such data on sales, shipments, customers and operations amount to a numbers-laden portrait of the recent past. The SAS stronghold is a more sophisticated kind of software typically called “advanced analytics and predictive modeling,” which uses historical and current data to try to peer into the future and model likely outcomes.
The competitive thrust that really grabbed SAS’s attention came in late July, when I.B.M. announced that it planned to pay $1.2 billion for SPSS, a maker of predictive modeling software. I.B.M. has placed SPSS and Cognos into a new business analytics and optimization group. That business will be supported by 200 scientists, and the company has said it will retrain or hire 4,000 consultants and analysts to work in the group.
“This is the big growth strategy for I.B.M., the company’s next big play for this decade,” says Ambuj Goyal, a computer scientist who is general manager of I.B.M’s business analytics software unit. “SAS comes from the legacy world of statisticians and programmers. The real opportunity is in deploying this technology broadly in corporations.”
To counter I.B.M. and others, SAS is looking to forge a tighter relationship with a big technology services company. It is also shortening product development cycles to 12 to 18 months, down from 24 to 36. “That’s what the market expects,” Mr. Davis says.
The most sweeping change is the company’s move toward the Internet model of software delivery — as a service that customers tap into over the Web, much as Google and other Internet companies do. SAS has dipped its toe in, with some initial products. But a major expansion is planned, supported by a sprawling $70 million data center scheduled to begin operating next year.
The remotely delivered software is part of a drive to broaden the market for SAS technology beyond an elite corps of quantitative analysts and into the rank-and-file of corporate professionals.
Analysts say the company’s strategy looks sound, even if the outcome is uncertain. “SAS has to do a lot of things right to succeed,” says Peter Sondergaard, senior vice president of research for Gartner. “But if it executes correctly, it could be a winner.”
ACROSS its campus here, there are signs that the SAS culture is evolving with the times. Rick Langston, 54, a senior software manager who joined the company 29 years ago, smiles and shrugs when asked about the 35-hour workweek. After leaving the office, Mr. Langston routinely checks on work e-mail at home.
These days, he explains, SAS is a global company with far-flung project teams, and overnight e-mails can resolve problems and speed things along. Deadline work to meet product development schedules, he adds, can mean long hours at times. “But this is certainly not a place where you are working 60-hour weeks, week in and week out,” he said.
