Sas Institute Inc. Business Information, Profile, and History

Company Perspectives

SAS is the world's leader in business analytics software, delivering the breakthrough technology you need to transform the way you do business. Our software provides one integrated process for analyzing data from every source and gaining the predictive power to drive change at every level. As the world's largest privately held software company, our vision is to deliver strategic value throughout your organization. We help you make a personal impact on business success by giving you The Power to Know.

History of Sas Institute Inc.

Privately held SAS Institute Inc. (the name is pronounced like "sass") is one of the largest independent software companies in the world. (It is not related to the Scandinavian airline SAS.) The company leases, rather than sells, its statistical analysis software, which is installed in more than 40,000 businesses, universities, and government agencies worldwide. The Institute's flagship product is an integrated system for enterprise-wise information delivery providing organizations with tools to access, manage, analyze, and present their data within an applications development environment. SAS has worked to make it easier for non-technical professionals to use. Headquartered in Cary, North Carolina, near the Research Triangle Park, about half of the company's employees are based overseas. By remaining privately held through the tech bubble and bust, SAS was able to retain its unique, college-like culture, while maintaining research and development spending.

Collegiate Origins

SAS Institute was founded and incorporated in 1976 by North Carolina State University professor, Dr. James Goodnight and John Sall. The two academics had developed a statistical analysis software package for their own research use that had become popular with faculty at N.C. State and a number of other universities throughout the South. "Eventually, our fledgling operation grew too big to run out of our offices at State, and they invited us to leave," Goodnight told Business Leader magazine, adding, "So, we moved across Hillsborough Street, and that's how it all started."

Over the next 18 years, Goodnight's and Sall's single software package, dubbed "Statistical Analysis System," grew into a modular information delivery system used by 98 percent of the Fortune 100 companies. In 1994, the company could boast over three million users in 120 countries, 12 U.S. regional offices, subsidiaries in 29 nations, and distributors in 20 others, and over 3,000 employees worldwide. In 1993, the company recorded sales revenues of $420.3 million, which marked a 15 percent increase over the year before. The figure also established the company's 17th consecutive year of double-digit growth in revenue.

These figures represent financial success that any company would envy. Most members of the SAS "family" attributed the Institute's success to a single philosophy: listen carefully to your customers and give them exactly what they want. "Here at SAS, we do software development by users for users," Vice-President of North American Sales and Marketing Barrett R. Joyner told Business Leader. He explained, "While we certainly need to be profitable in order to stay in business, our primary focus isn't making money; it's solving problems. We want to provide our users--business people, researchers, scientists--with advanced technology that will enable them to access, manage, analyze, and present their data effectively so that they can make sound business decisions."

This approach was obvious in the company's flagship software product, the SAS System for Information Delivery, which could be used in almost every computing environment, from the laptop computer to the data center. The system was an integrated suite of software products that provided users with a wide range of capabilities that they could set up in whatever combination they required. At the heart of the SAS System was a single software package called "Base SAS," which provided data management, analysis, and report writing. The rest of the system comprised more than 20 modular software packages that linked with the base software. These packages enabled users to add specialized functions, such as spreadsheets, graphics, quality improvement, project management, cooperative processing, applications development, and more, depending on the needs of their company.

Another component behind SAS's financial success was its commitment to research and development investments. In 1993, SAS Institute heralded its eighth consecutive year of leading the software industry in the percentage of revenue devoted to research and development. That year, the company reinvested a record-setting $143 million, or 34 percent of revenue, to improving its array of products. On average, the top 100 revenue-generating software companies reinvested less than 20 percent of revenue in research and development (R&D). SAS Institute's management team said that its commitment ensured that the company would continually provide its customers with software that exploits the latest technology. To support its massive R&D effort, the Institute built a five-story research and development building, with a virtual data center in each of its 1,100 offices.

SAS Institute's researchers had some unconventional methods for problem-solving. With roots based in Goodnight's and Sall's former campus offices, most of the researchers at the Institute took a "technological garage" approach to their work. Their style was similar to two entrepreneurs in their garage who start out with a crazy idea and end up with a product that earns millions of dollars. The Institute's management team encouraged its developers to follow up on all promising ideas, even if they seemed to have no immediate practical applications. The company conducted usability studies to determine the value of each piece of research. Many such projects--which may have never been initiated in other companies--ended up becoming real money-earners. The Institute's leadership firmly believed that this type of strategy encouraged developers to start projects even though they may not lead to end products and fostered the creativity and freedom that could lead to tremendous product innovation.

SAS Institute's marketing group also had its own distinct business philosophy. Rarely did the group resort to such marketing standbys as market penetration studies or competitive analysis. Instead, the company's marketing team preferred to rely on the SAS customers themselves via users groups. Since SAS Institute's inception, the direction of its research and development was largely driven by Institute customers, who were encouraged to express their opinions about the company's software products and services through formal and informal channels. To keep up with changing demands, SAS sponsored a network of more than 200 local, regional, national, international, in-house, and special-interest users groups. In 1993, the Institute experimented with the most extensive usability test ever performed on software. Preparing for major enhancements to the menu-driven interface to the SAS System--SAS/ASSIST software--marketing, training, and software development staff teamed up to conduct a three-phased study. They invited computer users of various experience levels to put the new version of SAS/ASSIST software through its paces and provide feedback. The company's annual SASware Ballot, a survey distributed to all SAS users, also provided a way for users to provide feedback to the Institute's management and influence development efforts, from general issues to specific enhancements.

In addition, SAS Institute held frequent users group conferences to provide a forum for Institute developers to meet directly with SAS System users. This free-flowing exchange of ideas led to software enhancements and new services that addressed the real computing issues that organizations faced. For example, in 1992, SAS introduced a series of Information Delivery Strategy conferences for information systems executives. These conferences gave the participants the chance to see the software operating in simulated vertical market settings and to voice their opinions to members of the Institute's marketing and development staffs.

As Joyner told Business Leader: "We're not a marketing-driven company. Throughout the 1980s, when a lot of other software companies were mesmerized by market share, we focused on talking face-to-face with users and meeting their needs. The competition saw us as a bunch of naive yokels who just fell off the turnip truck. In the last couple of years, though, many of our competitors have realized the value of being customer-driven." The ultimate measurement of the company's responsiveness was that the overwhelming majority of SAS software sites were renewing their annual software licenses year after year. According to the company's 1993 annual report, 95 percent of Fortune 500 companies that licensed SAS software that year elected to renew their licenses.

SAS Institute also made a concerted effort to develop close relationships with other firms in the field. The company believed that this strategy helped them to bring cutting-edge products to market rapidly. SAS Institute, for example, was one of the early participants in Microsoft Windows NT development and one of the first vendors to work with Digital Equipment Corporation on their ALPHA AXP project for RISC-based processors. In 1991, SAS struck a formal business partnership with Intel, one of the world's leading computer chip manufacturers. The agreement allowed for technology exchanges between the Institute and Intel and ensured that the two companies would forge a strong alliance between future generations of SAS software and Intel chips. In 1993, SAS Institute completed the development of an internal compiler that exploited the ground-breaking "Pentium" processor.

The business relationship with Microsoft Corporation was sealed in 1989 to give SAS access to Microsoft's operating system development information. The result of this deal was the delivery of releases of the SAS System for Windows and Windows NT in 1993. The relationship between the two companies became even stronger when SAS representatives sat on Microsoft's Independent Software Vendor Advisory Council. In addition to these two major agreements, SAS also had close working relationships with database companies, including Oracle, Sybase, Informix, and Ingres to ensure that its customers had easy access to the data they needed regardless of the manufacturer.

SAS Institute also stood firmly by its commitment to quality. Although "quality assurance" became one of the buzzwords of the early 1990s, SAS Institute had a long-standing reputation for producing software products that were reliable and high quality. "Quality is part of the culture here," Lynne Fountain, manager of public affairs, told Business Leader. She added, "Everyone who works here is really proud to be a part of SAS, and it shows in everything we do--from the quality of our products to the attractiveness of our campus and the gourmet food in our cafeteria."

SAS Institute also differentiated itself by its sales strategy. Its sales employees did not earn commission because the company wanted them to concentrate on finding the best way to solve customers' problems. Instead of "selling" its products the way its customers did, SAS licensed the base SAS software and modules on an annual basis. Prices varied according to the platform the customer decided to use. At the end of the licensing period, a customer could add or drop components to accommodate changing business requirements or decline to renew at all.

From the time it was founded in 1976, SAS Institute displayed a commitment to its work force, as well as to its customers. Like most high-technology firms of the late 20th century, SAS Institute understood that its continued success lay in its ability to attract and retain high-quality, intelligent, competent employees. As a result, the Institute made sure that its workers enjoyed bright, airy, well-equipped office buildings and could use an on-site recreation and fitness center along with an on-site health care center. The Institute also offered its employees two on-site Montessori child care centers and the "Generation to Generation" program, which helped employees cope with the needs of aging relatives. These types of employee amenities helped SAS to earn a place on the list of "100 Best Companies for Working Mothers" by Working Mother magazine for several consecutive years. Most important, however, they helped SAS Institute maintain an average annual turnover rate of a mere three percent when the national industry average was 22 percent.

SAS Institute's business strategy for the future was to continue to exploit a variety of new technologies to meet its customers' needs. A good example of this was SAS Executive Information Systems (EIS). This software package was introduced in 1992 on an experimental basis as part of a SAS System upgrade. This new module made highly complex data very "user friendly." With it, developers could make corporate data accessible to even the most computer-illiterate executives among the customer base. According to Goodnight, who served not only as president, but also as director of research and development, "SAS/EIS is one of the most important products in our history. It provides our customers with the tools to deliver information to anyone in their organization quickly and efficiently, allowing them to make better, more informed business decisions."

SAS/EIS software and other new SAS products incorporated cutting-edge technologies and applications, such as object-oriented programming technology, which allowed objects built for one application to be reused in others. This technology dramatically increased the efficiency and productivity of software development. SAS was also breaking new research ground in such areas as imaging, geographic information systems, and online user documentation. The company was hard at work developing several new products for niche markets. In 1992, for example, SAS introduced its first vertical market product for the pharmaceutical and biotechnology industries.

Expanding Through 1999

Several new offices were opened across the United States in the mid-1990s. SAS also established subsidiaries in several foreign countries, from Brazil to Russia. A subsidiary was established in India in 1997. By the late 1990s, the company had 5,000 worldwide employees and more than 30,000 customer sites. Sales passed $1 billion in 1999.

Expansion continued at home. In 1999, SAS added its 22nd building to the complex in Cary, North Carolina. Amenities such as the health and fitness center had been upgraded. The recreation center got a ten-lane swimming pool in 1999.

The organization maintained its reputation as a veritable case study in profits through pampering. However, the Wall Street Journal questioned whether the lavish perks couple with relatively modest salaries didn't make SAS a "bastion of smothering paternalism." At any rate, the policies helped keep turnover quite low, and working hours reasonable, in a industry with fierce competition for time and talent.

In 2000, Fortune ranked SAS as America's second best place to work. By this time, 90 percent of the Fortune 500 used SAS software. However, noted Dow Jones, the company's name was much less familiar than some of its publicly-traded competitors. The company's logo and corporate identity were updated in time for its silver anniversary in 2001. This included a new tag line, "The Power to Know."

Goodnight owned two-thirds of the company, his co-founder John Sall the other third. (The two were also partners in other ventures, including the defunct Midway Airlines Corporation.) With an estimated valuation of more than $20 billion, SAS was considered the world's largest privately owned software company. The company was preparing an initial public offering (IPO) of up to one-fifth of its stock. However, this was scrapped. SAS had no shortage of cash, and regulatory burdens were becoming tougher than ever. In addition, officials explained to The News & Observer, the company's long-term perspective (investing a quarter percent of revenue in R&D) would not have been appreciated at that time by analysts focused on quarterly numbers.

Independent Through Tech Boom and Bust

After two dozen years of double digit growth, sales were flat in 2001 at $1.1 billion. The company was nevertheless surviving relatively well as the tech bubble burst. In hindsight, the decision to drop the planned IPO seemed brilliant, as it allowed SAS to avoid the cost-cutting that followed the boom, observers told USA Today.

SAS was one of the few software companies to add workers in the ensuing economic slowdown. By the end of 2003 it about 10,000 employees, half of them in the United States and 80 percent of these at the Cary campus. SAS was expanding internationally and also taking advantage of lower development costs overseas. It site in Pune, India, was relatively tiny, with less than a half dozen employees, but growing fast. According to Workforce Management, most of SAS's turnover was involuntary. Industry Week reported the company was receiving 200 applications for every job.

Heightened interest in security and financial fraud following the terrorist attacks on September 11, 2001, was opening up new markets. The company's software was also being used to help medical researchers sift through mountains of patient information. Sales-generating business intelligence applications were a good seller in slow times; forecasting tools were particularly in demand. Part of SAS's growth was coming by acquisitions. The company bought six smaller companies between 2000 and 2003.

A Groundbreaking Release in 2004

As the economy edged into a recovery, SAS was producing advertising aimed at convincing more high-level executives that the company was more than a good place to work. One of SAS's main objectives was making its sophisticated products easier for non-technical personnel to use. The company rolled out its SAS9 software in March 2004. Billed as the most significant release in SAS's history, it was said to revolutionize the business intelligence industry by allowing more users access to data. The software was also made multithreaded to take advantage of a new generation of processors. By mid-2005, half of SAS's 42,000 customers had installed SAS9.

Principal Competitors

Business Objects S.A.; Cognos Inc.; Hyperion Solutions Corporation; Oracle Corporation.

Chronology

• Key Dates
• 1976 SAS Institute is founded by academics associated with North Carolina State University.
• 1978 SAS has 600 customers.
• 1980 European headquarters are established.
• 1982 Subsidiary is launched in Australia.
• 1983 On-site health care center established at the Cary, N.C., complex.
• 1985 Subsidiaries are launched in Japan and Hong Kong.
• 1994 SAS has more than three million users and 3,000 employees worldwide; revenues exceed $400 million.
• 1997 A subsidiary is established in India.
• 1999 Sales exceed $1 billion.
• 2000 Fortune ranks company as America's second best place to work.