No longer can SAS Institute be described as a ‘mere’ business intelligence software supplier. Its portfolio now spans more than 90 products, and extends far beyond simple data mining tools to embrace a range of applications, covering regulatory compliance, supplier management and direct marketing.
Furthermore, SAS has benefited from customers’ supplier consolidation programs. “Our business is growing primarily because we are getting better positions in the IT portfolio,” says Jim Davis, SAS’s chief marketing officer. He cited one customer, a US bank that is cutting the number of its IT suppliers from about 250 to fewer than 30, including SAS.
The growth Davis refers to is accelerating. In 2002, when revenue reached $1.2 billion, it was pegged at a modest 4.4%, but since the turn of the year sales are up by about 14%, bucking the trend in the industry. Sales to the banking and telecoms industries are strongest.
Now, SAS wants to drive home its advantage. In June, it beefed up its risk-management technology through the acquisition of the principal assets of OpRisk Analytics, a specialist in selling operational risk management tools to financial institutions.
The deal shows where SAS expects the next boom to come from. Investment in IT will soar as banks and insurance companies are compelled to meet a range of new regulations in the next three years, including the New Basel Capital Accord, or Basel II, which mandates better operational risk processes. Some estimates put Basel II-related IT costs even higher than those triggered by the scare over the so-called millennium bug.
Things may be going well for SAS, whose UK clients include Barclays Bank and Sainsbury, but its market position is not guaranteed. One problem, potentially magnified as the company sells increasingly to IT decision-makers, is resistance to change among many executives.
Some management teams are suffering from “initiative fatigue”, including fatigue from business intelligence initiatives, according to Andy Kyte, a Gartner research director. Others, he says, are intimidated by the scale of the task. “They are like a mosquito in a nudist camp: they know what to do, they just don’t know where to start,” he says.
Another irritant has come in the form of Microsoft and Oracle, which are allegedly giving away data-mining tools with their respective relational databases. At a recent data warehousing conference, a survey of attendees found as many people using Microsoft’s ‘Analysis Services’ product as SAS’s ‘Enterprise Miner’, although the most popular of all was Business Objects’ ‘Business Miner’.
To make matters worse, major enterprise application vendors, including SAP and PeopleSoft, are starting to make inroads into another key SAS battleground – business performance management software.
But SAS’s highly regarded technology affords the company some protection, despite rivals’ aggressive methods. SAS’s status as a private company also protects it from the quickening pace of IT industry consolidation.
The trend towards the consolidation of its customers’ IT portfolios, on the other hand, might today seem like good news for SAS. But it could prove a double-edged sword, aiding the likes of SAP and Microsoft in the longer term.