You don't need an analyst to tell you that the market for technology stocks is hardly buoyant. In addition, this is one year where there is no great pressure for share options from employees of software companies - just a salary and good prospects of employment for the rest of the year is enough.
So why is SAS considering making a trip to the stock exchange next year? Although no one from SAS will be specific, the bottom line seems to be that Jim Goodnight, who founded SAS more than 25 years ago, can't go on forever.
SAS is the largest privately held software company in the world. Its revenues in 2000 were more than $1.1 bn (£756m) and, but for a 20% decline in the value of the euro, it would have been much more. It has an extremely loyal blue-chip customer base (98% of the Fortune 100 and 90% of the Global 500) and its much-criticised software rental sales model is coming into its own in a difficult year.
The key question for potential investors will be whether the company's positioning is such that it can continue to match its previous performance. More than 80% of SAS's revenues come from renewals of existing contracts - something that recent start-ups would kill for - and it has had double-digit growth for the last 24 years.
The SAS system was originally conceived in 1976 to analyse agricultural data on IBM mainframes. In the past 25 years, it has grown substantially in terms of offerings and product scope. Today, the company focuses on
At its first-ever European analyst briefing the company declared that SAS is about to become a "solutions" company, and the first solution it is offering is in the CRM field. This is madness for a company with some of the best analytical software in the world; it is merely confusing the market by saying that it is now a CRM solutions provider, when clearly it isn't.
What it should be doing is exploiting its analytics, to mine all that extra data that is being garnered about customers by the CRM movement. We suspect that SAS's customers will soon put it right on this matter, and another expensive management-consulting project will be buried in a very deep hole.
ASP a silly question
We were much more interested by SAS's move into the ASP market. On the face of it, you cannot think of many more unlikely ventures: one of the world's most complex and monolithic pieces of software going for the one-to-many model of ASP.
However, SAS has found an interesting way to offer a really neat service to small and medium-sized retailers. Basically, you can upload a day's worth of data each night to SAS, which will then run standard analyses overnight, and have the results available on a secure server the next morning.
This removes the cost of setting up and running SAS in-house and, of course, perpetuates the SAS way of doing business on a contract that provides regular income. This is a small scale initiative for SAS at the moment, but it could be the start of something really big.
Traditionally, SAS has been a key player in the BI market. Its products are well suited to the type of reporting and analysis that is central to a BI solution. Data management, data access and data analysis modules provide the platform on which users can build and manage their data warehousing and analytical solutions.
The main thrust of the SAS analyst conference was the positioning of SAS as an end-to-end BI platform and solutions provider. This has always been the value proposition for SAS. It claims that investment in the SAS system will reap a high return on investment and lower the total cost of ownership, even if the price does tip towards the high end.
SAS's positioning is now changing. In an effort to stave off accusations of being a closed shop, SAS is actively marketing its technology as an open platform. The strategy covers support for middleware technologies, such as COM, DCOM, Java, support of the OMG's Common Warehouse Metamodel metadata standard and XML.
This provides a good framework, and builds on the accessibility provided by OLE DB for OLAP and SAS/Access to other data sources and platforms. However, SAS will have to go a long way to convince users that this approach is straightforward. Although access to other ETl, OLAP servers and metadata repositories is theoretically possible, users face slower application performance and a steeper learning curve if they mix the SAS system and third-party products.
Very little emphasis was placed on the SAS BI toolset during the conference. SAS chose to talk about its tools in the context of analytical solutions, rather than in isolation. However, the tools should not be overlooked. SAS has always had an extremely good reputation for providing analytical tools, especially in the data mining space. This remains one of the key differentiators separating SAS and other BI vendors.
Will it work?
SAS has a comprehensive BI offering. Its main strengths are its powerful data engine, programming language and analytical tools, which provide excellent support for bulk data processing and high-end data analysis. This makes it a strong contender in the BI market.
The SAS BI products will appeal to existing SAS users, as they offer a high level of integration between modules. In this scenario, SAS can provide a one-stop sho" for a BI solution. However, if integration with other third-party tools is more of a priority, the solution is more problematic. The main reason is that the SAS toolset is optimised to access SAS datasets, and not other data stores.
SAS's strategy relies heavily on users buying into the whole SAS system. If it wants to convince users with other BI implementations that the SAS system is a viable option, it will have to offer a more relational and SQL-compliant datastore.
SAS must learn from the staging of its first-ever European analysts conference. If its plan for an initial public offering is serious, then SAS will have to become comfortable with the close scrutiny of analysts. Opening the doors to the rest of world seems to be something that SAS is doing very cautiously.