Week Five Case Study
Cary. North Carolina
SAS (pronounced âsassâ), which is short for
Statistical Analysis System, began when it set out to create statistical
software to help agricultural researchers who were studying the effects of
soil, seeds, and the weather on crop yields. In 1970, researchers had to write
new computer programs every time they analyzed data. SAS standardized that
process and made it faster. Because the statistics faculty who wrote SAS needed
to generate funds to cover the expiring grant money that paid their salaries,
they started leasing SAS to universities and pharmaceutical companies. By 1976,
they had 100 customers. However, it wasnât until the first SAS Users Conference
later that year, when 300 people showed up, that they realized their business
opportunity. As you tell people now, that was pretty much the âahaâ moment.â
From website traffic, to credit cards replacing
cash, to genome sequencing, to sentiment analysis (analyzing every tweet, blog,
and discussion group comment about your company and its products), the amount
of digital data that a company has to go through is increasing at exponential
rates. As a result, 79 percent of Fortune 500 companies use SAS. Shell Oil uses
it to analyze data to predict how long the pumps will run on its North Sea
oil-drilling platforms. Kohlâs department store maximizes profits by using SAS
to analyze which products to mark down for sale. Credit card companies use SAS
to reduce fraud by identifying unusual credit card purchases in real time.
Finally, telecomm companies offer great deals to customers who, via SAS,
theyâve determined are more likely to switch to competitors.
Although SAS has been profitable every year since
inception, there are threats to its highly successful business model. First,
says Gareth Doherty, an industry analyst, âMost organizations aren’t in a
position to be able to leverage some of the sophisticated applications that SAS
offers because the No. 1 constraint when you’re working with a tool this
sophisticated is the user. If you donât have a rocket scientist sitting behind
the desk, it doesnât matter what you have running on the desktop.â Second, SAS
products are expensive, starting at $1 million for industry specific products
(i.e., banking or retail), followed by subscription renewals that are 20
percent to 30 percent of the purchase price. Although SAS spends 22 percent of
its revenue on research and development each year, larger firms are buying
business intelligence companies to compete directly with SAS. SAP paid $6.8
billion for Business Objects, and Oracle paid $3.3 billion for Hyperion. The
largest threat may come, however, from IBM, which paid $4.9 billion for Cognos
and $1.2 billion for SPSS. IBM combined those firms into its business analytics
group, which will employ 200 scientists and 4,000 consultants and analysts.
Industry analyst Bill Hostmann says, âIt will be a dogfight. SAS has never
faced a competitor like IBM. And I do think IBM sees SAS as a big, fatted cow.â
With competition intensifying, SAS is shortening its
product development cycle from 24 to 36 months to 12 to 18 months. Change like
that canât be achieved without attracting and retaining a highly motivated
workforce. Thatâs increasingly difficult with tech job openings up 62 percent
and a 22 percent average turnover rate in the software industry. Thatâs why
Google gave all of its employees a 10 percent raise and a $1,000 bonus. So, the
first step in maintaining your competitiveness is figuring out what motivates
people to join a SAS. Second, getting people to join SAS is one thing, but how
do you get them to work hard and maximize their efforts? Should you be
egalitarian and pay everyone the same, or should you closely link pay and
performance? Finally, how do you get your most talented managers and software
engineers to stay? Does SAS need to âgo publicâ like its competitors and issue
stock and stock options to its employees? Or are there other ways for SAS to
reward people and remain competitive in the talent market?
you were in charge at SAS, what would you do?
Jessica Guynn âWar heats up
for top Silicon Valley talentâ Los
Angeles Times, 10 November 2010,.latimes.com/2010/nov/10/business/la-fi-silicon-pay-war-20101111″>http://articles.latimes.com/2010/nov/10/business/la-fi-silicon-pay-war-20101111 [accessed 23 May 2011]; D. Chow, âFor SAS, Asia Presents Risks and Potential,â Wall Street Journal, 21 November 2010,.wsj.com/article/SB10001424052748704170404575623952475539676.html”>http://online.wsj.com/article/SB10001424052748704170404575623952475539676.html [accessed 4 June, 2011]; M.
Hartley, âBusiness Software’s ‘Cadillac’; ‘Tough Times are Good Times for
Analytics,’ SAS CEO Jim Goodnight Says,â Financial
Post, 17 July 2010, 3; D. Kaplan, âTHE Best Company TO Work For,â Fortune, 8 February 2010, 56-64; R.
Lane, âPampering the Customers, Pampering the Employees,â Forbes, 14 October 1996, 74-80; S. Lohr, âSAS Tests Its Business
Intelligence; Top Software Company Confronts New Threat from Heavyweight
Rivals,â The International Herald Tribune,
23 November 2009, 16; A. Ricadeloa, âIBM vs. SAS: The Battle over Data Analysis
Software,â BusinessWeek Online, 30
November 2009,.businessweek.com/technology/content/nov2009/tc20091129_192266.htm”>http://www.businessweek.com/technology/content/nov2009/tc20091129_192266.htm [accessed 4 June, 2011].
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