Quiet Southern Software Giant Is Ready to Shout
A quarter-century of refining software that turns raw data into usable information has made James Goodnight co-owner of one of the biggest companies no one knows.
National magazines have repeatedly ranked SAS Institute Inc. high on lists of best companies to work for. Employees are backed by a constant financial commitment to improve that exceeds industry norms.
It’s worked pretty well.
SAS software is used by corporations worldwide to find patterns within data and to identify money-making opportunities.
It’s the world’s largest software company in private hands. All but two or three of the country’s 100 biggest companies are customers.
The company’s 8,000 employees around the globe last year generated about $1.1 billion in sales. Sales growth has been in the double digits for 24 years, and 1999 profit was estimated at $100 million by Forbes, which ranks SAS in the middle of its annual list of the country’s 500 largest private companies.
At a turning point at age 25, SAS is ready to raise its profile.
Goodnight, a onetime statistician, and co-founder John Sall, who owns a third of the company to Goodnight’s two-thirds, have become rich with little marketing. Goodnight is 29th on Forbes’ latest list of the wealthiest Americans; Sall is No. 65.
The two, who own most of North Carolina-based Midway Airlines, now want to build public recognition of SAS and explore selling a piece of it to the public.
What won’t change, they say, is an employee-friendly workplace where commissioned artworks dot the 200-acre suburban Raleigh headquarters campus along with a foam statuette of the patron saint of SAS programmers, Yoda from “Star Wars.”
Goodnight says success involves knowing when to try something different. When digging in one spot doesn’t produce the mother lode, he says, start mining a new shaft.
“New holes are cheaper than big, deep ones,” said Goodnight, whose office’s main adornment is a wall of brightly lit shelves that support chunks of minerals he has collected from around the world.
Goodnight and Sall walked away from North Carolina State University with two other instructors in 1976 to make commercial use of statistical analysis software, or SAS, developed to analyze agricultural research data.
Company Will Focus on Customized Products
Now, SAS products are used by scientists sifting through genetic data to find disease-causing defects. Corporate finance executives keep watch for crooked insiders with software that spots irregular electronic transactions.
The Miami Herald used SAS software to win a Pulitzer Prize by tracing a web of conspirators who stole Miami’s 1997 mayoral election.
“It’s just really rip-roaringly fast,” said Tim Henderson, part of the newspaper’s computer-assisted reporting team. “It’s hard to learn and it’s expensive . . . really is a wonderful tool.”
Prices to lease SAS software range from about $2,500 a year for personal computer use to six figures for a mainframe, said Jim Davis, the company’s chief marketing officer.
The company now plans to focus more on products customized to the special needs of particular industries.
For example, one product for the telecommunications industry helps companies predict which customers will switch providers, chasing this month’s best deal. It figures out what drives their decisions and how much it’s worth to try to keep them.
By targeting industries like finance and pharmaceuticals, Davis said SAS expects to increase sales to $3 billion to $5 billion in four years.
SAS’ focus for growth in customer relationship management software and services targets a market worth about $24 billion in worldwide revenues by 2004, according to International Data Corp.
Those predictions may sound grandiose, but SAS has a habit of delivering on its promises, said Aaron Zornes, a research director at the META Group.
“The normal software company will over-hype and under-deliver,” Zornes said. “They [SAS] stand out. They’re ethical, hard-working people. . . . Their competitors, when they say something, we have to discount it 40% to 50%.”
SAS also is paying more attention to marketing and building its brand name.
The company each year plows 30% of its revenue--more than double the industry average and equivalent to about $30 million last year--into research and development.
Last year, SAS started its first-ever advertising campaign, spending $30 million on television and radio.
Perks Keep Company’s Turnover Rate Low
If the average person has heard anything of SAS, it’s probably that it’s considered one of the country’s best places to work.
Contract workers and part-timers are few, and everyone enjoys benefits that include full health insurance, a 35-hour workweek and profit-sharing.
On-site day care and an accredited Montessori school allow parents to eat lunch with their children in any of three subsidized cafeterias, where a piano player entertains diners.
There’s no limit to sick days, and employees can stay home to care for sick family members, or they can be checked out at the free on-site medical clinic.
Former employees say SAS salaries are more than 10% below labor-market standards.
The company says cash compensation is competitive while profit-sharing and benefits put SAS in the industry’s upper tier.
This has kept its turnover rate at around 5% for years while some Silicon Valley companies saw as many as a quarter of their workers flee each year to better-paying rivals or dot-com start-ups.
One study estimated SAS saved $70 million a year in head-hunting and productivity by not having to replace workers.
SAS spends close to that much on its perks, Goodnight said.
“So it really comes down to do you want to give your money to recruiters and training expenses and lost productivity or do you want to give that money to your employees,” Goodnight said. “To me it’s a no-brainer--you give the money to your employees.”
Goodnight said a year ago that he intended to launch an IPO later this year. That was before tech stocks crashed on Wall Street.
An IPO is still planned for some time in the future, but even then, Goodnight says he plans to keep control of SAS.
In other words, he says, investors shouldn’t expect the early stock price to skyrocket and create opportunities for a quick killing.
“If we go public, John and I will still own the majority of the company and be the largest stockholders,” Goodnight said. “I would simply tell people please don’t buy unless you plan to hold it.”
