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TABLE OF CONTENTS
Analysis ....................................................................................................................................... 4
SWOT Analysis................................................................................................................ 4
Strengths ............................................................................................................ 6
Unparalleled Depth in Analytic Capabilities ............................................. 6
Wide Range of Vertical and Horizontal Analytic Applications ................... 7
Ability to Enter Noncompetitive Sales Situations With Analytics ............... 8
Company Structure Allows Long-Term Perspective ................................. 9
Pricing Model Reduces Barrier to Adoption and Fosters Predictable
Revenue Stream ..................................................................................... 9
Wide and Passionate User Base ........................................................... 10
Deep Penetration in Accounts With High Switch-Out Costs ................... 10
SAS Culture Attracts and Retains Employees ....................................... 11
Weaknesses ..................................................................................................... 11
Weight of Own Portfolio Stifles Net-New Innovation .............................. 11
Core BI Product Is a Follower, Not a Leader ......................................... 12
Unproven Alliances and Partnerships.................................................... 13
Underperforming Midmarket Strategy.................................................... 13
Need to Address a Reputation of Being "Expensive" ............................. 13
Must Overcome a Reputation of Being "Difficult to Use" ........................ 14
Opportunities..................................................................................................... 14
In-Database Analytics as a Way Into New Accounts.............................. 14
Explore Acquisitions and Deeper Partnerships ...................................... 15
Widen On-Demand and Managed Analytic Offering .............................. 16
Software Partnerships........................................................................... 17
Service Partnerships ............................................................................. 17
Give Away Portions of the BI Platform ................................................... 18
Upcoming Governance, Risk and Regulatory Activities ......................... 18
Threats.............................................................................................................. 19
Stronger Competition Will Threaten SAS's Dominance .......................... 19
IBM .......................................................................................... 19
Other Megavendors .................................................................. 19
Other Independent Software Vendors ....................................... 19
SAS Knockoffs ......................................................................... 19
Small Proportion of Sales Into Net-New Accounts Threatens Long-Term
Revenue Regeneration ......................................................................... 20
Unclear Succession Plan ...................................................................... 20
Possibility of Acquisition of SAS ............................................................ 20
R Programming Language Cuts Into Base SAS Dominance .................. 21
Analytics Embedded Into Applications ................................................... 21
Outsourced Analytics ............................................................................ 22
Becoming Known Only as a Specialist in an Era of Consolidation.......... 22
Implication for SAS Institute ........................................................................................... 22
Company Overview........................................................................................................ 23
Methodology .................................................................................................................. 24
Recommended Reading ............................................................................................................. 25
LIST OF FIGURES
SWOT Analysis
In the business intelligence (BI) domain, most vendors have focused their efforts on more-
traditional use cases, such as reporting, online analytical processing (OLAP) and dashboarding.
While concentrating on those mainstream capabilities has worked well for BI vendors in the past,
many BI projects globally are getting to higher maturity levels, gradually working their way up the
BI value chain and moving away from only measurement and monitoring into ever-more
sophisticated analytics. SAS has dominated that high end of the market, drawing from a statistical
heritage, which should put the company in good stead for the future. But at the same time, more
competitive pressures than ever are threatening to displace SAS.
This document provides a detailed analysis of the strengths, weaknesses, opportunities and
threats that SAS is facing in the context of the BI arena, including analytics. Hence, it makes no
attempt to analyze the company as a whole and all the markets in which it participates (such as
CRM, data integration, data quality and data warehousing). However, while the spotlight is on
business intelligence, a wider scope is often needed (for example, ownership structure and
pricing) to understand strategic direction.
Figure 1 provides an overview of SAS's strength, weakness, opportunity and threat (SWOT)
characteristics, and Figure 2 provides a graphical representation of these in relation to one
another. To create Figure 2, we analyzed the strengths and weaknesses that are internal to the
vendor and the opportunities and threats that are external to the vendor. For each category, we
defined a number of characteristics based on parameters such as company or market, product or
services, finance, and operations. Each characteristic is examined in terms of the potential impact
on the vendor's position in the market if this factor is acted on or ignored in the next 12 months.
These impacts are then rated as high, medium or low to determine a final numbered rating for
each quadrant in the graphic.
Strengths
Unparalleled Depth in Analytic Capabilities
Unlike many other BI platform vendors that focus on historical data, SAS focuses on advanced
analytical techniques, such as data mining and predictive modeling. As far as mind share and
capabilities are concerned, SAS is the "800-pound gorilla" in the analytics space, with
workbenches enabling companies to analyze customers (for marketing, retention and risk
assessments), products (for product development, quality control and support) and corporate
activities, such as identifying key performance indicators and forecasts for performance
management activities like demand forecasting. No competitor can yet match SAS's ecosystem
of skills and availability around those products.
Here is a short description of key products SAS has in analytics:
SAS Enterprise Miner — A workbench enabling data mining and predictive modeling. It
is a flagship product for SAS.
Base SAS — SAS-developed programming language that has been the "lingua franca"
for statistics.
JMP — In-memory analytic offering with strong visualization capabilities that could be
positioned for a broader class of business analysts than the traditional SAS user, while
being an integrated SAS client.
SAS/ETS — Econometric, time series and forecasting techniques that enable modeling,
forecasting and simulation of business processes.
SAS Model Manager — For creating, managing, monitoring and deploying analytical
models.
SAS/QC — Tools for improving products, optimizing processes and increasing levels of
customer satisfaction.
SAS Text Analytics — Analyzing large quantities of text and interpreting, mining and
structuring information to reveal patterns, generate metadata, and identify sentiments
and relationships among documents.
In 2009, when many competitors downsized to meet the challenging market conditions,
SAS chose to keep all its talent, with no layoffs.
Where some competitors hesitate, SAS invests in large data center farms, an
investment spanning over many years, building up its cloud and grid strategy, which
may reap rewards longer term.
SAS releases newer incarnations of its BI and analytic software when the company feels
it's ready and not when the market or competitive pressures mandate them.
SAS has established a direct presence in international and emerging markets more
aggressively and broadly than any of its peers of best of breeds dared to do. Today,
63% of sales are represented by international sales, outside of North America. That
global scale can be matched only by the software giants today, and it provides a natural
hedge against economic woes in the U.S. and Europe.
As with most things, there is a flip side to being a privately held company. Most notably, it raises
questions on how reactive and nimble a company is to changes in its external environment. So
far, this has not been an issue, but if SAS chooses to not absorb ongoing market impacts quickly
enough, it runs the risk of becoming insular and unable to react when it really needs to. The
ownership structure raises questions on how top heavy the management process is, and whether
it encourages dynamic creative thinking and new ideas often enough.
Weaknesses
Weight of Own Portfolio Stifles Net-New Innovation
SAS reinvests a staggering 23% of top-line revenue into R&D — higher than most (if not all) of its
peers in the industry. SAS has nearly 3,000 people, mostly at its sprawling campus in Cary, North
Carolina, working on R&D. Over many decades, the company has developed a wide portfolio of
products and applications, as described earlier. On their own, these facts highlight some of the
company's greatest strengths. However, the sheer magnitude of maintaining that existing portfolio
and supporting large numbers of customers takes up huge amounts of capital — both human and
financial — and prompts the concern as to how much is left for net-new innovation.
The company's strong engineering culture influences its merger and acquisition activities. While
SAS has acquired software in the past five years, it has been more cautious than some
competitors. SAS has taken one side of the great software debate of the 21st century, believing
that keeping the foundational code consistent and rearchitecting vertical acquisitions on that
foundation is the way forward over an acquisitive model. The downside of this is that its "not
invented here" aversion has limited the company from pursuing inorganic growth. Another reason
for being restrictive can also be that some companies that SAS could acquire as best-of-breed
solutions in hot markets are looking for a big IPO payout that SAS, as a private company, may
not match. This relegates opportunity to vendors that are not going to make it to an IPO and that
need an exit strategy.
Current examples of SAS's net-new focus areas of innovation include social-media monitoring
and high-performance computing. While these initiatives are exciting opportunities, it's somewhat
underwhelming for a company with so much R&D resources at its disposal. For example, there
are no stated plans for collaborative decision making, while other competitors are aggressively
pursuing it. The company would do well to optimize product update cycles so that more resources
can be allocated to net-new, business-expanding innovation. In addition, "opening up the wallet"
for acquisitions could fast-track the vendor into being a more credible alternative to the stack
vendors in a time of consolidation.
Opportunities
In-Database Analytics as a Way Into New Accounts
There are benefits in being able to mine directly in the database. A practical example in the
financial sector is risk and stress-testing simulations that are becoming much-more granular —
sometimes by customers. Calculations like that can now be done without moving data out of the
database. The opportunity should be biggest in data-intensive vertical sectors, such as retail,
financial services and telecommunications.
SAS announced a partnership with Teradata in 2008 with the aim of SAS data management and
analytic functions integrating better in Teradata environments. Most traction has been in joint
Teradata and SAS accounts. SAS claims that it has led to large deals that the company would not
have been able to close had it not been for the in-database initiative.
While the Teradata partnership gets refined, the intent is for the initiative to be extended to other
data warehouse vendors and products, such as Oracle Exadata, HP, Netezza (now part of IBM),
IBM DB2, Greenplum (now EMC) and Aster Data. Work with Netezza and IBM DB2 is complete,
and Aster Data is still in process. Further opportunity could exist in extending the initiative to
columnar database vendors, such as Sybase (now part of SAP) and Vertica. Gartner has learned
that the only data warehouse vendors not involved in a partnership dialogue with SAS are
Microsoft SQL Server and IBM Informix.
SAS sees this as a major pillar to strengthen in the next few years. While in-database analytics
have the potential to grow into a commercial success for SAS, the main benefit is in how it helps
the company in positioning. It shows that SAS wants to be a serious augmentation to the four
main software stacks (Microsoft, IBM, SAP and Oracle), acquiring customers looking for best-of-
breed rather than stack-centric analytics. From a sales and go-to-market perspective, SAS is
expecting this to be a door opener into large IT-centric enterprise deals were it wasn't present
before.
Unfortunately for SAS, while this initiative has expanded, it has been disrupted by a massive
wave of market changes, mergers, acquisitions and consolidation currently hitting the data
warehouse and appliance market, which raises some concerns. How much will HP continue to
strategically support Neoview after the departure of CEO Mark Hurd? Now that IBM has acquired
SPSS, will Netezza close the partnership with SAS and replace it with SPSS? Will SAP (Sybase)
and EMC (Greenplum) change the strategic direction of their data warehouse appliances as the
acquisitions are digested? What happens if Teradata is acquired? These are all realistic
scenarios that SAS needs contingency plans for.
Easier-to-use tools — To address the issue of usability, SAS would need a way to reach
wider constituencies that have shunned or not had the opportunity to work with SAS
previously. Currently, light-footprint data discovery tools ("analytics light") with in-
memory functionality are spreading throughout business units, reaching new users or
old users disillusioned with the canned reports that IT provides them. Vendors playing in
this space are QlikTech, Tableau, Tibco Spotfire, Targit, LogiXML and a number of
SaaS vendors. In addition, many large vendors are addressing the data discovery space
to win the battle for the desktop, with Microsoft PowerPivot, Cognos Express, SAP
Business Analytic Engine and other organic initiatives under development. SAS has
JMP for high-end rapid prototyping and visualization, but it is not filling the perceived
usability gap. A lower-end data discovery tool could fill some real or perceived
shortcomings of SAS in one swoop. A new front end wouldn't undermine a tightly
integrated SAS analytic stack underneath. If the gaps outlined in Table 1 were filled, it
would open up possibilities in a new constituency of users that could be upsold to other
SAS tools.
Business rule/business process management system — IBM now owns SPSS and Ilog,
so it can combine predictive analytics with business rules. Potentially, SAS might need
to reach parity in this area.
Analytic business process outsourcer (BPO), in India or elsewhere — There are several
up-and-coming firms, especially in India, prepared to partially or wholly take over the
analytic process (see "Dataquest Insight: BI Platform Vendors Should Add Analytics
BPO Vendors to Their Overall Channel Strategy"). It is emerging as another alternative
that could fill the gap between what advanced analytics can do and the lack of skills
(e.g., statisticians, modelers, mathematicians) available inside organizations. A small but
growing number of enterprises in the U.S., Europe and emerging markets are
outsourcing analytics to offshore vendors. Many of these analytic BPOs work with SAS
tools today. Acquiring one of these, or at least setting up strong formal alliances, would
allow reach into less-resource-intensive companies — SMBs and others — looking to
solve analytic problems, especially in emerging markets.
Mobile BI — With the rapidly increasing mobility of the workforce, mobile BI is a new, or
rather renewed, focus area for BI vendors. While there are very few customer
deployments today, new form factor devices (such as the Apple iPad and Samsung
Galaxy Tab) and the wide variety of smartphones could change this scenario very
rapidly. SAS should consider how to leapfrog into becoming a leader in mobile analytics.
Software Partnerships
While SAS has started the process of linking up with software firms on the infrastructure front,
primarily with database management system vendors, it should also consider aggressive
partnerships on the software application front — specifically, with providers with strong presence
in key industries. By componentizing its analytic engines into other vendors' products, SAS could
open up a whole new OEM channel. Two-thirds of business applications sold globally are still
non-SAP or non-Oracle, and linking up with more-niche application vendors is one opportunity.
However, SAS should also look at partnering closer with the "megavendors." Increasing
megavendor dominance both from a supply perspective (through mergers, acquisitions and
organic growth) and a demand perspective (through standardization projects and "strategic
sourcing") is a reality today that SAS must deal with. Hence, deeper partnerships with the
application giants should be considered, and the opportunity is now. Both SAP and Oracle lack
SAS's depth in analytics, and after IBM's acquisition of SPSS, SAP and Oracle industry
applications could make interesting hosts. The large vendors are increasingly trying to power
analytics in the context of the application. Incumbent on them is the opportunity to realize what
they are missing in content and context. For predictive workbenches, SAP had an OEM with
KXEN and then SPSS (resold as SAP BusinessObjects Predictive Workbench). SAP might one
day look for another partner, given that SPSS has been acquired by IBM (having said that, SAP
recently recommitted its partnership with SPSS). SAS could also help fill gaps in Oracle's analytic
and performance management stories.
If SAS would link up much more closely with megavendors, some nervousness about IBM as a
competitor would be quelled. However, this has to be carefully balanced so that the current
revenue streams of the stand-alone analytic applications, as well as the ensuing upselling
opportunities of underlying infrastructure, are not too cannibalized.
Service Partnerships
SAS was never known for showing a great deal of interest in maintaining alliances with system
integrators and other professional services organizations. Competitive pressures have changed
that. The model of having a team of statisticians in-house that are thrown complex data
structures, who then come up with insights, is complemented by an emerging opportunity for
managed services. SAS is in a prime position for creating formal partnerships with service
delivery organizations that consider analytics an important growth market.
The most prominent relationship SAS has today is with Accenture. The two companies have
formed a "virtual joint venture" into which SAS is investing tens of millions of dollars in the next
few years. It is still too early to recognize any significant momentum, but the marketing machine is
already in full swing. If this alliance goes well, SAS should start growing its system integrator
network.
So far, the other stack vendors have focused on refining their value proposals in the BI platform
and performance management domains. An increasing push from the demand (IT) and supply
(megavendors) side to standardize on one or a few suppliers in BI puts SAS under further
pressure in BI-platform-selling scenarios.
IBM's efforts in analytics have not yet been matched by the other stack vendors. Microsoft has
added rudimentary data mining functionality in SQL Server and even into Excel. This may be
good enough for many organizations in the midmarket, for people who don't understand what
SAS does or who believe SAS would be overkill for their requirements. SAP is working on real-
time in-memory analytics, where predictive modeling can eventually be a very powerful add-on
should SAP choose to pursue that. SAP is also continuing its OEM agreement with IBM-SPSS as
the BusinessObjects Predictive Workbench. Oracle, meanwhile, has a data mining option
embedded in its database.
Other Independent Software Vendors
Tibco is starting to build an increasingly powerful story, following its acquisition of Insightful.
MicroStrategy is also building more of a data mining story. Information Builders has embedded R
into its platform. R-based analytics can easily be embedded by many independent vendors,
providing a potentially flatter playing field for advanced analytics going forward.
While the number of these types of competitors might be multiplying, the good news for SAS is
that there are currently few analytics vendors left to acquire for major vendors that would want to
dent SAS's proposition: KXEN, Angoss, StatSoft and Fuzzy Logix are a few of the smaller
independent vendors.
SAS Knockoffs
While there never was a serious threat involving the proprietary SAS language, a small U.K.
company named World Programming System (WPS) was an ongoing irritant to SAS by providing
Businesses seeking to reduce the cost of analysis by skipping the need to buy BI
infrastructure and invest in training
Businesses seeking to focus on their core business and facing the constant need to
evaluate whether they are deploying their capital correctly
This threat is small today, but if enterprises start evaluating analytic outsourcers en masse, SAS
will have a considerable challenge because the playing field will become broader, and clients will
often either demand lower prices or fees based on outcome. SAS should explore ways of working
with analytic outsourcers.
Optimize the development life cycle of its existing and upcoming product sets to allow a
larger portion out of every invested dollar in R&D to go into net-new investment to
maximize innovation.
Use its strong cash position to accelerate acquisitions, with the objective of addressing
perceived weak spots, broadening the scope of value it can offer to customers, and
avoiding being boxed into a corner as a specialist when consolidation is happening both
on the supply and demand side.
Take advantage of being the leader in analytics when many service providers are
ramping up their analytic initiatives.
Use its unique position of being able to work toward leadership in areas that are small
but emerging and disruptive longer term — such as being the comprehensive provider of
domain-specific analytics on demand and high-performance computing algorithms.
Company Overview
SAS Institute was founded in 1976 in Cary, North Carolina, where the company still maintains its
headquarters on a massive and sprawling campus. Two of the original founders, Dr. Jim
Goodnight and John Sall, are still active in running the company. Since its inception, SAS has
had more than 30 years of uninterrupted growth. Revenue in 2009 reached $2.3 billion, making it
the biggest privately held software company in the world. Gartner's revenue breakdown estimates
are shown in Figure 5. The bar to the right shows how SAS's BI revenue, subject to scrutiny in
this note, break down.
Table 3 shows SAS market share in the different BI segments that Gartner tracks. SAS is the
third biggest vendor in BI platforms, after SAP and IBM. In analytic applications, SAS is the
market share leader, at 28%. In CPM suites, an area not covered in this note, SAS is fifth behind
Oracle, SAP, IBM and Infor.
Gartner estimates that close to 90% of SAS BI software revenue comes from companies with
more than 1,000 employees, which is a significantly higher proportion than its peers in the
industry.
The biggest vertical sector for SAS is financial services; Gartner estimates that more than 40% of
SAS BI revenue comes from this sector. SAS is a market share leader in that space. The
company also sells a relatively large proportion to the government sector, compared with the
industry average.
Methodology
The vendor analyzed in this SWOT was selected because it is a huge vendor in the BI space.
With $1.3 billion in BI revenue, SAS is the only vendor that can challenge the megavendors (SAP,
Oracle, Microsoft, IBM) for sheer size and breadth of offerings.
RECOMMENDED READING
Some documents may not be available as part of your current Gartner subscription.
"Market Share Analysis: Business Intelligence, Analytics and Performance Management
Software, Worldwide, 2009"
"Competitive Landscape: How Worldwide Business Intelligence Vendors Position to Win"
"Critical Capabilities for Business Intelligence Reporting"
"BI Platforms User Survey, 2010: Customers Rate their BI Platform Functionality"
"Dataquest Insight: BI Platform Vendors Should Add Analytics BPO Vendors to Their Overall
Channel Strategy"
"Gartner's Business Intelligence, Analytics and Performance Management Framework"
"Future Acquisitions in the Business Intelligence Market: A Hypothesis"
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