End of an era: SAS Institute to go public

SAS Institute CEO James H. Goodnight discusses 
his business style with Murray Conron.

Murray Conron
The Ottawa Citizen 
Monday 17 July 2000

James H. Goodnight is president, CEO, and co-founder of SAS Institute, the largest privately held software company in the world. 

In 1976, Mr. Goodnight formed SAS Institute to develop data analysis software. Today, SAS addresses the management information needs in virtually all industries worldwide, and is the market leader in integrated data warehousing. 

After 25 years as a privately held company, Mr. Goodnight will take his company public by the end of next year. In addition to raising capital and increasing brand recognition, an IPO will enable SAS to acquire other businesses more easily, and launch a stock option plan that will allow it to compete more effectively for engineering talent. 

At age 57, Mr. Goodnight remains closely involved in the day-to-day development activities at the Institute. Over the years, he has tended to shy away from publicity centered on himself, believing that actions speak louder than words. The Citizen interviewed him at the 25th Annual SAS User Group International convention. 

MC: How would you describe your management style? 

JG: Above all else, I'm not really a marketing person, but more of an R&D person. I'm not the outgoing personality you might usually interview, more of an introverted programmer. 

MC: I might believe you more if we hadn't seen you singing "There's no business like e-business" on stage last night! 

Designing a new software module, or adding a new feature to an existing module, is a decision involving many people in the corporation. What sort of thinking do you go through before you say, "That's the right path for us?" 

JG: One of my favorite things is to start a new project. Five years ago, we started our business solutions group with six people in an empty building, and within the year I had 50 people working on our CFO Vision project and our very successful multi-dimensional database, a spinoff from the CFO product. 

One of our recent developments is in Supplier Relationship Management. After talking to Dun & Bradstreet and seeing some of their applications, I went to business solutions and said, "This procurement is very compelling. We're going for this." Once I'm committed to a project, they've got the support they need. If they see a fork in the development road, they come back to me for advice. 

When it's time for something new, I pass the current project materials over and let somebody else worry about it. Data mining was like that. I stayed on the project for about a year, then when I saw that team built up, I moved on. More recently I started work on an In Memory database, which gives us tremendous speed when processing Web site transactions, and it's now incorporated into many of our Internet products. 

MC: When you say you are working on a project, you actually write code? 

JG: That's true, and I really enjoy it. It's a form of recreation. 

The business solutions group would say that I bring a spark to the projects I start. I'll start a project if I can see a new business line and can provide some insight. 

Right now, I've just brought some of our teams together for a new purpose. We have a virtual team that's part of our e-business. I call it our "e-team," made up of 150 strong developers. One day I said to them, "Here's some products I want you to work on." As a result, we can now build and maintain Web sites very, very quickly. We are working with our Fortune 500 customers to create the next level of Web interactivity and user-friendliness. 

MC: The so-called Balanced Scorecard concept provides the means for large organizations to monitor their strategic information like financial management, IT performance, process quality, and the achievement of business goals. When you apply this to SAS Institute, is there ever a "wow" factor between where you are now and where you had planned to be? 

JG: It seems that for any initiative, we always wish we had arrived there a year sooner. Our Enterprise Miner is very timely, though, up and running as one of our most successful products, using frame intelligence on the Web site. The dot-com companies are just scooping it up. 

Before we start, we visualize what we want to do, and that's the gap we set out to fill. In data warehousing, we recognized this tremendous asset we had and provided a formal framework for it. We saw that as well in our data mining and e-commerce. We've developed a go-get-it attitude and share our resources. That's why at meetings it's not unusual to see three or four divisions blend together for the common goal to start something new. 

MC: The Institute has maintained its lead by pouring typically 25-30 per cent of its revenues back into R&D. What pressures or factors determine where your development dollars go? 

JG: Our product development is 80-per-cent customer driven. We pay attention to all the feedback we get from our users, our regional offices, the support knowledge base, the SASware Ballots, and the executive conferences. We get very close to our customers this way. As for the remaining 20 per cent, we look ahead at market trends spanning the next two years. 

MC: The e-intelligence panel discussion this morning touched upon the issue of privacy. Do you appreciate the concern of a visitor to a Web site, whether for a pharmaceutical product or some other personal article, not to be tracked and followed about. Such a visitor might resent later solicitations for subscriptions or other intrusive queries. 

JG: Press people bring this issue up a lot. The data that a particular company collects during your site visit regarding your requests and preferences are very valuable pieces of information that help the company serve you better and more quickly. 

If the company is smart, they will not want to sell or give this information to somebody else, since they have gone to the trouble of collecting and analysing it. 

From the corporate view, that kind of knowledge of consumers who are using your site gives you a very competitive advantage over sites that don't have this function. So, really, the data are too valuable not to protect. 

MC: If you had a chance to do the last 25 years again, what might you do differently? 

JG: Well, let's see, I'd buy some Microsoft stock, and some Cisco, and Dell, and EMC ... 

MC: Yeah, sure! But don't you think a lot of people are looking at your company and saying, "Gee, I'd like some of that action?" 

JG: That's hard to say. We've had a lot of discussions with Goldman Sachs and Merrill Lynch. Our problem is, we have a bad history of double-digit growth. You can project our growth over the next couple of years and see exactly where we are. There is no promise of any huge surge in profits for this company. All we can do is guarantee continuous 16 per cent a year, but that's not what people buy. What people buy now is something wild, like a lottery ticket. 

MC: Say in the next five to 10 years, what advice will you give your successor? 

JG: I'll want my successor to maintain and further build the atmosphere surrounding SAS development that leads to creativity and productivity for the knowledge workers. These are the priorities that have put us on the Fortune Best Companies to work for in the last three years. 

The knowledge workers we have at SAS need this environment in which they are stimulated, and that makes them feel that what they do is appreciated. We need to look after them from a whole life and family standpoint. 

So, my advice is, pay attention to your employees, and listen to your customers. 
 

SAS facts:

SAS Institute earned more than $1 billion U.S. in revenues last year. More than three million people worldwide use SAS software at more than 33,000 business, government, and university sites in 115 countries. In Canada, SAS Institute offers sales and services from six regional offices, including Ottawa, Toronto, and Montreal. With headquarters in Cary, North Carolina, the Institute provides employees with on-site childcare, health care, and recreation and fitness centres. There are ample profit sharing and incentive programs. Turnover at the Institute is about four per cent, a fraction of the rate at other software companies. Mr. Goodnight's commitment to such progressive programs has earned the Institute national recognition in publications such as The Wall Street Journal, Business Week, Fortune, Business Leader, and the Harvard Business Review.