SAS Institute Inc. History

Company History:

Privately held SAS Institute Inc. is one of the largest independent software companies in the world. Installed in 27,000 businesses, universities, and government agencies worldwide, the SAS System--the Institute's flagship product--is a modular, integrated, and hardware-independent suite of software products for enterprise-wise information delivery that provides organizations with tools to access, manage, analyze, and present their data within an applications development environment.

Headquartered in Cary, North Carolina near the Research Triangle Park, the Institute maintains regional offices in Austin, TX, Irvine, CA, Washington DC, New York, NY, Seattle, WA, Kansas City, KS, Atlanta, GA, Orlando, FL, Denver, CO, Pittsburgh, PA, and Cincinnati, OH, as well as established offices, subsidiaries, and distributors in about 60 countries around the world.

SAS Institute was founded and incorporated in 1976 by North Carolina State University professor, Dr. James Goodnight and John Sall. The two academics had developed a statistical analysis software package for their own research use that had become popular with faculty at NC State and a number of other universities throughout the South. "Eventually, our fledgling operation grew too big to run out of our offices at State, and they invited us to leave," Goodnight told Business Leader magazine. "So, we moved across Hillsborough Street, and that's how it all started."

Over the next 18 years, Goodnight's and Sall's single software package grew into a modular information delivery system used by 98 percent of the Fortune 100 companies. In 1994, the company could boast over 3 million users in 120 countries, 12 U.S. regional offices, subsidiaries in 29 nations, and distributors in 20 others, and over 3,000 employees worldwide. In 1993, the company recorded sales revenues of $420.3 million, which marked a 15 percent increase over the year before. The figure also established the company's 17th consecutive year of double-digit growth in revenue.

These figures represent financial success that any company would envy. Most members of the SAS "family" attribute the Institute's success to a single philosophy: listen carefully to your customers and give them exactly what they want. "Here at SAS, we do software development by users for users," vice president of North American Sales and Marketing Barrett R. Joyner told Business Leader. "While we certainly need to be profitable in order to stay in business, our primary focus isn't making money; it's solving problems. We want to provide our users--business people, researchers, scientists--with advanced technology that will enable them to access, manage, analyze, and present their data effectively so that they can make sound business decisions."

This approach is obvious in the company's flagship software product, the SAS System for Information Delivery, which can be used in almost every computing environment, from the lap-top computer to the data center. The system is an integrated suite of software products that provides users with a wide range of capabilities that they can set up in whatever combination they require. At the heart of the SAS System is a single software package called "Base SAS," which provides data management, analysis, and report writing. The rest of the system comprises more than 20 modular software packages that link with the base software. These packages enable users to add specialized functions, such as spreadsheets, graphics, quality improvement, project management, cooperative processing, applications development, and more, depending on the needs of their company.

Another component behind SAS's financial success is its commitment to research and development investments. In 1993, SAS Institute heralded its eighth consecutive year of leading the software industry in the percentage of revenue devoted to research and development. That year, the company reinvested a record-setting $143 million, or 34 percent of revenue, to improving its array of products. On average, the top 100 revenue-generating software companies reinvest less than 20 percent of revenue in R&D. SAS Institute's management team said that its commitment ensured that the company would continually provide its customers with software that exploits the latest technology. To support its massive R&D effort, the Institute built a five-story research and development building with a virtual data center in each of its 1,100 offices.

SAS Institute's researchers have some unconventional methods for problem-solving. With roots based in Goodnight's and Sall's former campus offices, most of the researchers at the Institute take a "technological garage" approach to their work. Their style is similar to two entrepreneurs in their garage who start out with a crazy idea and end up with a product that earns millions of dollars. The Institute's management team encourages its developers to follow up on all promising ideas, even if they seem to have no immediate practical applications. The company conducts usability studies to determine the value of each piece of research. Many such projects--which may have never been initiated in other companies&mdash-d up becoming real money-earners for SAS Institute. The Institute's leadership firmly believes that this type of strategy encourages developers to start projects even though they may not lead to end products and fosters the creativity and freedom that can lead to tremendous product innovation.

SAS Institute's marketing group also has its own distinct business philosophy. Rarely does the group resort to such marketing standbys as market penetration studies or competitive analysis. Instead, the company's marketing team prefers to rely on the SAS customers themselves via users groups. Since SAS Institute's inception, the direction of its research and development has been largely driven by Institute customers, who are encouraged to express their opinions about the company's software products and services through formal and informal channels. To keep up with changing demands, SAS sponsors a network of more than 200 local, regional, national, international, in-house, and special-interest users groups. In 1993, the Institute experimented with the most extensive usability test ever performed on software. Preparing for major enhancements to the menu-driven interface to the SAS System--SAS/ASSIST software--marketing, training, and software development staff teamed up to conduct a three-phased study. They invited computer users of various experience levels to put the new version of SAS/ASSIST software through its paces and provide feedback. The company's annual SASware Ballot, a survey distributed to all SAS users, also provides a way for users to provide feedback to the Institute's management and influence development efforts, from general issues to specific enhancements.

In addition, SAS Institute holds frequent users group conferences to provide a forum for Institute developers to meet directly with SAS System users. This free-flowing exchange of ideas leads to software enhancements and new services that address the real computing issues that organizations face. For example, in 1992, SAS introduced a series of Information Delivery Strategy conferences for information systems executives. These conferences gave the participants the chance to see the software operating in simulated vertical market settings and to voice their opinions to members of the Institute's marketing and development staffs.

As Joyner told Business Leader: "We're not a marketing-driven company. Throughout the eighties, when a lot of other software companies were mesmerized by market share, we focused on talking face-to-face with users and meeting their needs. The competition saw us as a bunch of naive yokels who just fell off the turnip truck. In the last couple of years, though, many of our competitors have realized the value of being customer-driven." The ultimate measurement of the company's responsiveness is that the overwhelming majority of SAS software sites renew their annual software licenses year after year. According to the company's 1993 annual report, 95 percent of Fortune 500 companies that licensed SAS software that year elected to renew their licenses.

SAS Institute also makes a concerted effort to develop close relationships with other firms in the field. The company believes that this strategy helps them to bring cutting-edge products to market rapidly. SAS Institute, for example, was one of the early participants in Microsoft Windows' NT development and one of the first vendors to work with Digital Equipment Corporation on their ALPHA AXP project for RISC-based processors. In 1991, SAS struck a formal business partnership with Intel, one of the world's leading computer chip manufacturers. The agreement allows for technology exchanges between the Institute and Intel and ensures that the two companies will forge a strong alliance between future generations of SAS software and Intel chips. In 1993, SAS Institute completed the development of an internal compiler that exploits the ground-breaking "Pentium" processor.

The business relationship with Microsoft Corporation was sealed in 1989 to give SAS access to Microsoft's operating system development information. The result of this deal was the delivery of releases of the SAS System for Windows and Windows NT in 1993. The relationship between the two companies became even stronger when SAS representatives sat on Microsoft's Independent Software Vendor Advisory Council. In addition to these two major agreements, SAS also has close working relationships with database companies, including Oracle, Sybase, Informix, and Ingres to ensure that its customers have easy access to the data they need regardless of the manufacturer.

SAS Institute also stands firmly by its commitment to quality. Although "quality assurance" became one of the buzzwords of the early 1990s, SAS Institute had a long-standing reputation for producing software products that were reliable and high quality. "Quality is part of the culture here," Lynne Fountain, manager of public affairs, told Business Leader. "Everyone who works here is really proud to be a part of SAS, and it shows in everything we do--from the quality of our products to the attractiveness of our campus and the gourmet food in our cafeteria."

SAS Institute also differentiates itself by its sales strategy. Its sales employees do not earn commission because the company wants them to concentrate on finding the best way to solve a customer's problem. Instead of "selling" its products the way its customers do, SAS licenses the base SAS software and modules on an annual basis. Prices vary according to the platform the customer decides to use. At the end of the licensing period, a customer can add or drop components to accommodate changing business requirements or decline to renew at all.

From the time it was founded in 1976, SAS Institute has displayed a commitment to its work force, as well as to its customers. Like most high-technology firms of the late 20th century, SAS Institute understands that its continued success lies in its ability to attract and retain high-quality, intelligent, competent employees. As a result, the Institute makes sure that its workers enjoy bright, airy, well-equipped office buildings and can use an on-site recreation and fitness center along with an on-site health care center. The Institute also offers its employees two on-site Montessori child care centers and the "Generation to Generation" program, which helps employees cope with the needs of aging relatives. In recent years, these types of employee amenities helped SAS to earn a place on the list of "100 Best Companies for Working Mothers," by Working Mother magazine for seven consecutive years. Most important, however, they help SAS Institute to maintain an average annual turnover rate of a mere three percent. The national industry average is 22 percent.

SAS Institute's business strategy for the future is to continue to exploit a variety of new technologies to meet its customers' needs. A good example of this is SAS Executive Information Systems (EIS). This software package was introduced in 1992 on an experimental basis as part of a SAS System upgrade. This new module makes highly complex data very "user friendly." With it, developers can make corporate data very accessible to even the most computer-illiterate executives among the customer base. According to Goodnight, who serves not only as president, but also as director of research and development, "SAS/EIS is one of the most important products in our history. It provides our customers with the tools to deliver information to anyone in their organization quickly and efficiently, allowing them to make better, more informed business decisions."

SAS/EIS software and other new SAS products incorporate cutting-edge technologies and applications, such as object-oriented programming technology, which allows objects built for one application to be reused in others. This technology dramatically increases the efficiency and productivity of software development. SAS is also breaking new research ground in such areas as imaging, geographic information systems, and online user documentation. The company is also hard at work developing several new products for niche markets. In 1992, for example, SAS introduced its first vertical market product for the pharmaceutical and biotechnology industries.

Principal Subsidiaries: SAS Consulting Services, Inc.

Further Reading:

• Romani, Jane Hairston, "SAS Institute: 21st Century Technology ... Today," Business Leader, December 1993.
• SAS Institute, Inc., SAS Communications, First Quarter 1994.

Source: International Directory of Company Histories, Vol. 10. St. James Press, 1995.

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