Interview with Dr Jim Goodnight, CEO and founder of SAS   28th August 2006 Jim Goodnight is a veteran of the software industry having built SAS Institute, “SAS” from its humble beginnings thirty years ago into one of the world's foremost business intelligence and analytics businesses. With a turnover of around $1.7 billion, SAS is the world's largest privately owned software house. Its unbroken record of profitable expansion is a remarkable achievement yet it still ploughs more money into research and development than almost any other software houses and has an outstanding record for customer retention. Much of its growth has been fuelled by the relentless increase in data volumes that companies have to manage, but Goodnight sees no sign of that growth abating. He told FSN, “Data volumes are doubling every 18 months and mangers are beginning to realise that data is a strategic asset. We provide the analytics and the predictive tools that give them the understanding of that data and allow them to forecast trends and customer preferences.” Goodnight acknowledges that much of the growth in data is down to regulatory demands on listed companies and highly regulated industries – ironically something that SAS as a private company does not have to bear. Reflecting on this fortunate position Goodnight told FSN, “No customer likes compliance. It represents a pure cost and comes straight off the bottom line. Huge amounts have been spent on anti-money laundering, Sarbanes Oxley and Basel 2 with new requirements coming on line all the time, all of which cost money. As a private company we have benefited from the upsurge in compliance and become more involved in supplying solutions but I have to say that as a capitalist the more restrictions that are put in place the more difficult it is to do business in the country of regulation.” “Just look at the pharmaceutical industry. Many large pharmaceutical companies have given up on research and development in Europe because of the weight of regulation and moved these functions to the United States and India . It's a form of compliance migration, just as we had tax migration and wages migration before it,” he says. The compliance burden also explains why so many companies are taking themselves private and one of the reasons that Goodnight has never been tempted to take SAS through an IPO. “I definitely wouldn't list SAS in the United States . I think that quarterly reporting is ridiculous. Businesses move so very quickly that it is impractical to prepare a forecast every 3 months. It also focuses management on managing short term stock price movements and attending quarterly analysts meetings rather than concentrating on customers. Too many senior executives are concerned with stockholders. We let our customers be our ‘stockholders', after all it is they who ultimately pay our salaries. So we listen to them and look after their needs. It's been a winning formula and ‘concentrating on the knitting' also underpins SAS' attitude to acquisitions. Whilst the rest of the industry has been plotting or executing acquisitions at a frenzied pace, SAS has been largely self sufficient, preferring to build its expertise and solutions from within the organisation. “We've got so many projects to work on that we are far too busy to think about acquisitions. It takes all of our energy just to develop new products and get our sales force to recognise and sell over 200 existing products.” As an illustration of the challenging business problems being solved by SAS, Goodnight explains the exciting developments in vertical market solutions such as the latest fraud detection system written for HSBC in London . “It is five to six times faster than existing solutions and involves over 260,000 lines of code just to decide whether or not to accept a credit card charge. We are also working on the massive issues faced by retail chains that daily have to decide the prices of more than 100,000 products for sale.” So Goodnight expects to continue to concentrate on customer solutions, whilst the competition is focussing on acquisitions. “There is still more consolidation to come, especially in the Business Intelligence segment of the market. I think that Larry Ellison has said Oracle could buy Business Objects and there are rumours that IBM will buy Cognos,” he says. “If that happens there won't be much competition left.” But he is not complacent about growth and since the mid-nineties SAS has been transitioning from the IT tools on which it built its reputation into the solutions business, with a rash of developments around strategic planning, group reporting, activity based costing and financial management. “You can only take tools, such as ETL and data warehouses so far and so we moved into the solutions market to expand. Now we're finding the biggest competition we face with the new solutions are in-house developed applications using SAS tools,” says Goodnight wryly. With the latest developments in environmental and corporate social responsibility reporting there is no shortage of growth potential in SAS' native markets. But the organisation is also making its own contribution to the environment and communities. For example, its new headquarters in Toronto opened in April 2006, is Toronto 's first LEED (Leadership in Energy and Environmental Design) registered commercial building.  LEED recognizes construction projects that demonstrate the utmost commitment to environmental sustainability and energy efficiency. SAS also makes significant contributions to local communities where it works, around the world. After thirty years of solid business achievement Goodnight has few regrets and, unlike his contemporaries, has no plans to take more of a backseat. “My only regret is that I did not put all of my spare cash into Microsoft shares when they floated,” he says. On the other hand he seems to have done handsomely by backing his own skills and judgement. Related FSN articles: SAS Activity-Based Management – FSN product Review SAS Financial Management (FM) – FSN Product Review SAS in the Finance Function
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