"They only cover a small part of the domain." Oracle and SAP have also branched into the analytics market to add revenue growth. "We want to position SAS as a niche play in statistics and data mining," says Rob Ashe, a general manager at IBM. Oracle and SAP have been buying, tooIBM's sales force is trying to persuade would-be customers that Big Blue can outperform SAS in providing the hardware, software, and consulting services they need to incorporate data analysis into their operations. IBM paid $1.2 billion at a hefty premium for SAS competitor SPSS in a deal announced July 28.In April, IBM formed a group of 4,000 "business analytics" consultants, which the company expects to yield $2 billion in services revenues next year.IBM paid $4.9 billion for business intelligence software maker Cognos in 2007. Over the past five years, IBM has spent $12 billion to acquire 13 companies in data analysis and to beef up its own research and development in that arena. "They're betting they can poach a lot of SAS's business off the mainframe," Hostmann says of IBM. That gives Big Blue an opportunity to convert customers to its products. About a quarter of SAS's revenue comes from copies of its software installed on IBM mainframe computers. IBM is at the forefront of companies hoping to lure SAS clients that may be looking for an alternative. That makes it harder for customers to switch providers. The software employs its own programming language and the statisticians and actuaries who use it are trained on the system and highly familiar with it. SAS products are deeply embedded in the companies that use them. SAP held a 24% share of the market and IBM 11%. SAS had about 15% of the market, the same as Oracle's share. Sales of data analysis software increased 22%, to $8.8 billion, in 2008, according to Gartner. "That makes the product somewhat pricey," compared with other vendors', says Bill Hostmann, an analyst at market research company Gartner (IT). Versions of SAS products tailored for specific industries can start at $1 million to run a unit of a company, with annual subscription fees of 20% to 30% of the initial cost. SAS products are deeply embeddedSAS's growth comes partly because it can charge premium prices for its software, which lets statisticians predict future scenarios based on historical data. That's attractive because it is expanding even as demand for other kinds of software, such as applications that streamline business processes, has declined. SAS specializes in software that helps companies extract insights from growing volumes of data. business-software company, sales slipped 1% for the 12 months ended Aug. By contrast, revenue at German software giant SAP is expected to decline by 8% this year, and for Oracle, the large U.S. At SAS, sales this year will be unchanged from 2008, when they stood at $2.26 billion, according to Goodnight. The company has held up well during a recession that crimped rivals' growth. Goodnight and the rest of SAS will need to keep backing up the bold talk with results. "We always look for any company that's acquired to be messed up for a year," Goodnight says in an interview. Goodnight views the mergers as a chance to make hay.
In the past two years, IBM (IBM), SAP (SAP), and Oracle (ORCL) have bought companies that compete with SAS in providing software that can predict trends, identify profitable customers, reduce risk, or shave costs.
Goodnight is equally blunt about his competitors in the $9 billion market for data analysis software. 10 talk at the Churchill Club, a gathering of Silicon Valley business people, the head of the closely held software maker disparaged Wall Street analysts, questioned the value of marketing staff, and told a joke involving Bill Clinton and the Pope that some people of faith might have found offensive. Jim Goodnight, chief executive of SAS Institute, doesn't mince words.
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