Users: SAS Future in ASP Arena Uncertain

Say CRM app integration key to success


SAS Institute Inc. threw its hat into the crowded ring of application service providers (ASP) last week, announcing customer relationship management (CRM) software and services aimed at midmarket retailers that might otherwise find its high-end analytics applications too pricey or complex to manage.

But whether the rent-an-application approach can give SAS serious traction - and serious revenue - in the turbulent market for CRM software is an open question, said several users here at SeUGI 19, the SAS European Users' Group International's annual meeting.

"I think they're sticking a toe in the water," said Shaun Coyne, chief technology officer at Stamford, Conn.-based GE Capital Real Estate, one of SAS's largest customers. But, he said, "payback needs to be there early on" for companies implementing CRM.

Teaming up with Plano, Texas-based Electronic Data Systems Corp. as the hosting site and Compaq Computer Corp. as the hardware provider, the Cary, N.C.-based company is offering SAS IntelliVisor for Retail at an initial sign-up cost of $30,000, with monthly fees of $20,000.

"In the CRM world, there's no clear leader because no one product manages across all customer channels equally well," said William Lepler, vice president of CRM at retailer The Limited Inc. in Columbus, Ohio. "If SAS can keep up the high quality of its software, they'll be successful at this. But the key differentiator will be the ease of integration, because CRM is an integration nightmare."

AMR Research Inc. in Boston recently estimated that of approximately 500 CRM vendors in the market today, about 85% will be gone by 2005. Yet CRM remains top-of-mind for many IT executives and their companies, according to a recent study from Intellor Group Inc. in Gaithersburg, Md. The analyst firm surveyed 137 companies, 88% of which were using or thinking about using CRM systems.

"The combination of SAS's tool capabilities and its core strength in drawing information from any source speaks to a position no one else owns," said Michael Boyd, director of CRM at retailer Eddie Bauer Inc. in Redmond, Wash. "The way I see it, they're trying to evolve to a point where they're charging for value vs. just charging for the product."

The ability to gather and crunch valuable data about customers from multiple channels, including the Web, catalog sales or store locations, is the force fueling Web-based CRM, Boyd said. "We're just starting to understand how to use channels more effectively," he said, noting that companies often embark on costly CRM projects without understanding the underlying goals.

But companies the size of The Limited and Eddie Bauer are unlikely customers for the ASP offering from SAS. The real targets for the Web-based CRM software are midsize retailers such as The Vermont Country Store Inc. in Manchester Center, Vt., a beta user of IntelliVisor.

"For us, the ASP model delivers things faster, and that's key in the retail space. We wanted to leverage what we're good at: merchandising," said Fred Gluck, director of e-commerce at the store, which mails out 40 million catalogs each year but views the Internet as a major new channel for reaching customers.

"We're good at keeping our back-end [systems] taking orders, but we're terrible at building data warehouses and dealing with extremely large amounts of data," Gluck explained. He said that at only 90 days into the new arrangement with SAS, his e-commerce operation was making better decisions about how to position products for faster sale on the company's Web site.

SAS officials said the IntelliVisor product was the first in a line of industry-specific software and services packages that will be rolled out during the next year, focusing mainly on telecommunications firms, financial services, retailers and pharmaceutical companies.

SAS Founder Defends Pricing, Return as CEO

Still very much in charge of the privately held software vendor he founded a quarter-century ago, SAS Institute Inc. CEO James Goodnight spoke with Computerworld's Maryfran Johnson last week at the Cary, N.C.-based company's international user group meeting in Florence. The discussion topics included Goodnight's plans to go public (no hurry), his views on pricey licensing fees (you get what you pay for) and how users should look at the Web (as just another sales channel).

Q: You've reshuffled top management in recent months and reassumed the CEO position. Have you got "founder's disease" - that inability to let someone else take charge of your company?
No, I'd fire myself before I'd let that happen. One of the reasons I left was to go to Europe and take a break. Then I learned so much in Europe about the things we needed to do to globalize the company, I came back and started implementing those. My main focus is on truly globalizing SAS as a company. There were some personality problems [with former CEO Andre Boisvert], and he's no longer there.

Q: SAS's high-end pricing is still an issue with some of your customers, who say it's reminiscent of IBM's old mainframe pricing. Do you have any plans to change the company's pricing structure?
It's hard to find customers who don't want lower prices on anything, isn't it? Our pricing model has done very well for us and given us stability over the years. . . . We have a license fee structure, not a "pay once and own it forever" deal. Customers license SAS [technology] on a yearly basis, and we use the money they're sending us to improve the product and keep it up-to-date. About 80% of our revenues come from our renewal licenses, and we're very dependent on that renewal stream. It provides a wonderful cushion, as over 98% of customers renew each year.

Q: What's the status of your plan to take SAS public?
Well, we're implementing Oracle Financials right now, and it's so full of bugs, it's going to take at least a year. We are moving in that direction, but you've got to be able to report your financials within 15 days of the end of the quarter, so we need a financial system in place. We never worried about that before. With 156 offices in 53 countries, it just takes a while. I'm in no hurry.

Q: Are you concerned at all about conflicts between your traditional direct sales force and the new application service provider model of renting software?
Our sales force loves the idea. If they can't sell the data mining software itself, then they'll sell the idea of an ASP. The thing I like about [ASP-style] solutions is that they cost a lot more. Solutions are a more solid sticker [in terms of customer retention] than the base software system is.

Q: The main focus of the announcements at this week's conference is online customer relationship management. Why concentrate now on such an economically weak area as Web commerce?
A lot of these companies [attending the conference] are brick-and-mortars with catalog operations, [but they] are also making sales on the Web. They're interested in understanding their Web traffic and customer behavior better.
A lot of times, people will browse the Web and [then] go to the store to make the purchase, so there's a lot of cross-channel movement going on. The idea of buying over the Web didn't instantly catch on like everyone thought it would, but the true survivors are the ones where the Web is just another sales channel.

Copyright © 2001 IDG Communications, Inc.

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