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For the first time, SAS is actively seeking other companies to sell its software. To capitalize on the growing demand for business intelligence tools, the Cary company is beginning to build a network of outside vendors to sell some of its products to small and midsize businesses. SAS' internal sales staff has generated virtually all of the privately held software company's revenue since its founding in 1976, said Jim Davis, chief marketing officer. But the market is growing so quickly that the company can't keep up with demand, he said. Business intelligence software allows companies to bring together huge amounts of data, analyze it, ask business questions and generate forecasts and then share the results. The market grew 11.5 percent in 2005 to $5.7 billion worldwide, according to research firm IDC. SAS hasn't needed a reseller program until now because there hasn't been the same demand for its products in the small to midsize business market, Davis said. "This is going to allow us to get into some spaces that we haven't been able to get into, just based on sheer volume of requests for the software," he said. "Is it critical to our financial success? No. Is it critical to our ability to achieve the revenue potential that's out there? Yes." The changes are part of a broader shift at SAS to streamline and adapt its business to the highly competitive market for its products. This summer, the company combined two sales and marketing organizations, eliminating up to 170 jobs and its phone-based sales division. The company will add 200 new salespeople to its nearly 500-person sales force in North and South America this year, but SAS simply can't build a direct sales force big enough to fully capture the available market, Davis said. "It's not cost-effective. It's not cost-effective for any company," he said. So SAS is going with resellers, a quicker way to build the needed sales force, Davis said. Even so, he anticipates the company's head count will continue to grow at its typical 3 percent to 5 percent annual rate. Small and midsize businesses, "the next battleground" for business intelligence software, are an expensive challenge for companies to penetrate with direct sales efforts, said Karen Haus, an analyst for W.R. Hambrecht & Co. She follows Business Objects, one of SAS' publicly traded competitors. Those customers need more support and resources than large businesses, but have less money to spend. Rather than sending out salespeople, SAS can rely on resellers to sell the company's products along with other pieces of software or hardware, she said. "It's a lot more cost-effective to let those partners bring your products along for the ride than to find those opportunities for yourself," she said. Meanwhile, SAS' own sales force will focus on the higher-order products that management sees as more core to the company's success, such as its analytical software for specific industries, Davis said. SAS has hired a new vice president, Miles Mahoney, to lead the reseller unit. Mahoney set up reseller programs at Business Objects, Crystal Decisions and Borland Software. He has signed up 27 partners, including Comsys, Datatel and Mainline, and SAS expects to have 50 by the end of the year. Next year, Davis expects at least 100 vendors to be selling SAS' software. SAS wants to double its 2005 revenue of $1.68 billion within a few years. The company's goal is for resellers to drive 15 percent to 20 percent of its revenue from new sales in three years. The vendors initially will sell six SAS products to small and midsize businesses in North and South America. In the United States, that means businesses with revenue of $1 billion or less. SAS ultimately intends to introduce the program globally, Davis said. SAS' resellers will receive 30 percent to 40 percent of the revenue from their sales of SAS products, plus 25 percent of SAS' renewal income from those clients if they meet certain goals. The renewal "annuity stream" is unusual in these types of agreements, he said. SAS generates 70 to 80 percent of its revenue from renewals, so it's important for the resellers to provide the level of service that makes customers want to stick with the software. The resellers' SAS portfolios will include two software products each for integrating, analyzing and reporting data. The six products offer some new features for SAS software, including the ability to purchase the company's BI Server software on a per-user basis. Previously, the company licensed the software based on the size of the customer's servers. The feature makes the product available for small companies that may not have been able to afford it under the previous pricing structure, Davis said.
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