IBM vs. SAS: The clash over Data Analysis Software (Nov 30, 2009) — In the middle of sharp competition to trade data analysis software, personally held SAS Institute says it will fend off pressure from rivals IBM, SAP, and Oracle

Jim Goodnight, chief executive of SAS Institute, doesn’t chop up any of his words. During a Nov. 10 talk at the Churchill Club, a meeting of Silicon Valley business people, the head of the directly held software maker disparaged Wall Street analysts, questioned the worth of marketing staff, and told a joke concerning Bill Clinton and the Pope that a few people of belief might have found unpleasant.

Goodnight is likewise frank about his competitors in the $9 billion market for data analysis software. In the past two years, IBM (IBM), SAP (SAP), and Oracle (ORCL) have bought companies that contend with SAS in providing software that can forecast trends, recognize lucrative customers, decrease danger, or cut off costs. Goodnight views the mergers as an opportunity to create hay. “We constantly look for any company that’s acquired to be messed up for a year,” Goodnight says in an interview.

Goodnight and the rest of SAS will require maintaining backing up the valiant talk with results. The company has detained up well throughout a slump that crimped rivals’ development. At SAS, sales this year will be unaffected from 2008, when they stood at $2.26 billion, according to Goodnight. Profit may decline by 4%. By contrast, income at German software giant SAP is anticipated to decline by 8% this year, and for Oracle, the large U.S. business-software company, sales slipped 1% for the 12 months ended Aug. 31.

SAS specializes in software that assists companies take out insights from increasing volumes of data. That’s striking because it is growing even as demand for new kinds of software, for example applications that modernize business processes, has declined.

SAS’s development comes partially because it can charge premium prices for its software, which lets statisticians, forecast future scenarios based on historical data. Versions of SAS products customized for particular industries can begin at $1 million to run a unit of a company, with annual subscription fees of 20% to 30% of the initial cost.

Sales of data analysis software improved 22%, to $8.8 billion, in 2008, according to Gartner. SAS had about 15% of the market, the same as Oracle’s share. SAP held a 24% share of the market and IBM 11%.

SAS products are intensely entrenched in the companies that make use of them. The software employs its individual programming language and the statisticians and actuaries who use it are trained on the system and very familiar with it. That makes it harder for customers to change providers.

IBM is at the front position of companies hoping to attract SAS clients that are possibly looking for an option. About a quarter of SAS’s income comes from copies of its software installed on IBM mainframe computers. That gives Big Blue an occasion to exchange customers to its products. “They’re betting they can poach a lot of SAS’s business off the mainframe,” Hostmann says of IBM.

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