By Steve Rowen, Managing Partner
March 9, 2010
My partner Nikki Baird and I both attended SAS’s annual analyst conference last week in Steamboat Springs, Colorado. There we were given access to the technologist’s roadmap, pipeline, and perhaps most interestingly, its customers.
CEO Jim Goodnight opened by sharing a very healthy-looking 2010 pipeline with the analysts in the small audience, delivered directly on the heels of a 2009 wrap-up that was somewhat surprising for SAS. Well-known and lauded for his employee-centric environment, Goodnight vowed to prohibit layoffs (as well as raises) at the beginning of the volatile 2009 calendar year, a move which paid off in both employee confidence (and subsequent productivity) and overall corporate output: as the books closed on the tumultuous year, SAS was able to report an “up” year.
Goodnight was followed by Jim Davis, SVP and Chief Marketing Officer, who shared details regarding several of the sources of those gains, namely solutions aimed at picking off low-hanging fruit. For example, SAS’ new social network analysis capabilities enables fraud detection – a perfect fit for banks and financial institutions (such as Los Angeles county’s welfare department, which was able to uncover $32 million in fraudulent activities by using the tool in two weeks alone), but one which, no doubt when tweaked for retail, will garner adequate interest from retailers battling organized crime rings. Davis characterized 2009 as the “year of awakening,” while 2010 promises to be the “year of establishment.” “If there was a silver lining in this economy, it was that business analytics came out shining,” said Davis.
Yet if SAS’ analyst conference reminds us of anything, it is the size and scope of the technologists’ reach. Consider this: retail accounted for 4% of SAS’ 2009 performance (by way of comparison, financial services made up 42% of its income). Yet throughout the horizontal conference, it was made very clear that retail is fast becoming a major focus point in the overall portfolio; nearly every presentation hosted a retail scenario. Also throughout, echoed in the presentations of not only Goodnight and Davis but also that of Carl Farrell, SVP Americas, was that SAS is aware of its public perception as a tools-based vendor, and is no longer interested in selling “technology”; instead, it is focused on building a reputation as a solution provider by specific industry: “Technology is a commodity, anyone can sell technology. We provide value and solve business problems – solving a business problem is something that will rise throughout the executive team, and that’s where we plan to thrive.”
It was interesting to discover that 70% of the company’s revenue is generated by existing customers, that 32% of users today choose a Software-as-a-Service (SaaS) delivery method, and that the company’s Loss Prevention solutions, which are already doing well in both European and Canadian markets, will soon receive the appropriate push here in the United States. It was also interesting to hear about the company’s partnership with Accenture, as well as how it plans to tackle more social media analysis beginning early next quarter. However, there is no value that like of hearing customers’ perspective, and the customer panel was no exception.
First up was a major retailer that uses SAS for markdown optimization in virtually every department in its stores (only fine jewelry is excluded). And in 2009, for the first time, the company’s markdown sales outstripped full price sales – significantly. An EVP for the retailer cited one of the technologist’s greatest assets as the ability to limit his own company’s payroll. “They have thousands of PhD’s working on analytics… so what we need to do is put the smarts in the system. We can then accomplish what we need to without those kind of resources.” The retailer is also currently working with SAS on assortment planning, inventory and receipt planning and forecasting, as well as a grid-based platform. As to overall impact, overall company performance exceeded that of its competition in 09, and as a result, the retailer is currently looking at ongoing opportunities from SAS’ size and pack optimization solutions. “The only reason we haven’t done it yet is because it requires massive change in our DC’s,” said the executive.
Next up was an entertainment company with a major retail presence. As it pertains to analytics, the retailer thinks about analytics in the realm of four players. They are as follows:
o Experiential players - what would past experience tell me to do?
o Deterministic players – on average, what has happened in the past?
o Probabilistic – what does history tell me about the probability of the event(s) occurring?
o Event Triggers – how does history combine with events in real-time to make optimal decisions?
Given this framework, this particular retailers relies on SAS a strategic partner in analytics campaign, viewing four separate enterprise installations. Additionally, it calls on SAS to “help offer real solutions to real problems” via customer segmentation, forecasting, and targeted advertising. As the retailer’s senior director put it, “How people look for a better value on their returns – ie: ‘I care about targeting moms’ or “I care about targeting Hispanics’.” The company is also quite pleased with the vendor’s work regarding pricing analytics and establishing long-term customer value.
And while both retailers were quick to admit that social media efforts have become a major focus for them going forward, neither was willing to share the gritty details. The first has gone from 20,000 Facebook fans in June, 2008 to nearly one million today, but when asked the classic “Now what?”, the representative was only willing to say that it has become a great opportunity for people to become a part of the retailer’s key marketing strategies. As if that didn’t that pique our interest enough, the entertainment retailer was even more guarded: “We’ve got a lot of stuff going on that we can’t talk about because we currently have a patent pending.” So perhaps the greatest lesson learned at SAS Analyst Conference 2010? At least one retailer has figured out how to monetize social media in an interesting fashion: just don’t expect them to share how.
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