Partnerships, Contracts Serve to Raise SAS' Federal Profile

Partnerships, Contracts Serve to Raise SAS' Federal Profile

James Goodnight

By Richard McCaffery

Staff Writer

SAS Institute Inc. officials want to team with several systems integrators in the services area to bolster the software firm's position in the government market.

The Cary, N.C., company is negotiating with several integrators and expects to have two signed up as services partners as early as December, said Jeff Babcock, regional director of national sales.

Those partners will be used to help train government customers and implement SAS' data mining and data warehousing software, company officials said.

"We're going to need to have folks we can subcontract work out to," said Babcock, who declined to name the companies with which SAS officials are talking.

SAS has a team of 100 software consultants in its Rockville, Md., office performing a mix of government and commercial work, but that group could soon be stretched thin.

"Right now, we're right at the edge of outstripping our consultant resources," Babcock said.

The company is in this enviable position thanks to two contract wins this month: an $18 million contract award from the Defense Information Systems Agency and a $4 million deal from the Department of Agriculture.

Government work, including efforts for state and local governments, comprised 15 percent of the company's $750 million in sales last year, according to an SAS official. Fourteen federal departments and 70 percent of the independent agencies use SAS software, company officials said.

Founded in 1976, SAS makes a wide range of data analysis products primarily for commercial customers. This includes data warehousing and data mining software that uses statistical models to help businesses make predictions and answer questions.

"They're a high-end, well-managed firm that thinks long term," said Thomas Hewitt, chief executive officer of Federal Sources Inc., McLean, Va. "Its business is dominated by commercial [work], but their products are needed by government."

Sales to the federal government have more than doubled since 1995, when SAS formed its government unit and started selling its products through integrators. Sixty percent of the company's sales to the government go through the sales channel, Babcock said.

Projected revenues for its federal government division this year are $36 million, up from $15 million three years ago. More importantly, Babcock said, nearly half of this year's projected revenues are new orders, up from $2.8 million in 1995.

Statistics give companies a competitive edge in the emerging global economy. The worldwide data warehousing market sprinted from $857 million in 1995 to $1.5 billion last year, according to Dataquest Inc., an IT market research firm in San Jose, Calif. The data mining market has grown from $10.7 million to $44 million over the same two-year period.

As a result, the field is getting more and more competitive. SAS competes with companies like SPSS Inc., Chicago; IBM Corp., Armonk, N.Y.; Oracle Corp., Redwood Shores, Calif.; and Micro-Strategy Inc., Vienna, Va. Microsoft Corp., Redmond, Wash., also wants in on the action.

But SAS has an established lead. In 1997, the company had a 20.8 percent share of the worldwide statistical and data mining software market, according to International Data Corp., Framingham, Mass. SPSS came in second with a 17.3 percent share.

James Goodnight, SAS' co-founder, president and chief executive officer, shrugged off the increasing competition.

"We've been competing for a long time," said Goodnight, whose first computer job was programming an IBM mainframe at the Imperial Tobacco Co., Durham, N.C.

"We keep improving the products," he said. "That's been the secret of our success for years." The firm managed to pump 32 percent of its total revenues back into research and development last year, Goodnight said.

Another major push for SAS is its performance management product. The company is teaming with PricewaterhouseCoopers LLP, New York, to sell software aimed at helping government agencies meet requirements associated with the Government Performance Results Act of 1993. The legislation requires agencies to demonstrate they are accomplishing objectives and spending money efficiently, Babcock said.

In April, the U.S. Customs Service purchased a suite of software and services worth up to $200,000 to help officials measure agency performance, Babcock said.

The Air Force award is SAS' biggest federal contract of the year, an $18 million, five-year deal to help the Defense Information Systems Agency consolidate information stored on mainframe computers at its 12 defense megacenters throughout the United States. The agency is using SAS' data warehousing software and data analysis tools.

"It's a real nice growth contract," Babcock said. "What it does for us is increase revenue on the Defense side from $7 million to $18 million over a five-year period."

SAS received its recent Agriculture Department business through a partnership with Federal Data Corp., a Bethesda, Md., systems integrator. Under the $4 million, four-year deal, SAS is providing data warehousing and data mining software for Agriculture's data center in Kansas City, Mo.

SAS also has three-year, $1.1 million contract at the Veterans Affairs Automation Center, Austin, Texas, to make information on its mainframe computer accessible via a Web-based network. Work started in March. Federal Data Corp. is the prime contractor.

SAS redesigned its federal strategy in 1995 when it had just $12 million in annual government sales. "There was no real effort or focus to understand the government's needs," Babcock said. At the time, SAS' government work was split among 11 divisions spread throughout the United States.

Babcock consolidated the company's government teams and assigned them to headquarters in Rockville and Denver. SAS trained its systems engineers to tailor demonstrations to the federal government, and stopped requiring government customers to renew software licenses annually.

Most importantly, Babcock said, SAS teamed with Federal Data Corp. and Logicon Inc., Torrance, Calif., to sell its equipment and services to the government.

"SAS needed an easier way to get their product to market," said Patrick Krause, director of partner services, Federal Data Corp. SAS products have been sold on FDC's General Services Administration schedule since 1996.

Krause said FDC was especially interested in the company's services related to procurement reform. "We need partners that have that product set," he said. "It's federally mandated."

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