SAS Institute: There Is No For Sale Sign In Our Yard

Forrester Research predicts that growing interest in predictive analytics will spur a new wave of consolidation in the business intelligence software market. So I asked the king of predictive analytics, SAS Institute, if the company is up for sale. Here's the answer: "We don't have a sign in the front yard by any means."That answer, to my question posed in a phone call today, comes by the way of Jim Davis, who is senior VP and part of SAS CEO Jim Goodnight's inner circle. That answer is pretty easy to interpret: You love your home; you've put a lot of customization and work into making it your dream house. If a potential buyer walks up and offers market value, you give a wry smile, politely say "No thanks," and turn back to watering your flowers. But if the offer is a phenomenal, almost-unheard-of deal-the potential buyer recognizes what a beautiful castle you've built, despite what those damn appraisers might think-you put the hose down and at least listen for a few minutes.

Indeed, at this point, SAS seems content to keep watering its flowers. "We aren't looking into [an acquisition]," Davis said. "I can honestly say, there are no talks underway at this point. We're in very good shape, we're profitable, and have a very large cash balance."

It's a fair question to ask, since SAS is the clear leader of predictive (also called advanced) analytics with one-third of the $1.52 billion market in 2008, according to IDC, while SPSS, in the process of being acquired by IBM for $1.2 billion, was a distance second, with 14%. It gets really diversified after that; Microsoft was No. 3 with less than 2% of the market, because of the advanced capabilities in SQL Server.

In an Aug. 18 report , Forrester predicted a new wave of consolidation in the BI market, following the IBM/SPSS deal, as more software vendors look to beef up their predictive analytics capabilities.

Forrester predicts that in the coming year, vendors will look to partner or acquire companies specializing in predictive/advanced analytics, including Accelrys Software, Angoss, FICO, KXEN, and Portrait Software. SAP, in particular, is likely to make a predictive analytics acquisition, the research firm says.

But Davis, also the company's chief marketing officer, argues that just showing up on a customer's doorstep with both BI tools (query and reporting, dashboards) and advanced analytics isn't enough. "People are not interested in buying technology as much as they are in buying a solution," he said.

Yes, you might expect a marketing guy to say that. But he does have a point. SAS Institute (which only got one third of its $2.26 billion in revenue last year from analytics; most was of it was from data integration software) approaches the market almost entirely from a vertical industry view. "There is no 'advanced analytics package.' We sell fraud detection and credit risk to banks, price optimization to retail, and churn analysis to telco," Davis said.

In fact, those are all strong-selling products right now, he said, and should be for some time. Retailers were very concerned about achieving the best price points last holiday season, and "my guess is they're not incredibly optimistic about this Christmas season," Davis said.

Still, even though SAS will report revenue growth this year, it likely won't be as strong as last year's 5.1%, Davis said, while adding that Goodnight will stick by his promise to employees last January: There will be no layoffs at SAS in 2009.

It's those kinds of promises that a privately held company can make. In a privately held company, the employees, not the shareholders, are your family. And my guess is even if Goodnight & Co. does get a fantastic offer, they're going to look very closely not just at the offer price, but the kind of family that plans to move in.