SAS Gets Smart

business intelligence software

It's been a year since SAS Institute launched its reseller program in the U.S. in an effort to expand sales of its BI, data analysis and data integration software to the SMB market. While the effort has had some hiccups, most notably the departure of the company's chief channel executive in July, so far the initiative appears to be on track.

"I think they've done all the right things," said Charles Burke, president of The Normandy Group, a Cincinnati-based solution provider that has worked with SAS technology for years and was one of the first VARs to join the channel program. "They have a defined commitment to the channel," he said, noting the vendor's emphasis on cooperation between its field sales force and channel partners to avoid conflict and the generous availability of training resources from SAS. "It's allowed us to ramp up very quickly," he said.

Last November, SAS enlisted Avnet Technology Solutions to be a conduit between the software vendor and Avnet's Hewlett-Packard VARs, playing matchmaker to encourage resellers to market SAS applications with HP servers and storage systems.

By the end of July, SAS had recruited 93 resellers to its channel program with expectations that number will reach 150 by year's end and 200 to 250 by the end of 2008. That may seem modest by some standards: Competitor Business Objects has enlisted as many as 1,800 channel partners in its recent push into the SMB market. "We're slow on this by design," said Jim Davis, SAS senior vice president and chief marketing officer. "We don't want to add 1,800 resellers overnight. [Resellers] have to qualify to sell our software."

Less modest is SAS' revenue goals for its nascent reseller efforts. While channel sales are just a trickle today, "We're assuming that in maybe three years we'll be seeing 15 percent of all new business [being conducted] through the channel," said CEO Jim Goodnight during an interview at SAS' campus-like headquarters in Cary, N.C.

That's quite a change for a company that until now has generated almost all of its revenue—which reached $1.9 billion in 2006—through direct sales. Goodnight acknowledges that prior to two years ago when SAS debuted query and reporting, forecasting and predictive analysis software to compete in mainstream markets against Cognos, Business Objects and others, he didn't see the need for a channel strategy. "But once we were in a competitive position at the low end, we decided we should get into that market," he said.

SAS also recognized that SMBs are a relatively untapped market for BI software. But SMB customers are looking for packaged solutions that are relatively easy to buy, implement and use. And those solutions had to be priced far below the premium SAS gets for its top-shelf products. So last year SAS inaugurated the channel program, authorizing VARs to resell a half dozen of the company's BI, analytics and data integration packages targeting small and midsize businesses. (SAS defines small and midsize companies as those with revenue less than $500 million and between $500 million and $1 billion, respectively.) Bowing to reseller wishes, the company prices VAR-sold products on a per-user basis, a change from the per-server pricing it charges for direct sales.

Next: Direct-Sales Force SAS is leaving most sales to companies with revenue of less than $500 million to resellers, although it's retaining a few named accounts for its direct-sales force. It's also letting channel partners keep 25 percent of the annual subscription fees for the software they sell. (SAS bills its customers for annual subscription fees rather than up-front license fees as most software vendors do.) And it's offering other incentives such as free technical and sales training for resellers based on the same curriculum SAS uses to train its own field engineers and professional services employees.

Some program enrollees already have a relationship with SAS. Zencos Consulting, a Durham, N.C.-based solution provider, offers a range of BI and data warehousing consulting, implementation and development work. When SAS launched the reseller program, "We were a natural fit," said CEO David Septoff, who previously worked at SAS for 12 years. "So far it's been a good investment for us." He adds that Zencos has had overtures from Business Objects and Cognos to join their reseller programs, but he's turned them down, choosing to resell SAS products exclusively.

The Normandy Group, also a longtime SAS consulting partner before the channel program was created, resells Cognos reporting, analysis and planning applications in addition to reselling SAS. Burke said his business is about evenly split between Cognos and SAS sales and said his earnings from SAS sales "are very competitive with our other alliances."

Others are new to the program. "SAS felt we were strong enough from a technical perspective, including data mining and predictive analytics, to become a reseller," said Paul Schaeffer, president and CEO of Saige Solutions, Bellevue, Wash. He has particular praise for the training opportunities, ranging from technical training to sales coaching.

It hasn't been all smooth sailing for the channel initiative, however. It's too early to say whether the late July departure of channel executive Miles Mahoney will put a crimp in the company's plans. Mahoney was instrumental in getting the reseller program up and running. But Davis insists the channel plans are in place and SAS is executing on its strategy.

The company immediately named Russ Cobb, a five-year SAS executive, as Mahoney's replacement. Before taking the reins of the channel program, Cobb was senior director of corporate and product marketing, overseeing strategic planning and go-to-market approaches for promotion, pricing and distribution.

VARs interviewed for this story said they haven't detected any disruption in the channel program resulting from Mahoney's departure. "There were no bumps in the road for us there," said Zencos' Septoff, adding that he has known Cobb for years. Normandy Group's Burke said channel programs can flounder when program managers leave because they lack support from top execs, but he said Goodnight is fully committed to the SAS initiative and that's kept the program running smoothly despite the management change.

SAS is still working to find the right combination of software products and pricing to sell through the channel. "I think we're still figuring that out," Davis admitted. In May the company unveiled nine software bundles specifically designed for the channel and lowered prices a bit after benchmarking the market. But SAS isn't dropping prices to the point of turning its products into commodities. "This isn't Crystal Reports," Davis said, referring to Business Objects' widely used reporting software.

Davis said some channel conflict is inevitable as resellers and direct-sales reps overstep their designated turfs. "The difficulty is in the line of demarcation. That line is not as hard a line as you might think," he said. But he'd rather there be an occasional conflict rather than resellers and direct-sales staff staying too far away from that line. "If there are no conflicts, then we're not doing something right," Goodnight agreed.