SAS Review

By Michael Burns published in the CAmagazine October 2006

In the global market for corporate performance management and business intelligence software, SAS Institute Inc. is unquestionably a leader. With 10,000 employees, 4.5 million users and 40,000 customer sites in 110 countries, the company earned revenue of US$1.74 billion last year. Based in Cary, North Carolina, it has offices throughout the world, including Toronto. It also has the distinction of being the world's largest privately held software company.

In the past, SAS competed with companies like Hyperion and Cognos. Today, it also shares the market with some ERP vendors that are bundling CPM components with their systems. So why would anyone want to use multiple products if they could just use one integrated ERP solution?

Answer: historically, ERP systems have been excellent at transacting data but miserable at transforming it into the knowledge needed for CPM. This has led to the proliferation of Excel as the most widely used tool for decision-making. Excel is highly flexible but error prone, lacks an audit trail for changes, leads to multiple versions of the same information (multiple versions of the truth) and is not up to date. Organizations – especially the larger ones -- had no choice but to turn to CPM vendors. Also, many of the larger organizations have multiple ERP systems and find it more economical to use one CPM system to draw data from all of them.

CPM systems typically offer more CPM functionality than ERP systems do. On the surface, an ERP dashboard might look almost identical to the SAS. But below the surface, SAS offers powerful integration and extraction, transformation and loading. ETL tools are crucial for taking information from one or more databases, transforming it by cleaning out inconsistencies and optimizing it for later analysis, then loading it quickly for use by CPM. For companies with terabytes of data (1 terabyte = 1024 gigabytes or 1 billion or 10004 or 1012 bytes), it’s essential to have ETL tools.

SAS differentiates itself especially when it comes to predictive analytics. This is used to determine the probable outcome of an event, such as future sales of a new product. SAS uses multiple methods to forecast demand for products. These methods can be summarized as 1) time series techniques designed to identify forecast trends and seasonal patterns in data, 2) regression or correlation analysis, which considers external factors (independent variables) and their impact on the forecast (dependent variables) and 3) qualitative overrides based on the judgment, knowledge and business acumen of experienced people.

In the past, companies that had tons of data to analyse would employ many statisticians to make the predictions. Now, SAS can do the statisticians’ work. The SAS forecasting system will apply about 50 different methods from its time series and regression models and apply them to recent historical results. The system will pick the method that gives the best statistical result and apply it to the future. Then business people can use the forecast but override the results if they are aware of some factor that would affect the future.

SAS also differentiates itself when it comes to activity-based management, which provides profitability by customer or product (or service). It’s not usually hard to get revenue by customer or product, but it’s much more difficult to get costs. In some systems, costs are tracked at a customer class or product type level to simplify the analysis. SAS can track costs at the lowest level of detail. For example, it will track activity for a bank at the customer/account level each time a customer uses an ATM machine or at the stock keeping unit (SKU) level each time a product is touched in a warehouse that uses scanning technology to pick, pack and ship. With SAS you would define rules by deciding which cost will be assigned to transactions. The cost would then be attached to specific customers or products, providing a profitability view at the individual customer or product level.

SAS has about 100 different solutions, but they have all been developed in-house and leverage the same technology. The CPM product’s strengths include Excel user interface (but data storage on a server), real-time consolidation and role-based portals (access to information over the Internet). The company’s products are used worldwide with about 3% of the market attributed to Canada. Although SAS is used across a wide variety of industries, including manufacturing, life sciences, retail and telecom, its largest customer base is in financial services, with about 40% of the market. SAS typically targets organizations with revenue greater than $300M.

SAS is not well known among CFOs in Canada, but that’s likely to change as the company begins to market its products and services more actively to finance executives across the land.

CPM AND BI IN A NUTSHELL

Corporate performance management describes all of the processes, methodologies, metrics and systems needed to measure and manage the performance of an organization. It typically includes strategic planning, scorecarding, budgeting and forecasting, business intelligence and consolidation.

Business intelligence is turning data into information useful to make decisions. Products include a flexible report writer and a dashboard with key performance indicators or online analytical processing that allows you to view information from multiple dimensions and drill down for more detail.