Case Study

SAS Case

As the leading AI and advanced analytics platform, SAS continues to innovate relentlessly. We've aligned our company behind one common goal: to help customers realize the full potential of their AI and analytics investments. This commitment has supported the profitability, stability and growth of the company for decades. More than 83,000 organizations rely on SAS to help them make better decisions. The year 2019 represented significant transformation for SAS, driven by a transition to cloud-based technology and related pricing strategy, as well as financial accounting changes. SAS began adjusting its pricing strategy to smooth multi-year revenue pricing more evenly over contract periods, which is consistent with cloud pricing across the industry. SAS also adopted the new accounting standard for reporting revenue referred to as ASC 606 that changed the timing of when revenue is recorded. As a result, SAS revenue in 2019 was relatively flat, growing .5% in constant currency. In USD, SAS revenue was $3.1 billion, reflecting accounting and pricing changes, as well as the impact of exchange rate changes. Initiatives SAS targeted for investment performed very well. SAS experienced double-digit revenue gains in AI software and solutions for IoT, risk management and fraud and security intelligence. Cloud revenue rose as well, reflecting customers' appetite for cloud-ready solutions like SAS Customer Intelligence 360 and SAS Viya to modernize their analytics environments. In 2019, we committed to invest $1 billion in AI innovation over three years. That investment continues to pay off as customers realize the benefit of innovation, education and services to optimize ROI on AI projects. We've also expanded our channel program to give customers the full power of our partner network. In 2019, SAS partners influenced 56% of new sales, and half of our top 50 deals. Analytics remains a hot industry, and we're redoubling our efforts to remain the undisputed leader in this space. We continue to reinvest an average of 25% of revenue back into R&D - double the average of large technology companies - to create innovative products, improve customer experience and help our customers digitally transform to meet the needs of tomorrow. Everything we do at SAS is designed to help organizations transform to make better decisions. Innovation is our north star, and we constantly strive to deliver better for you.

Empower everyone, everywhere with analytics

Our technology has propelled four decades of growth for SAS in a competitive market. Today, more data and more diverse data are generated than ever before and are moving about the networks. SAS puts the right analytic technology to the right place at the right time: on premises, in a public or private cloud, at the edge. Here are technologies that we're refining as we move into the next decade.

SAS Platform.

The SAS Platform is the engine that powers our analytics technology. Open to any interface or coding language, our end-to-end platform works with all analytical tools including open source. From data to discovery to deployment, the SAS Platform handles the entire analytics life cycle, helping you operationalize analytics and get models into production faster. Cloud Analytics creates value. But to cash in, organizations must ensure resources like data, insights and analytics software are available across the enterprise. Companies want to realize efficiencies from cloud computing, lowering the costs of storage and processing. Together, these factors are making it less likely that organizations will power their analytics efforts using a fixed, on-premises infrastructure. While every organization has different needs, most still require a strategy for the cloud, and the ability to find the right combination of technologies to turn a mountain of data into useful decisions. Through a comprehensive vision for cloud solutions and deployment, SAS is aggressively evolving our technology to become cloud-native. We help organizations innovate, manage risk and create value through the SAS Cloud, which combines software, infrastructure and services that are designed and managed by SAS for optimal performance and value. And we offer cloud-deployable options that help customers run SAS in new and modern ways on almost any private, public or hybrid cloud infrastructure. SAS services are configured to address the growing interest in a "cloud first" approach to analytics, AI, data visualization and data management. Innovative deployment options now serve any business need. For example, SAS for Containers gives data science teams a flexible and efficient way to execute SAS workloads and help IT teams to be agile and take advantage of cost-efficient cloud infrastructures. And with SAS Results, a cloud-based results-as-a-service offering, customers provide the data, a specific business problem and a scope of work, and SAS delivers answers you can act on. Cloud collaborations In 2019, SAS and Red Hat announced an expansion to their existing partnership with the creation of a best-in-class hybrid cloud analytics solution, using SAS Viya on Red Hat OpenShift, the industry's most comprehensive enterprise Kubernetes platform. By offering our award-winning software and services on the SAS Cloud or third-party cloud providers like Amazon Web Services (AWS), Google or Microsoft Azure, we give organizations the ultimate flexibility to optimize the performance and value of their analytics ecosystem. SAS doing great things with public cloud providers Handling today's modern analytic workloads in the cloud is no easy task. Heavy workloads of AI, model development and model training can really slow things down. And more and more SAS customers are exploring options for running their development and production workloads. As customers make the decision to move toward cloud-native deployments, SAS continues to develop software, services and deployment patterns that use the capabilities associated with public cloud providers like Microsoft Azure, Amazon Web Services and Google. From establishment of Global Cloud Acceleration Centers to using advanced technologies to modernize SAS' risk, fraud, compliance and customer intelligence solutions, SAS and our partners help companies navigate their cloud journey more simply and with optimal efficiency. This includes:

Coordinated security and access management services of environments that are as safe as on-premises deployments.

Access to cloud-based data sources like AWS Redshift, Google Big Query, Snowflake and more.

Orchestration tools like OpenShift and other Kubernetes services to manage SAS in container-based environments.

Continuous innovation/continuous delivery pipelines to deploy new SAS functionality without major upgrade efforts. 17 An early return on SAS' $1 billion investment in AI came in the way of a 2019 release of SAS Viya 3.5. And in 2020, customers can even more easily get SAS technology in their hands with the launch of cloud-native SAS Viya 4.0, a more powerful, easy-to-access platform.

Artificial intelligence.

The stickiness of AI speaks to its usefulness. For years, we've embedded AI technologies into solutions across the SAS portfolio. During that time, we've advanced AI technologies like machine learning, computer vision, natural language processing and forecasting and optimization. As a result, our AI continues to grow, and a rapidly increasing number of customers now rely on SAS to operationalize AI for profit and human progress. AI is in our DNA. Long before it dominated headlines, AI was an integral part of SAS software. Today we build upon decades of research to embed AI technologies like machine learning, computer vision, natural language, deep learning, and forecasting and optimization in solutions across the SAS portfolio. As a result, customers in every industry can capitalize on advancements in AI. At SAS, AI is not a standalone product but a surge of intelligence to our existing products. Much like Siri was added as a feature to a new generation of Apple devices, we inject AI capabilities into our software to help organizations boost productivity and unlock new possibilities. Automation, conversational platforms, bots and smart machines can be combined with large Artificial intelligence SAS AI Center of Excellence Expert knowledge of tools, techniques and methodologies is vital to unlocking the benefits of AI. This knowledge is scarce and difficult to acquire because the need for AI talent has outpaced industry's ability to fill it. To address this problem, SAS has created the SAS Artificial Intelligence Center of Excellence (SAS AI CoE), a group of PhD-level experts in AI, machine learning, natural language processing, computer vision, optimization and simulation, who are focused exclusively on customer implementations. The group is highly tuned to customer needs and combines a business-focused mindset with deep technical expertise to address business challenges and conduct assessments to uncover innovative opportunities that have business value. Jim Goodnight CEO SAS amounts of data to improve many technologies at home and in the workplace, from security intelligence to investment analysis. For this reason, we're investing $1 billion in AI over three years through software innovation, education, expert services and more. This commitment builds on our already strong AI foundation. And we continue to underpin these offerings with data management, visualization, deployment and decision support to help customers operationalize AI and optimize customer return on their AI projects.

AIoT.

When you merge AI and IoT, you get the Artificial Intelligence of Things, or AIoT - a revolutionary combination that can transform industries, elevate customer experiences and accelerate business performance exponentially. We've engineered our AI solutions to feed on real-time data streaming from billions of IoT devices. Soon, most IoT projects will be AIoT projects, and SAS is positioned to deliver substantial business value in this area. We've found clear evidence of momentum behind this emerging combination of technologies. And it makes sense. The true value of IoT data is only realized when combined with AI and analytics. Otherwise, your IoT data just collects dust. Companies that develop AIoT capabilities report stronger results across critical organizational goals including the ability to speed up operations, introduce new digital services, improve employee productivity and decrease costs. This was confirmed last year in IDC's global AIoT study, in which 450 business leaders were asked about their use of IoT and AI technologies. The survey revealed the most significant predictor in realizing value from IoT initiatives across an organization is the heavy use of AI. A full 90% of survey respondents heavily using AI in their IoT operations reported exceeding value expectations. The research also showed organizations using IoT with AI appear to be more competitive than IoT-only enterprises by a double-digit margin across a variety of business indicators like employee productivity, innovation and operating costs. For Volvo Trucks and Mack Trucks, sensor data and AI solutions from SAS are used to predict maintenance issues and minimize unplanned downtime. Similarly, Lockheed Martin saved 1,400 hours of downtime for its biggest defence customer by applying machine learning to real-time data streaming from C-130 aircraft. And a high-tech manufacturer in Japan uses SAS to analyze streaming data from IoT devices to better forecast demand and improve customer satisfaction. Though still a nascent technology, AIoT is making a faster and greater impact than expected. And we anticipate explosive growth over the next few years as more organizations working with IoT data realize the power of AI to automate business decisions. Mix that with the rising adoption of AI technologies like machine learning and the recipe for success is clear. By embedding AI into our IoT solutions, we're leading the way in making AIoT a reality.

Do great things for humanity

SAS is continually recognized for providing an inclusive and enriching work environment that ignites employees' creativity, giving them the opportunity to change the world. As CEO Jim Goodnight says, "Treat employees like they make a difference and they will." SAS is a model for the philosophy that treating employees well makes good business sense, for SAS and its customers.

SAS has perfected the art of employee management. It has been ranked on Fortune magazine's best places to work list every year since the list was first published. Employees seem to genuinely enjoy working at SAS and are unusually attached to the company, resulting in a turnover rate that is less than 4% in an industry where 20% is the norm.

One thing SAS does well is giving its employees opportunities to work on interesting and challenging projects. The software developers have the opportunity to develop cutting-edge software to be used around the world. The company makes an effort to concentrate its business in the areas of analytics, which add the most value and help organizations best analyze disparate data for decision making, creating opportunities for SAS workers to be challenged. Plus, the company removes obstacles for employees. Equipment, policies, rules, and meetings that could impede productivity are eliminated.

In addition, the company has a reputation as a pioneer when it comes to the perks it offers employees, but these perks are not given with a mentality of "offer everything but the kitchen sink." There is careful thinking and planning behind the choice of perks the company offers. SAS conducts regular employee satisfaction surveys, and any future benefits and perks offered are planned in response to the results. The company wants to eliminate stressors and anything that dissatisfies from people's lives. To keep employees healthy and fit, there are athletic fields; a full gym; a swimming pool; and tennis, basketball, and racquetball courts on campus. Plus, the company offers free on-site health care for employees, covers dependents at their fully staffed primary medical care center, and offers unlimited sick leave. The company understands that employees have a life and encourages employees to work reasonable hours and then go home to their families. In fact, a famous motto in the company is, "If you are working for more than 8 hours, you are just adding bugs." SAS is truly one of the industry leaders in leveraging its treatment of people for continued business success.

The full 2019-2020 report is available here: https://www.sas.com/content/dam/SAS/documents/corporate-collateral/annual-report/company-overview-annual-report.pdf

SAS vision-and-mission is available here: https://www.sas.com/en_au/company-information/vision-mission.html

Questions:

1.What type of strategy (cost leadership/differentiation) does SAS take?Discuss in terms of personnel, resources and activities performed. Provide a thorough analysis to justify your answer.

2.What measures or key success factors would you consider important to evaluate the performance of SAS? Provide examples of at least three key success factors.

3.You are a consultant for SAS.Discuss the possible problems of profit planning at SAS, based on the current strategies. How could you address these problems by focusing on the interconnected strategic budgeting cycles? Provide a thorough analysis to justify your answer.

4.Suggest what is the type of corporate structure should be used in SAS? Explain why SAS should use this structure.(Hint: connect to its current strategy)

5.Where does the financial department fit within SAS's structure as you describe above?In your response, explain what type of responsibility centre SAS's financial department would be classified as? Provide two performance measures that can be used in the responsibility centre you identified.