By JASON CHOW
When Jim Goodnight founded SAS Institute Inc. in 1976, the business analytics industry was in its infancy and terms like globalization and social media had yet to be invented.
Today, the Cary, N.C.-based firm has more than 11,000 employees and operates in 100 countries on projects that range from assessing risk for banks to catching tax cheats for governments to planning routes for airlines. As Mr. Goodnight describes it, SAS "uses companies' historical data to work out their futures."
Mr. Goodnight is the majority owner of the privately owned SAS—the company reported revenue of $2.31 billion in 2009, of which 11% came from Asia. This year, he forecasts the company to grow revenues 5% globally, and highlights Asia as the fastest-growing region—he expects revenue in the region to increase 30% from 2009.
Though SAS is smaller than its rivals SAP AG, Oracle Corp. and International Business Machines Corp., it has never endured a loss in its 34 years of operation.
Mr. Goodnight talked to Jason Chow in Hong Kong about the risks to growth and the potential in Asia. The following interview has been edited.
WSJ: Where is growth in Asia coming from?
Mr. Goodnight: We do a lot of work in risk management for banks. We make sure their risk computations are up-to-date and [help them] with their anti-money laundering.
We see a lot of growth from the pharmaceutical sector. SAS has a tool to analyze clinical trials and effectiveness of a particular drug. We're seeing more pharmaceutical drug trials move to Asia, especially in India.
Essentially, anybody who's got data. And lots of it. But of course, there are things like social-media analysis that don't require your data. We can tell you what people think of you or your brand without any data from you. We can search out every blog, every tweet that's been done about you for the last 30 days or whatever time frame, and we can tell you how people are thinking of your brand. We call it sentiment analysis. We're having a hard time keeping up with customer demand on that product.
WSJ: What are the current challenges to your business?
Mr. Goodnight: I think they're all internal. We're producing so many new products. [They're all] in the funnel and we've got to get them in production and it's taking us longer to get them out the door…. A lot of the problems are testing issues. It's taking too long to solve all the problems. Every piece of software has its bugs. And with more and more products, we're struggling with compatibility to make sure the next release is easy to migrate to for certain customers. With the sheer number of software solutions we have, it's making it harder and harder to develop and test them all.
WSJ: Are you concerned about companies copying your software, especially here in Asia where the copyright laws aren't as strong as in the West?
Mr. Goodnight: In Asia, there is no copyright, or at least not in China. But my concern is more about all the new stuff we're developing. If someone wants to reproduce our software and compete on price, they don't realize that we can also compete on price. There's nothing to say we can't reduce our prices. In our base software, we've got hundreds of competitors in that space already. But I've told people in my company that I'm not terribly concerned about it because these people aren't going to reproduce our anti-money-laundering software, our risk-management software, or credit scoring or credit-card fraud detection. It's just one of 200 products.
WSJ: You're a privately held company. Would you ever go public?
Mr. Goodnight: Certainly not. It's great to have the freedom when you're not public. When you're public, you're expected to just lay people off and try to make the bottom line look a bit better. I don't believe in laying people off. At the start of 2009, we made if very clear there would be no layoffs. We definitely saw a precipitous fall at the end of 2008. People just quit buying software and at the beginning of 2009, we didn't know if that trend was going to continue. We carefully said, 'Let's try not to hire anybody, let's not have any layoffs, not have any salary increases,' and I told people to try to keep expenses down. In 2009, we ended up with 2% growth in revenue and higher profits than ever before.
If you put faith in people that you're going to protect their jobs, not throw them to the wolves and that they're not going to lose their house, I think it pays off a tremendous amount in productivity.
WSJ: After 35 years as CEO, you've outlasted most executives in your field. What does the word 'management' mean to you?
Mr. Goodnight: I believe management must trust the people who work for them. You have to treat people like they make a difference. And if you do, they will.
We're a company of knowledge workers. Everything we produce comes from our heads—not our sweat or our hands—and certainly, I'm one of those people, and I know how I want to be treated. We have great benefits. We're very egalitarian. The guy who cuts our grass has the same health and retirement benefits that I do. We get a lot of corporate visitors who come see how we do things. LG Electronics came over recently from Korea, and we've seen many others. I think all corporations would be better off if they had the culture we have.
WSJ: What's the best decision you've made as a manager?
Mr. Goodnight: Back in the mid-80s, we rewrote our source code, which gave us what we call our multivendor architecture. It was a huge investment to rewrite everything. But after, our systems could now be portable through all computers. It gave us tremendous flexibility as we migrated off mainframes to minicomputers. We could use the same software on all machines.
WSJ: And the worst decision?
Mr. Goodnight: I bought an airline once. [In 1997, Mr. Goodnight and SAS co-founder John Saul bought a majority portion of now-defunct Midway Airlines.] Bad decision. We had a little airline that everyone was trying to get rid of in Raleigh, N.C., and I bought it because I wanted us to maintain the hub in Raleigh. There's no money it. Don't ever buy an airline. Waste of time.
Write to Jason Chow at Jason.Chow@wsj.com
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