SAS INSTITUTE INC. CARY, N.C. COMPUTER SOFTWARE
The headquarters of the SAS Institute (#429) feel more like a well-funded academic-research foundation than a commercial software house. "The campus," everyone calls it: 10 glass-and-brick buildings, flower-lined walkways, a small lake, all set among 100 rolling green acres.
At noon on a sunny summer day, the place is a beehive of activity. Volleyball and basketball games have already started at the new gym, and the Nautilus room is filling up, but all six racquetball and tennis courts are free. Most of the 750 headquarters staff members are at the cafe for lunch, sitting at flower-topped tables, listening to the pianist, trying to decide between the trout Veracruz and the stir-fried chicken. A few children nibble happily alongside their parents, but most of the 121 children in the company's Montessori day-care program are napping up at the preschool.
This is a company with deep roots in academe. James Goodnight, along with three other cofounders, wrote the original version of the SAS System in the late 1960s, while he was studying for his Ph.D. in mathematics at North Carolina State University, in Raleigh. The program was designed to help graduate students track agricultural data, but by 1976, Goodnight found that he had more than 100 customers for his product outside of the university. When he finally had to move his fledgling business off campus, he decided to recreate an academic environment for it.
Not that there aren't good business reasons for the campus setting. In an industry in which products become obsolete within two years and success depends on the ability to attract and retain a group of professional in great demand, the campus is a powerful recruitment and compensation tool. During the past 10 years, annual turnover has averaged a remarkable 10%.
By any standard, the investment in its campus has paid off handsomely for the SAS Institute. It has become a money machine and the largest, most profitable company of the INC. 500 five-year veterans. With its program licensed at 9,179 sites, the institute claims 81% of the statistical-analysis market for IBM mainframe users. There are now 12 additional products along with the original, generating 1985 sales of $71 million on margins that have topped 15% for most of its 10-year history. That's the money that pays for the gym, the health center, and the pianist, as well as the profit sharing, which adds 15% to everyone's salary. In addition, there are annual performance bonuses.
Tom Lawton, editor-publisher of the trade journal Computer Services Report, explains the institute's unbroken record of success this way: "They've stuck to their knitting." Unlike many software houses that have pushed to create a wide range of products for a variety of users, the SAS Institute has concentrated on one basic product. Everyone at the campus works on -- or with -- the SAS software, from the cashier at the cafe up to chief executive officer Goodnight, who still spends half of each day at the terminal. The SAS Institute is also unusual because it puts research and development ahead of marketing on its priority list: 55% of the company budget and 60% of its staff are allocated to R&D. And unlike its competitors, the institute does not try to recoup its development costs with a large initial sales fee. Instead, the product is licensed to customers after a free 30-day trial. Users pay over time -- assuming, that is, that they decide to keep the SAS System on line year after year. And most do: the renewal rate is an impressive 95%.
A licensing arrangement for its product puts lots of pressure on the institute to keep the SAS software user friendly and to keep in close touch with customer needs and requests. Besides the training programs and user conferences, which are standard in the industry, the institute allows its customers to determine, in effect, the company's R&D priorities through a formal SASware Ballot sent around each year, which asks which program enhancements and additions customers want most. In the early '80s, for example, users asked for SAS software that didn't take a mainframe to run, so the company introduced a program for minis in 1984 and one for micros in 1985. Now, customers are asking about artificial intelligence, and company programmers are experimenting on a system that will respond directly to voice commands and will require little familiarity with computers.
To CEO Goodnight, all this seems like just good common sense. Tall, bearded, with the slightly dreamy grin of a gentle man, he seems as much the self-effacing graduate student as he used to be, uncomfortable with questions about his management philosophy. "We just bumble along from year to year," he insists. "I'm just the type who likes to sit back and watch. I try to manage very little."
At the SAS Institute, a little management appears to go a long way.
5 YEARS ON THE INC. 500
E & A INDUSTRIES INC. INDIANAPOLIS CONGLOMERATE
Neither of the founders of E & A Industries (#139) quite fits the stereotype of the successful M.B.A. Rather than wearing three-piece suits, they sit in shirt-sleeves; there are holes in their shoes. Rather than carpeted corporate corridors, their funky offices feature a battered desk and overlook a parking lot at the edge of an urban ghetto.
In their day, they were among the golden boys of the Harvard Business School: Ed Klink, West Point graduate, Vietnam vet trained at both the Airborne and Ranger Schools, Baker scholar who graduated in the top 5% of his Harvard class; and Al Hubbard, who received his law degree cum laude and his business degree with distinction from Harvard on the same day. But even then, they were different from their classmates. Rather than trying to make a career in consulting, in the boardroom, or on The Street, "our only goal was to get into business for ourselves," Hubbard says.
