SAS Institute banks on SMB

Mumbai

August 7th, 2007

Phillip Beniac and Miles Mahoney explain that having rolled out
the channel program in the US, the company is planning to take it to 13 other
countries, including India.

SAS Institute has finally realized that to ensure rapid growth it has to take
its solutions through the channel, especially if it needs to make inroads into
the fast-growing SMB market. Phillip Beniac and Miles Mahoney explain that
having rolled out the channel program in the US, the company has learnt some
lessons and incorporated several changes in the program to take it to 13 other
countries, including India

What is your core customer clientele?

PB: We have around 5,500 customers in
APAC alone. We have been in operation from the US for 25 years and are present
in the APAC region for the past 15 years. The US contributes 40 percent to our
overall revenues; EMEA brings in another 44 percent and APAC 11 percent. This
makes APAC our third largest market. We hope this number to go up to 15 percent.

SAS has traditionally being working with enterprise customers. Why is it
now looking at the SMB segment?

PB: What we have noticed is a dramatic
increase in demand from the mid-sizes or SMB companies.

Our strategy for the last five years has been to target only the corporate
houses. But we are seeing the market open up. So far we got our market share of
25 percent of the global business by going purely to the corporate. Now, if we
want to increase our marketshare, we have to look beyond the enterprise to the
next set of BI application, which is the SMB clientele. Currently, the SMC
constitutes 35 percent of the overall business intelligence (BI) applications
market.

SAS has decided to operate through the channel. What made you take this
decision after almost 25 years of going direct?

MM: We realized if we want to cater to
the SMB customers, the best way of going to market is through the channel. This
is why we launched our reseller program in the US in 2006. Since then we have
been building support and infrastructure to manage the channel across other
countries as well.

Why did you not launch a global channel program rather than introducing it
in the US first?

MM: Since the channel was a new
business area for us, we wanted to go about it gradually. We have 86 resellers
under the channel program and they are instrumental in bringing in 250
customers. Now, we are looking at recruiting more partners to our channel
network. In the first phase, we will take our reseller program to 13 countries
outside the US, including India.

What USP are you offering the channel?

MM: Earlier, a solution provider would
have to go to two to three vendors for various application components to cater
to the BI need of a customer. Now they can get everything from us, which eases
their business operations.

We have also created nine new application bundles that partners can select to
address the various BI needs of their customers. These are span data collection,
integration, analysis and reporting.

Since you are new to the channel, how will you ensure that you will meet
their needs?

MM: Our direct sales team was earlier
interacting with the customers and we have derived from their experiences, to
put in a foundation for selling

and have invested in support for the customer and the channel. This will be
extended to the channel.

What kind of customers would you like to work with through your channel in
India?

MM: Our partners can work with
companies with a valuation of up to $200 million, which falls under our
definition of the SMB market. We term companies that have a valuation of above
this figure and up to $1billion as the mid-sized organizations, and here our
direct sales will work with our partners. They will also hand the enterprise
customers of over $1 billion valuation. So the SMB clientele will be addressed
entirely through the channel.

Who decides which channel partner will handle which companies in the
mid-markets segment? Won't this give rise to channel conflicts?

MM: For this, we have come up with a
registration system. If a partner registers a customer with us, he will have the
exclusivity to handle that customer for nine months.

But why are you keeping this exclusivity for only nine months?

MM: When I say nine months, I mean
getting business from that client within nine months. We would not like to let a
client account stagnant because a partner registered it and then could not
develop the customer and bring in business.

What is the channel compensation model that you have devised, since
selling applications is a skilled business and therefore the remuneration should
be commensurate to it?

MM: We have YoY renewal model and have
a 95 percent renewal rate. Partners who get the renewals will get 25 percent of
that annual renewal coupled with some other perks which in turn are dependent on
factors like customer satisfaction ratio, number of people trained, and ability
to up sell and get more packages.

Additionally, partners get a teaming fee for getting new accounts registered
with us and this could be across any of the business segments we target directly
or indirectly.

We have also allowed for a little bit of localization of our current channel
programs for all geographies. So while 70 percent of the program will have a
global de facto outline, the remainder could be tweaked for local conditions.

What is the kind of support infrastructure you have put in place?

MM: Each place will have a local
country channel account manager to work with partners. We will also have an
online repository for them to get technical knowledge and real-time information
about SAS. We will also impart training to their team, though we will not issue
any physical certificates.

We are looking at signing up around seven partners in India by the end of 2007.
While signing up partners we will look at their ability to sell BI applications,
the geographies they operate in and their domain knowledge.

What is the biggest challenge for SAS as it embarks on indirect business?

MM: Our biggest challenge is getting
our message across to the right partners and getting our name out front to
customers. Also, making the channel a part of our corporate DNA will also take
time, since for a quarter century we were talking to customers directly.