Billionaire Software Pioneer Jim Goodnight Paves Way for Successor

(Bloomberg) -- More than four decades after co-founding SAS Institute, Jim Goodnight is considering some changes.

The college professor-turned-entrepreneur is grooming his 54-year-old chief operating and technology officer Oliver Schabenberger to eventually take over when he retires, Goodnight said last week in an interview.

Goodnight has headed SAS -- the world’s largest closely held software company by revenue -- since its inception in 1976. Despite its low profile, the firm had revenue of $3.27 billion in 2018, thanks to analytic platforms that are used by more than 83,000 businesses, governments and universities.

The changes at the top aren’t imminent and are part of a longer-term strategy. Goodnight, 76, is still in the office every day and remains an active chief executive officer.

“I can’t retire yet,” he said. “My golf game is terrible.”

Asked if he’d ever consider selling, Goodnight said “if the right offer came along,” but later added “we are not considering a sale of the company for the foreseeable future.”

Still, that’s a more accommodating stance than a decade ago, when the company said “We don’t have a sign in the front yard by any means.”

AI Investment

Since then, the business of analyzing data has attracted plenty of deep-pocketed rivals like Alphabet Inc., Amazon.com Inc. and International Business Machines Corp. To keep pace, SAS is increasing its investment in artificial intelligence with a $1 billion push to further automate data analysis decisions. Over the past two years, the firm has been incorporating AI into its anti-money laundering tool for financial institutions.

“I have always thought in terms of two years down the road,” Goodnight said. “Two years out, I think we will have brought AI to a lot more of our solutions.”

The business Goodnight and his colleagues spun out of North Carolina State University has become one of the biggest companies in the region. Revenue has grown every year since 1976, helping make Goodnight -- who owns two-thirds of the company -- the 39th richest person in the U.S. with a $13 billion fortune, according to the Bloomberg Billionaires Index.

But monetizing that fortune could prove tricky, given the competitive landscape.

“SAS might be past its sell-by-date,” said Rita Sallam, an industry analyst at Gartner. “They were really the only game in town maybe 10 years ago before the rise of open source, before the rise of cloud. There is a much broader set of options for people looking to deploy data science and machine learning.”

Statistics Professor

Still, SAS is a company with plenty of major retail and bank clients who depend on it, she said. “It’s not going anywhere anytime soon,” she said.

Goodnight went from NCSU statistics professor to executive after he and his co-founders were invited to speak at an event for users of the statistical analysis software -- or SAS -- they’d developed to improve crop yields. When 350 people showed up, Goodnight realized they were on to something.

“We were the stars of the show,” Goodnight said. “We said we need to get out of the university. We can’t grow here -- and it was pretty clear that we could be successful.”

Things took off quickly

“We just tried to end the year making as much money as we did at the university, but by the second or third year we were doubling revenue every year,” Goodnight said.

Recruiting Locally

SAS is located just outside of Raleigh, North Carolina, which has been an advantage for the company, Goodnight said. It allows them to recruit heavily from three nearby universities: Duke, North Carolina and NCSU.

“It’s great because we don’t have to pay quite as high of salaries as Silicon Valley does,” he said, adding that the cost of living is lower in the region and it still offers competitive compensation. “We’re seeing more and more companies trying to get out of Silicon Valley. Rent for a one-bedroom is $3,000 a month and the prices have just gone out the roof.”

Schabenberger also taught college statistics before joining SAS in 2002, first at Michigan State University and then at Virginia Tech.

“I didn’t join SAS to be a manager, to be in the C-suite,” he said. “I joined to write code. I love programming and I was looking for a challenge.”

If he’s named to the top job, he should have plenty of challenges.

“They have a very large installed base of legacy software, but new growth is relatively flat," Sallam said. “One of the challenges SAS has with its installed base is their business model. It’s very complex, viewed as expensive and difficult to use -- exactly the opposite of what companies are looking for when they buy analytics software.”

Growth Opportunities

Schabenberger only sees growth opportunities, saying that SAS’s offerings will more effectively enable customers to leverage big data.

“Devices we’re using today, they’re somewhat smart, but they’re still kind of dumb,” he said. “What if we could have those devices learn. What if the car actually learns how you drive and the phone learns your voice and what if they communicate with each other and form an informal network.”

When Schabenberger does take the reins, Goodnight should have ample opportunities to work on his golf game. He’s the co-owner of Prestonwood Country Club, which has three courses.

“I just don’t know if it’ll get any better,” he said.

To contact the reporters on this story: Sophie Alexander in New York at salexander82@bloomberg.net;Tom Metcalf in London at tmetcalf7@bloomberg.net

To contact the editors responsible for this story: Pierre Paulden at ppaulden@bloomberg.net, Steven Crabill

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