META Trend: During 2002, Web and customer analytics will be required to justify Internet investments. By 2003/04, Web metrics will evolve beyond benchmarks that gauge operational effectiveness to enable actionable analytic solutions. Through 2005/06, further integration with offline sources and customer-oriented business and competitive intelligence systems will provide better insight into the Web site's efficacy as a channel.

With $1.13 billion in annual sales, SAS is the largest business intelligence provider, and (like its competitors) it is pursuing packaged analytics (e.g., CRM, financial, supply chain) to grow revenue faster than mature data warehousing and business intelligence (BI) tools (e.g., query generation, report writing). Yet, with the dramatic slow down in customer relationship management spending, Global 2000 organizations have been reluctant to purchase packaged analytical CRM applications. Moreover, the plethora of solutions from vendors inside the traditional BI space (e.g., Informatica) and from operational CRM vendors has made it difficult for one vendor to establish itself as a clear analytical CRM leader.

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SAS is making inroads into the area of Web and customer analytics, and it is one of the few BI vendors to demonstrate success (notwithstanding the SPSS acquisition of NetGenesis) in the Web analytics space, which is dominated by traditional clickstream analysis vendors. We believe SAS will be successful in its Web analytics efforts, growing at a 75 percent CAGR, which is more than twice the industry average (growing from revenues of $3M in 2001 to $50M by 2006). This growth will be fueled by the verticalization of Web analytics as well as the growth of pure CRM analytics focused on customer modeling. Although few IT organizations will be able to correlate offline and online channels in 2002/03, this level of analysis will be standard by 2005/06, providing a long-term advantage to traditional BI vendors that own the data warehouse. Near term, however, BI vendors (e.g., SAS, Informatica) will have to battle traditional clickstream vendors (e.g., WebTrends, Accrue) as well as operational CRM specialists (e.g., E.piphany, digiMine, Unica) in the Web analytics market, primarily winning at the high end (i.e., greater than $200K).

More than 50 percent of SAS revenues comes from solutions for data warehousing (23 percent of sales) and BI (35 percent of sales). As a result, its strategy to grow packaged analytics solutions (e.g., CRM, Web, supplier management) will be centered on its core BI roots. This corresponds with META Group's recommendation to focus analytical CRM efforts within a data warehouse center of gravity. Global 2000 enterprises have struggled to combine online and offline data, a task that requires additional services beyond the deployment of software. SAS is one of the few clickstream vendors with the resources, expertise, and credibility to perform this task.

However, numerous vendors have OLAP cubes and report writers, and SAS's ultimate success in the Web analytics space will come from the verticalization of its predictive analytics. SAS has delivered versions of IntelliVisor tailored to the retail and pharmaceutical industries, and we believe these offerings with customized interfaces, data models, algorithms, and reports are the primary differentiator for SAS. This verticalization is synergistic with SAS's overall CRM and marketing automation efforts, which constitute 5 percent of the company's overall sales (mainly from the acquisition of Intrinsic). For example, the data mining algorithms are delivered "out of the box" to model and predict marketing campaign success for specific pharmaceutical customer segments (e.g., doctors, pharmacists, patients).

Starting at $10K-$15K per month for basic page view and session information, however, IntelliVisor is priced too high for most Global 2000 companies, especially those that have low traffic sites and are just trying to get a basic handle on Web site usage (e.g., from page views to anonymous path analysis). Most customers purchasing SAS products will opt for its high-end solution, priced at $20K-$30K per month and delivering advanced data mining algorithms. Although SAS is the market leader for advanced analytics, it has difficulty presenting tangible differentiation compared to other predictive data mining solutions (e.g., E.piphany, Unica). This problem is amplified by the willingness of many SAS competitors to deliver predictive data mining solutions for free. For example, IBM's Intelligent Miner and NCR's TeraMiner are frequently bundled with larger product offerings.

As a Web analytics service provider, SAS has traditionally relied on log files, but it recently added Web page "beaconing" technology, which enables users to eradicate log-file parsing from the process by using JavaScript page tags to collect data. Although the debate over log files versus beacons continues, we believe beacons ultimately provide a better solution (e.g., locally cached pages not appearing in log files would be tracked). Moreover, SAS lacks modules for collecting Web data from dynamic content management and application engines (e.g., BroadVision, Vignette, ATG). The company does plan to release these offerings (e.g., actually be able to report on Vignette CURLs) within the next 12 months.

Existing SAS organizations, particularly retail and pharmaceuticals with a strong data warehouse center of gravity, should look to IntelliVisor to analyze clickstream data along with other customer data (e.g., call center, campaign, point of sale). However, if an organization is not going to take advantage of multidimensional clickstream analysis or extensive data mining capability, it should consider moderately priced, midtier Web analytics solutions (e.g., WebTrends, Sane). Organizations seeking high-end analytics with more of a satellite approach--where data is collected and analyzed within the bounds of a particular customer process (e.g., mail campaigns, personalized content)--should evaluate SAS's integration of IntelliVisor and Intrinsic, but they should also keep on the shortlist an "add-on" analytics module from an operational CRM vendor (e.g., Unica, E.piphany).

Business impact:
Combining an array of business performance management tools with predictive analytics will improve an organization's insight into Web site performance as a customer channel versus offline channels.

Bottom line:
SAS is one of the few traditional BI/analytics vendors with a credible Web analytics strategy, giving it an advantage in the overall analytical CRM market. In the short term, however, most organizations will look for cheaper clickstream data feeds into their existing data warehouse and OLAP solutions.