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SAND
Technology Inc. (SNDT) |
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CEOCFO Current
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This is a printer friendly page! SAND™
Technology facilitates outside-the-box thinking by giving managers unrestricted access to
all of their business data Bio of CMO: Company Profile: Flagship product: SAND
Analytic Server CEOCFOinterviews: Mr.
Thompson, what sets SAND Technology apart in your industry? Mr. Thompson: “SAND
Technology is in the general area of business intelligence software. While most
business intelligence vendors have focused on allowing managers to view and manipulate
data on their desktops, they haven't addressed the key underlying problem, which is about
making the data available to managers in the first place. That is SAND technology’s
focus. We deliver the data to the decision makers,
so that the business intelligence tools they have purchased can be put to optimum
use.” CEOCFOinterviews: How do
you do that? Mr. Thompson: “SAND
Technology makes a specialized product that we call the SAND Analytic Server. This
is a platform that is optimized for hosting business intelligence and analytic
applications. Traditionally, people work with business intelligence tools using
relationally-based data. Relational databases were something that came to market in the
eighties and nineties specifically for transaction-class applications, and they do a great
job in this area. But to run analytic applications, you need to do a lot of work to
repurpose the data structure and build specialized schemas and indexes, and this requires
a lot of manpower. SAND’s product is designed exclusively for analytics, so as a
purpose-built analytic solution, it negates all those requirements, and delivers
productivity faster and cheaper.” CEOCFOinterviews: Please
give us an example of what your platform would do. Mr. Thompson: “In a
normal situation, using a relational data warehouse for example, the people building the
application have to know in advance what questions managers are going to ask, because they
have to specifically prestructure the data in order to answer those questions efficiently.
The problem is that typically the business is so fast-moving and eclectic that often you
don’t know in advance what you are looking for. You certainly know some
standard questions, but there are always other things that come up that you will need to
explore. Traditional systems just can’t handle spontaneous questions without a
lot of expensive and time-consuming intervention by IT staff. In SAND’s case,
we can take the data from the same sources, integrate it while loading it into a SAND
Analytic Server, and managers can start asking questions immediately. They can ask any
question of any data that is loaded, and they have the ability to go anywhere in the data
in search of “business intelligence”. Many people think of business intelligence
in terms of managers looking at “cubes” of data, which are predefined data
subsets they have been given to work with. The problem with this approach is that it
presupposes that the answer is in the subset. Our SAND Analytic Server can allow people to
think “outside-the-cube” because we don’t put those restrictions on them;
we give them unrestricted access to all their business data.” CEOCFOinterviews: What
are you actually selling your clients and what is your business model? Mr. Thompson: “Our
normal business model is typical for a software company: we sell licensed software, which
is priced based on the kind of machine the customer is running on and the size of the
application they are running. In addition, we support and upgrade those products, so we
have an ongoing maintenance and upgrade revenue stream off of the back of each product
sale.” CEOCFOinterviews: Do you
have particular industries of focus? Mr. Thompson: “The
problem that we address, which is the need for self-serve access to complex data in large
volumes, is something that is going to be an issue for all industries over time. But there
are some key industries where this is already a major business issue: typically these are
industries that have astronomical amounts of data that is acquired rapidly and changes
often. There are telecommunications companies that want to be able to track and understand
telephone calls or complex customer behavior, or financial services companies with large
volumes of transaction data to analyze. Within healthcare, we are seeing a push for secure
and private patient records that are still easily accessible by approved caregivers. We
have been involved with governments, particularly in the criminal justice area, building
applications that allow investigators to look at a lot of data from a number of sources
and quickly match pieces of data to answer their questions. Retailers in the grocery
sector using customer loyalty cards want market-basket-level analysis to understand what
their customers are buying, right down to the individual item. In each case there is a lot
of data that is hard for them to get their hands on, but which is critical to their
competitive success. Those are the markets that SAND addresses very well.” CEOCFOinterviews: Do you
have an out-of-the-box product or do you customize your applications? Mr. Thompson: “Our
product is a piece of application infrastructure, so it is an out-of-the-box product, but
the SAND Analytic Server does enable a certain level of customized implementation. Think
of it as a special kind of repository which you fill up with the customer’s own data.
Everybody’s business is different; so the way they want to look at the data and the
questions they are asking are different. So applications can be customized for each
business. SAND works heavily with the systems integration community – in fact one of
our best channels to market is through systems integrators such as Accenture.” CEOCFOinterviews: You
have recently changed your business model; please tell us what has happened there. Mr. Thompson: “As
an early-stage company, you have a responsibility to develop your own reference sites. You
can’t expect a third party to do that early selling; you have to prove the efficacy
of the technology. For the last few years, we have been doing that. As part of that
process, we developed our own systems integration division. But as we wanted to go to
market with other established systems integrators, there was a conflict of interest in
terms of having our own shop in place. Last year we made a decision to sell that systems
integration division and focus on our core competency in product development. It was
a good transaction for us. It lowered our overall operating costs significantly,
created a nice pool of operating capital, allowed us to become very focused on product
sales, and allowed us to pursue relationships with other established systems integrators
without conflict. At the same time, we maintain a business relationship with our
former colleagues, and they are still selling applications based on our products. We will
retain a revenue stream from them into the future, and benefit from the references from
all the customers they have acquired to date as well as the good customers that they will
bring in the future. So our business today is focused around building the
core products that are part of the SAND Analytic Server suite, taking them to market
primarily through systems integrators and other solution provider channels.” CEOCFOinterviews: Does
the end-customer know that he needs a product like yours, making it a matter simply of
finding the right product in your category? Mr. Thompson: “They
know they are dissatisfied with the performance of their current environment, and its
inability to allow their decision makers to make quick, spontaneous but fact-based
business decisions, so they absolutely understand the problems. The bigger the company and
the more data involved, the more exacerbated this problem becomes. We have a technology
and methodology that is unique to the market, so we do run into people who know they have
a problem but don’t realize that a solution exists. Our primary marketing objective
is identifying people who are experiencing the kinds of issues we deal with and letting
them know that we have the solution.” CEOCFOinterviews: Is
this what you are doing through your partners or are you out there identifying potential
customers as well? Mr. Thompson: “We
have sales resources of our own as well; with a partner channel, you have a responsibility
to do some business development in conjunction with your partners. A strategic systems
integrator’s business is introducing their clients to innovative solutions, so if we
can bring them into the initial situations, that is a good way for us to educate them
about out products and speed up the process of getting them to introduce those products on
their own. After they become "converts", we benefit from the association
and their established reputation, as well as their extended market reach. In terms of the specialized markets like
telecommunications or healthcare, we tend to partner with specialist solution providers
that have established market reputations for excellence. I will use healthcare as an
example: we have a very good partner called Park City Solutions, Inc. that is an
established vendor in the healthcare market, and we are primarily going to market as a
component of their overall solutions rather than developing our own healthcare-oriented
sales force.” CEOCFOinterviews: Return
on investment has been a big factor for many companies in the downturn, which hopefully is
now an ongoing upturn – is that important for SAND? Mr. Thompson:
“Because we are purpose-built for analytics, we offer not only high ROI to users, but
very early payback. Typically, where other products will start to pay off in years,
we offer tangible business benefits within weeks. That’s a big selling
factor.” CEOCFOinterviews: What
would you say is your largest competition? Mr. Thompson: “Our
greatest competition is the fact that there is a very entrenched way of doing things, and
we represent a new way of doing things. So we compete with the status quo. People
have spent their careers learning the traditional approach, and they believe they know
where the limits are. When we come in and say we can remove those limits, that is the
biggest obstacle because people are bound by their traditional way of doing things.
The good news is that emerging vendors in this space with innovative technologies such as
ours are starting to acquire some visibility in the industry. For example, analysts
like META Group or Gartner are now watching companies like SAND Technology.” CEOCFOinterviews: How do
you convince the people that are entrenched in the old way of doing things to make a
change? Mr. Thompson: “One
way we are dealing with the “status quo” competition is by leveraging the
Fortune 500 customers that we already have. Every business wants to be innovative, but
what they really want is to be “first to be second”, and we are lucky to have a
strong group of reference customers who are the leaders that others can follow. We can go
into a company in any one of our key industries, reference a potential customer’s
competitor and say "this is what we’ve done for them", at which point they
are usually pretty keen to try our solution The second element is to show them what is really
possible. Therefore our sales strategy is to propose a trial or a “proof of
concept”. The way we do this is to say to a C-level executive: “Tell me the
question you cannot currently answer”. Then, when we show them how easy it is to
obtain the answer, they understand the power inherent in what we are providing.” CEOCFOinterviews: Please
tell us about your business outside of North America and how it compares? Mr. Thompson: “The
company is headquartered in Montreal, Canada, but we sell on a worldwide basis. As well as
staff across the US, we have a distributor in the Pacific Rim, and offices in Germany and
the UK. Historically sales outside North America have been generating a larger
percentage of revenue than those in North America.” CEOCFOinterviews: Is
there work yet to be done with research and development? Mr. Thompson: “I
have been in the software industry a number of years and have never seen a product that
was completely “finished”. Innovation never stops, but we are currently at
Version Three of our core analytic server. In software, Version One is typically a
“proof” statement and Version Two usually adds the things you couldn’t get
into Version One. With Version Three, you often do some extensive reengineering based on
market experience, so this is always a big release for companies. We completed that last
year, so we are very mature in terms of the underlying technology. But there are
always changes in market conditions that you need to accommodate, so we have a very active
R & D team; in fact, more than half of the company's employees work in research,
product development, or some other engineering-related function.” CEOCFOinterviews: What
is the financial condition of the company? Mr. Thompson: “The
enterprise software market has suffered over the last few years. Sales for the best
companies have been relatively flat, and many companies have struggled. We have been very
fortunate over this period to have been able to grow revenue significantly on a
year-over-year basis, which means that bit by bit we are growing our market share.
In a business intelligence software market that analysts estimate grew about 15% last
year, we grew about 128%, so we are growing significantly faster than our market.
The company closed the last fiscal year – 2003 – with a significant upturn in
revenue. Investors should review the recent SEC filings for details, but the company is
well financed, there is a reasonable amount of cash on hand to carry the company forward,
and although I don’t want to be too forward-looking at this point, the company can
see the road ahead to sustained profitability.” CEOCFOinterviews: SAND
recently announced a share repurchase program. Will you tell us about that? Mr. Thompson: “We
had a share repurchase program that lapsed some months ago, so we reintroduced one to keep
our options open in this area. CEOCFOinterviews: Will
you tell us about out your growth pattern going forward? Mr. Thompson: “The
company has announced that, because of the sale of the subsidiary, our revenue overall
will be lower this year than last year. We have suggested it will be in the area of forty
to sixty percent of last year’s number, with a commensurate lower cost base. We
expect to see continued profitability if we can come through towards the upper end of that
range. Once we have this period of sales model transition behind us, and have completed
the recruitment of new partners, the company expects to continue year-over-year growth,
and to be operating with the kind of margin that you normally associate with a maturing
software products company. The market that we are in, business intelligence
software, is predicted to be a growth market, and we are committed to be a major player in
that market. We see no limits to what the company can do – it just needs to execute
on its plans and it needs the time to do that.” CEOCFOinterviews: In
closing, why should investors be interested and what should they know about SAND
Technology? As a company SAND Technology represents a real value opportunity to investors. We are in the right place at the right time. We are satisfying a critical business need. We have fully productized a significant amount of patented R&D. And we are in the process of building the significant business relationships that will allow us to capitalize on this opportunity. If you believe in the value of the underlying business promise, you will see the value in the company.” disclaimers |
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