Sand Technology a Risky Bet
June 7, 2009 7 Comments
It’s a shame that Sand Technology isn’t doing better, because the technology is apparently quite good and has been for years. Decades, indeed, but after all that time, Sand is a US$7M firm. Why is that? Their June visit to the Boulder BI Braintrust (BBBT) offered some clues. And some followup into public filings paints an unattractive financial picture that suggests any prospects should proceed with extreme caution. Sand’s phenomenal compression of data for “nearline storage” and analysis sounds good, but it’s hard to ignore their finances.
Sand (SNDTF on the OTC BB) reported a loss for the year ended July 31, 2008 of $1.3M, compared to a loss of $2.5M for the same period the prior year. It’s very hard to find any financial information on their web site – investors are referred to DeJong and Associates for the information. That was useful, but the “Our Take” section was very over-enthusiastic. I went to www.sedar.com to look at their public filings. The results? They have lost money for the past 5 years (albeit at a declining rate. ) Their sales have grown from $5.3M to just under $7M in the same time period (they dropped from 2005 to 2006). They’ve cut R&D every year. As of their last filing, they are almost out of cash. In an alternative DBMS market where emerging firms are adding customers rapidly and getting new funding, it’s hard to recommend Sand, however attractive their technology may appear to be.
Their visit to the BBBT is documented by Shawn Rogers on the BBBT blog here. Arthur Ritchie, President and CEO, is a charismatic man, with a wonderful facility for telling stories, an engaging ability to challenge thoughtful people to re-think fundamental assumptions, and a visible passion for his product. Our meeting with him was no exception. Many of us know of Sand, and a predecessor product called the Nucleus database, from the 1980s. We revisited the history. recalling how the firm started working with Hitachi decades ago, and its many years attempting to market its technology. Curt Monash has also looked at Sand, and offers a bit more historical detail here.
In that meeting, though, some of us found an absence of crisp messaging. The 5 content slides provided for the presentation didn’t provide any detail on market segmentation, product naming, pricing, sales structure, partners, and the other kinds of facts analysts want. (You can see some of those things on their web site, though.) I left early because we were rambling; I was not alone. I was remote, on the phone, and that makes it a bit easier to go, but if I were in the room, I still would have excused myself. As an analyst, one of the things you want to see is how the company presents itself. I had little clue from the materials provided. If Arthur is making the sale, it may go well – he’s very engaging. But you can’t scale Arthur. Perhaps that’s why the sales numbers have been so flat.
Sand’s website describes them this way: “SAND Technology provides data management software and best practices for companies who have large amounts of data that they need to store, access, and analyze just-in-time, and on-demand while leveraging existing infrastructure, improving operational performance and lowering TCO.” Sounds like they threw everything they could into that statement. The product portfolio includes Sand/DNA for: Oracle, DB2, MySQL, SAP, SAS, Syslog tracker. Some of these things are not like the others. But the basics are straightforward – incredibly compressed data – keep and analyze it all.
Sand claims 100 customers in the usual industries: Retail, Financial Services, CPG, Utilities, Health care, Telco, and Transportation. A year ago, in a briefing for me, they said there were 70; now they claim 100, but the revenue number only went up a few hundred thousand dollars. As Monash remarked to me in a conversation about Sand, “if there are 30 new-name customers in a 70 customer company with flattish revenues, repeat business must have fallen off a cliff.” The customers mentioned on the website include mostly European firms: T-Systems. Entega, Aegon, AOL Deutschland, Chus, Deutsche Post, Dunnhumby, Klingel, O2, Physicians Mutual, Wanadoo, Siemens, nhn, RI-Solutions. Not many US firms; the firm is more established in Germany, and clearly hopes an SAP connection will prove helpful. Sand has made announcements with SAP of late, and has certified their solution with SAP.
Their site also lists partnerships with Oracle, Accenture, Sun, Cap Gemini, OpenText, EMC, BearingPoint, KXEN and Information Builders’ iWay. Of these only KXEN and iWay have any mention you can find with a quick search on their web site. So there is little evidence of effective partner marketing going on.
I tend to dwell a lot on execution in my work with vendors, clients and non-clients alike. I want to know how the message is delivered, how many sales teams they have, how the comp plan works, what the partner program looks like. And some vendors who brief me are surprised that I don’t want to spend more time on deeper technical details than I do. Here’s why: good technology is necessary but not sufficient. The winning offerings know who their prospects are, what problems they have, and how to position themselves as solving those problems. They know how to reach those prospects, and how to close business. They know how to support them, and sustain or even increase revenue by meeting their needs. I talk to their customers and partners if I’m digging deep, and I expect to learn as much from that exercise as from technology slideshows and demos.
When I talk to a vendor who leaves most of that out, maybe it’s “just bad marketing.” But if the financials are not good, and momentum is not there, and the partners aren’t visibly committed, that’s enough to give me pause.