Pegasystems Inc at Pegasystems PegaWorld iNspire Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Rishi Nitya Jaluria - RBC Capital Markets, Research Division - Analyst : Of course, Rishi Jaluria, RBC. Alan, thanks so much for the time. love the session this morning. Two questions on gen AI for you. First, you kind of hinted this at the beginning of your remarks right now, but a lot of companies out there, including a lot of your vocal competitors are talking about their gen AI strategy. whether it's real or not. Maybe from your perspective because there is a lot of maybe marketing fluff out there, how should we, on the investment side really recognize what is truly AI and what isn't ? And how do you think about differentiating that? And then maybe if you could just -- at Kerim's keynote this morning, just talking a lot about the local models and how that provides kind of another layer of protection for those that want to train data on their own models, but not train the central model. Can you walk us though a little bit how that works? And what kind of the feedback -- or early reception or early feedback has been?

Question: Rishi Nitya Jaluria - RBC Capital Markets, Research Division - Analyst : Rishi Jaluria, RBC. I wanted to ask about kind of the consumption element and how that drives adoption. We've heard Alan and Ken talk about that on earnings calls, but since you're on the ground and actually seeing what customers look like, what does that structurally look like in a contract where there is that consumption element? And then alongside that, you talked about incentives with the sales team to actually help drive more consumption over time, which makes a lot of sense, what do those sort of incentives look like? Unidentified Company Representative So I think what is -- one thing that sets us apart from other organizations is that we have never been big in selling a lot of stuff that ends up on the shelf, right? We're just not built by that (inaudible) really doesn't like us when we do that. So the whole culture is very focused on selling a client what they need for that particular moment in time, solving a business problem with volumes that we can see for now. Then once those people are, once that team is successful, they may have more volume within that specific business domain or they may want to do other things, and we sell them against some stuff. Now of course, we've moved from a perpetual license to a term license or a subscription-based model, where that is even more incentivizing as a salespeople to make sure once we sell that piece, we really need to make sure they are successful. But because not only will they not extend, but there is a (inaudible) after a term of the contract that they may say, I'm not getting the value, so I'm leaving you as a client. So that is naturally incentivizing not only, by the way, the salespeople, all of the cross-functional teams are also very much focused and incentivized on making clients successful, getting the renewals in and then hopefully getting the new revenue, either in that domain, like I said, when we scale with volume as a consumption-based model or moving into other domains. Yes, sure. happy to -- so we all have targets. And all we need to do as salespeople is to make sure -- well, the majority of our incentive is based on new ACV. So we need to make sure that we create new ACV for clients that have been with us. And there is a small part that is based on retention as well. But if someone reduces their footprint, that will go into the mix. And so if we sell something new, we have to make sure that we get up that ladder again so that it's not like we can say, oh, this client is not so successful here, but they buy something there, and we get compensated on that. It is really looked at more broadly to make sure we are all working. Not that it's not already in our DNA despite what everyone may think of salespeople. But it really naturally incentivizes us to do it that way as well. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JUNE 12, 2023 / 7:00PM, PEGA.OQ - Pegasystems Inc at Pegasystems PegaWorld iNspire Unidentified Analyst My name is (inaudible), I'm from D.A. Davidson. So when you're getting together with customers and you're trying to understand their needs and the goals and how Pega can help them get there, how far into the future are you typically looking for those goals. And then I'm wondering, when a technology that's as disruptive as generative AI comes in, do you see that cause customers to hesitate to spend because they're worried that technology might change again. And if that is the case, how do you help them feel comfortable moving forward in a dynamic environment like that? Unidentified Company Representative Yes. Yes. So with respect to the first question, we try to build 3-year plans that we actually vet with our customers ideally. So we look at what are these clients focused on and how much they share with us, right? Sometimes it's 18 years -- 18 months out, sometimes 3 years out, so we really try to build that strategic account plan, but then we also do technical discovery. So we look into an operation, and we try to see how much of that can be automated, how much of that can be consolidated? And what does that mean in terms of value? And because we are very focused on creating results fast. We look at building first, we call it MLP, so minimum lovable products for a client that really generates results into 3, 4, 6 months. So that the client will see typically within a year, really get ROI. So that is what we do per domain that we look at. But then, of course, we try to set (inaudible) and that's why it's really important that we have these enterprise advisory services now that we help an organization already think about what could be the next step so that you create the layer cake that Alan spoke about in a way that allows for quick and easy reuse and then additional benefits down the line. Does that answer the first question?? And the second question was what again? Right. Yes. Yes. Thank you for reminding me. So the other thing that we think sets Pega apart from other technology vendors is we have this model that Alan spoke about. And being able to generate the model that creates -- that allows us to innovate in a way that no one else can. And we've always seen that before as well. So when new channels would emerge, when there was new technology available, we will be able to -- we would do that on the Pega side, we would generate the model, and therefore, the clients would not be bothered as much by it. Now of course, generative AI, I think it's early days. This is massively changing everything, but it's not that dissimilar from what I just described because client knows that they will never run out of runway that they are future-proof because we have this model, and they've seen us do it. So some of our clients that have been with us have been through (inaudible) from scratch rewrites of our architecture because we thought there was a better way of doing it and they are seeing that we can actually do it that way.

Question: Rishi Nitya Jaluria - RBC Capital Markets, Research Division - Analyst : Rishi Jaluria, RBC. I appreciate all the color. If we think about -- part of this is the value proposition of launchpad is being able to develop stuff a lot faster. I guess in the past, right, we had seen Pega go down that route before with Pega Express. What differentiates this from Pega Express? And maybe what learnings are there from that we can kind of say, look, here is where we can get better traction with Launchpad than we were able to get with Express in the past. Unidentified Company Representative Yes. I think the biggest thing is, first of all, this is a multi-tenant solution, which we wouldn't have had at the time that we were doing Pega Express. So there's a very different play instead of having to spin up instances every time that you want to create a new app and incurring the cost and the difficulties with that, we have something that is much easier and lighter in terms of the multi-tenancy. The entire subscriber management component is built, like this is truly not built for Pega to go to market after the mid-market. This is built for Pega to enable software providers to build their own business, going to market to sell the applications that they build. So I think that that's what the big differentiator is. Really, this is an engine to enable providers to go to market for us.