By: Neil Ward-Dutton, Research Director, MWD Advisors
Published: 18th March 2014
This work is licensed under a Creative Commons License
Just a couple of weeks ago Pegasystems announced its full-year results for 2013. Revenue topped a half-billion dollars for the first time, growing 10% over the previous year.
10% growth is good growth in these uncertain times, and certainly for a well-established software company with a lot of heritage; and many of Pegasystems’ competitors have been off that level of BPM business growth over the past couple of years. However, revenue growth is stalling. From 2009–10 growth was 27%; from 2010–11 it was 24%; from 2011–12 it dropped to 11%. 10% marks a further small growth slowdown. Pegasystems is still growing, but it’s not growing as fast as many people might have expected.
You might recall that Pega acquired CRM provider Chordiant in 2010. At the time Chordiant’s annual revenue was around $76m—which was about 25% of Pega’s total revenue. This was a Big Deal.
But in the year to 2011, overall Pegasystems revenue grew a total of $80m. Which means that either Pegasystems’ pre-Chordiant BPM business contributed virtually no growth in 2011; or the Chordiant business went backwards. Moving forward, in 2012 Pegasystems’ overall revenue grew $45m; in 2013 it grew $47m. Clearly, the Chordiant acquisition has not delivered a big revenue boost.
So the question is—is Pega going to be able to get those growth numbers back up? A little, it seems: it’s currently publishing ‘forward guidance’ that indicates full-year revenue will be around 13% higher than 2013.
How is it going to do this?
The company bought mobile software player Antenna for $27m or so in 2013; according to its recently-filed annual 10-K statement Antenna attributable revenue was $3.3m in 2013. Antenna technology is partially bundled with Pega’s core technology platform, although customers wanting all the advanced features of the suite have to purchase a separate license—but even still, Pega can’t be relying on Antenna products alone to help it push forward.
What’s the answer? I’d love your thoughts!
As a side note: something else that’s worthy of note is Pega’s cloud business: according to its filing, subscription revenues to the ‘Pega Cloud’ totaled around $3m in 2013. That’s less than 1% of total revenue. This is not particularly surprising, as Appian is really the only BPM vendor to be seeing serious success with its cloud subscription and deployment model. The others all offer something; but so far it’s just not taking off in any serious way.
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