Apr. 1, 2009 (Investor's Business Daily) -- Pegasystems is a small-cap software stock that's showing strength in the downturn.
The company makes business process management software. Businesses use BPM to automate complex, fast-changing processes.
Pegasystems (PEGA) CEO Alan Trefler founded the firm in Cambridge, Mass., way back in 1983, and 26 years later it's having one of its best growth spurts. He says clients depend on the company's "rules-based software" -- a rule might be a call center employee offering a caller "X solution" given so-and-so variables -- to manage customer services. Such business rules help smooth out the flow of company operations.
"We're taking advantage of the power from a new way of thinking that a business should be automated with BPM software," Trefler said.
Pegasystems competes against larger companies such as Oracle ( ORCL), Tibco (TIBX) and Software AGSOW.DE.
On March 9, Pegasystems reported that its fourth-quarter license revenue jumped to $25.4 million from $14.9 million in the year-earlier quarter, while per-share profit doubled to 8 cents. The next day, its stock soared 17%, and it has risen from there. For the year, sales rose 31% to $212 million while per-share profit jumped 61% to 29 cents.
Trefler recently spoke with IBD about his company's growth.
IBD: How do you describe business process management and rules-based software?
Trefler: It lets large organizations wrap and renew their existing software systems instead of ripping and replacing them. In other words, we allow them to put a software layer atop their existing systems to make them smarter, easy to use and more powerful.
IBD: Can you give a specific case of how the software works in a customer setting?
Trefler: One client, Farmer's Insurance Group, a unit of Zurich Financial ServicesZURN.VX, used our technology to completely revolutionize how they sold insurance policies to business owners. Over five months, they entirely changed the way they quoted and closed insurance business through their agents. It reduced the time needed for a quote from weeks to minutes.
This was done by making the process more intelligent, and making it possible for their agents to define new product offerings in our technology, while also letting them leverage their existing back-end system.
IBD: So, your software is a kind of middleware integration layer?
Trefler: No, this is not middleware. Business process management sits atop middleware. It creates the screens that people use (in their jobs). They can personalize and customize those screens. The software uses rules to make the right offers and the right validations, and automatically updates all their back-end systems.
