Pegasystems Inc. (PEGA), SAP AG (ADR) (SAP): This Tech Stock Is Finding Its Way Through the Woods

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The field of business process management (BPM) is getting crowded. Both established and new companies are engaged in a battle for customers. Products’ time to market is decreasing fast. In this environment, companies are turning to solutions that enable them to operate their processes as quickly as possible. One of the companies that provide BPM solutions is Pegasystems Inc. (NASDAQ:PEGA). Pegasystems Inc. (NASDAQ:PEGA) is a relatively small company with $1.2 billion of market capitalization. Despite the worldwide cut on IT budgets, Pegasystems Inc. (NASDAQ:PEGA) has managed to rise 43% year-to-date.

Pegasystems Inc. (NASDAQ:PEGA)

Smart strategy

When a small company tries to fight with a big company, chances are that it will lose. You need to produce something really game-changing to afford that. BPM systems do differ from each other, but none of them are totally different from another. Pegasystems Inc. (NASDAQ:PEGA) applies an interesting approach. Instead of fighting with the competition, it issues extensions that enable Pegasystems Inc. (NASDAQ:PEGA)’ BPM to work with products of other companies.

Pegasystems Inc. (NASDAQ:PEGA) has issued SAP AG (ADR) (NYSE:SAP) Extender and salesforce.com, inc.(NYSE:CRM) Extender. SAP AG (ADR) (NYSE:SAP) is the biggest provider of enterprise resource planning (ERP) systems. Nearly 80% of Fortune 500 companies use SAP AG (ADR) (NYSE:SAP) to automate their core processes. The main trait of SAP AG (ADR) (NYSE:SAP) is complexity. SAP AG (ADR) (NYSE:SAP) integration is a very difficult process. Pegasystems offers a system that makes an easy connect between SAP’s ERP system and Pegasystems’ BPM system.

Sure, SAP AG (ADR) (NYSE:SAP) has its own BPM system. In a lot of cases, SAP is a legacy system that has been around for a while, and it’s easier to implement Pegasystems’ BPM than to connect SAP products with each other.

salesforce.com, inc.(NYSE:CRM) is concentrated on customer relationship management (CRM) systems, so Pegasystems’ product does not compete with salesforce.com, inc.(NYSE:CRM) products. salesforce.com, inc.(NYSE:CRM)’s revenue grew 28% in the first quarter. Gartner announced that salesforce.com, inc.(NYSE:CRM) is the largest CRM platform in the world. The company is growing its customer base, and this is good for Pegasystems.

Points of strength

Pegasystems states that its business is strong in financial services, communication, and manufacturing. The company receives mush of its revenue from North America as well as Asia-Pacific. Europe remains problematic, however, it is problematic for almost every company in almost each industry.

Pegasystems has started Pega Academy, an online source of training on Pegasystems’ products. This helps cut training costs for the customers, as online training is cheaper than in-house training. In the meantime, such an initiative helps build customer loyalty. Customers who have devoted time and effort to learn the best practices in using the product are less likely to switch to a competitor’s product.

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