Our roadmap for today is that we will talk initially sort of the standard how's business and then Pega's actually a super interesting new product called Blueprint which we're going to talk about a little bit and then we'll go into if we have any time left we'll go into more standard things but I definitely want to give a little bit of time to Blueprint. Okay so starting at the top who wants to answer how's business?
You know, I think we closed the year very strong. We were really quite pleased. Teams came through broadly. Customers showed renewed buying interest which is always awesome when that happens. You never take that for granted. And so I felt like we were coming into 2024 with some wind in our sales both because of just the market not having collapsed like some people were afraid it was going to but also because of our product portfolio which in the first half of the year was going to sort of culminate in releases as we enter PegaWorld in June.
Yeah. All right. Well, let's touch on each of those. So, let's touch on the market. Didn't collapse the way some people thought it was.
Well, look, the whole debates I can remember a year ago. The debates on Hard Landings, Soft Landings, no landings and I don't know how you want to categorize it, but buying behavior continues to exist. Customers are selective. It is definitely, definitely a constrained environment. Customers are very worried about what they're spending their money on, but they are willing to make investments even if it's a little slower, even if it's a little more cautiously.
Yeah. How was the arc of that sort of customer buying behavior last year? You know what I mean? Q1, Q2, Q3, Q4.
You know I think.
So, we had a little bit of the middle of the year—I would say Q2 into Q3—one of the fears that I think a lot of companies were reacting to, and quite frankly the investment community was probably more reacting to this than our clients, but nonetheless was GenAI and what's that going to do, and oh my gosh, companies are going to go out of business, and everybody's going to be: When's your next renewal? because you're not renewing your ERP systems because GenAI is going to do all your accounting.
Everything was just kind of like this irrational kind of, and I do think that there were some of our clients were their buying patterns were maybe distracted, at least for us, a little bit into Q2 and the beginning of Q3, and then but it settled pretty quick, and I think people started realizing this Gen AI stuff is real, but it also isn't like what everybody kind of played it out to be early on. It's forming into different use cases than what I think people originally thought. So I do think so our arc was a little bit of Q1. There's always a little bit of the kind of flow over from the Q4 previous, and Q4s are always a big event with our clients, so that gives us a selling opportunity.
Q2 was, I would say, a little softer, and that probably played into the first part of Q3.
I've already forgotten about that whole.
March.
Everyone had to be there categorized as an AI winner and an AI loser.
Right. It was March 21st when the first basket was produced. Thankfully we weren't in the you're screwed basket but there were some other companies that were.
Oh my God. Chegg. Chegg had a really bad earnings call then.
That's right. Okay. Okay. So that's good. So that was sort of the buying behavior side of it. The other part of it, Alan, you were saying that makes you feel good about this year is the product portfolio. So before you do Blueprint, you want to give us a big picture on the product portfolio.
Well, you know, I think if you go talk to clients, you quickly hear that all they are hearing from vendors is all AI all the time, and the level of it gets to the point where the SEC even talks about AI whitewashing or don't AI wash what you're saying. So, you know, there's a lot of hype in the market, but the thing that's very true here is there are extremely real and genuine drivers of value that come out of the proper application of some of this AI. So the first thing I say is there's a lot of confusion. We've been in the Statistical AI world for well over a decade, and we still are. Statistical AI is where you do Machine Learning, figure out a next best action for a customer, make them an offer, retain them, do those types of things.
And in the bubble of AI, statistical AI and GenAI are getting confused even though they are fundamentally different both in terms of technology and also candidly in terms of the use cases you would apply them on. But the statistical AI sets us up really well for being able to apply.
I had to go buy a book. Do you know this guy Stephen Wolfram?
I do.
I figured you might.
Yeah. That's actually a good book. It's only massively oversimplified.
But that's what makes it so good for me. I'm on page two and I've already learned a lot. So I didn't understand what temperature was. In the first two pages he understands temperature which is just how creative do you want your LLM to be right? And it's actually.
How much hallucination?
Right. Yeah. And anyways so no I think your point is well taken.
It is a good book, and he actually has his own search engine, which, if you haven't tried, you should just Google his name. The Wolfram search engine is actually very powerful and very good for certain types of problems, particularly ones that you think of as mathematically oriented.
Yeah. Making a note of it. Okay. But you're right. I totally distracted. Your point was that Statistical AI has been going for at least a decade, right, and generating results, right, and then the GenAI stuff comes along and there's sort of a lot of confusion and you can hear it in the conversations with the management teams, right. AI is used in a very broad.
Interchangeable.
Yeah. Yeah. Yeah. Yeah.
And there were very, also very, different use cases between the use cases in which you would quote "train your own model" or the use cases in which you would use other techniques with GenAI to get outputs. And I'm happy to say I think we understand this stuff extremely well. We invested the effort, had a lot of the right people. I personally am very deeply involved in trying to understand and discuss with our thought leaders what we're doing and I think our strategy here is terrific. So if I was going to summarize that for you, a lot of people have said look GenAI which has the ability to summarize conversations, has the ability to generate a letter, has the ability to write better than 95% of the people in our companies.
It's enormously powerful, and there's a set of features like summarization, generation, chatbot type response, some of those features which are great features to use and to apply. And we've got about 22 of those that we've already added to our product to do important things that a customer would find to make themselves more feature rich as they work with their clients. But we actually came up with another way to apply GenAI that's profoundly different and that I don't see anybody else doing. And that other way is to say all right love the features but what if we could turn the power of GenAI onto the very process fabric of a business itself into the very way that it thought of onboarding a customer, selling a product, doing a follow-up.
What if we could get the GenAI to be able to influence the workflows of a business? And of course we're in the AI decisioning and workflow business so we have this decisioning capability largely statistical and a workflow capability. And what we realized is that it would be possible to ask a prospect or a customer a certain number of structured questions, allow them to just go free text, pontificate, put in their business objectives and the other sorts of things they want to do here as well. And then we could take that we could go out to the internet and find the best practices in the internet and organize those for the particular process in mind.
We could then take our best practices from the four decades that we've been building systems and we could then also use GenAI first GenAI to get the information from the internet but then use GenAI to extract value from our processes and then use GenAI to marry those two together so that you get a synthesis of how you want to do something. What are the steps and stages that you want to go through if you're doing a KYC I know your customer evaluation. And the quality of what comes out from this is absolutely mind-blowing. It is. I had a CEO of a U.K. bank come by a booth that we were in and we just rolled this out and he said put in how should I have my bank eliminate the account of a politically exposed person.
Now the reason this was sensitive is Coutts Bank had gotten rid of a prominent liberal politician in the U.K. and had led to the forced resignation of the CEO because the process wasn't done exactly right. What this thing came up with was he looked at this that's brilliant. It had the right checks about compliance checks and consider the political ramifications and other types of things. So being able to take the internet as input to process optimization, being able to take our stuff as input and that's just the beginning because I'll tell you the next two things we're doing between now and June.
Yeah. We're talking about Blueprint now right?
This is Blueprint. That's what we call Blueprint.
Now we're talking about Blueprint and Blueprint is GA or no?
So, Blueprint is GA with our—the first version of Blueprint is GA with our partners. So, we decided to open it up to our partners like Accenture and Cognizant, whatever, so that they could get really comfortable with it this month, and then at the end of this month we're opening it up to not just our customers but to prospects as well.
Okay. So we're at the beginning of March right? So Blueprint generally available to partners in March and then in April is going to be generally available right?
Yes.
Okay. And then don't take this the wrong way if people didn't understand it. Okay. So I saw whatever we did a half-hour, 45-minute demo, and when you see the demo it really clicks, and I think it might be hard to make it click with the words. So let me just ask, did it click? Do people get it, or do we need an example? And I'm looking at you three because you can all answer. So awesome. You saw the demo. Oh, and you didn't see the demo, right? Okay. Did it click? It's okay to say no, it didn't click.
No, I would like some more information.
Okay. Yeah. So.
We can help you out if you go to Pega.com.
Let's go back to an example. I think an example is really powerful.
Okay. So if you think about say how you handle your bank and you handle a deceased customer sensitive situation right actually it turns out it's more complicated than people realized. You have to close accounts, you have to hold certain things in abeyance, you have to do distributions. You'd like to have a stage in there in which you retain the money right? You don't want the family to pull the money out of the bank if there's a chance that you could retain it but boy you have to handle that gingerly if you're going to do it. What Blueprint will do with a description of just simple verbal description of I'm a retail bank or a high net worth individual bank how do I handle the process of managing and closing the accounts of a deceased customer? It's all you put in.
Okay. So we would type in this is a super regional bank. We have a private banking arm. How do we handle the deceased customer in the private banking arm? Which is actually super relevant because of the whole transfer from, right? Big deal right now. Yeah.
It will give you a little guidance as you're typing it and if you don't like what you've typed you can just retype it because the thing about this is it's not driven by what the computer system needs. The power of GenAI means it's driven by how you choose to explain it.
Yeah.
And by the way, if you wanted a version of this in Spanish, you just click a little button that says Spanish. I was in Germany last week, and we were popping these things out in German, and I had no idea what they said, but the audience was really impressed. Yeah, I would just say. So you'd put that in, and what comes out of it is the first thing that comes out is, say, here are the types of things you need to do, right? You're going to have to go through an account closure process here as well. You're going to have to have a notification process. You're going to have a transfer of assets process. You may have a payment of debt process. It's going to tell you what are the workflows that you need.
Then it will dig into each one of those workflows and it will tell you this workflow consists of the following five steps. Go out and get the balances from all of the accounts. Put a stop on all of the accounts so more doesn't come out here. Sometimes you have to wait 3 days for transactions to clear, right? And then so all of those steps including is this an automated step? Is this a step that involves a person? Is this a step that involves a system? Then the next thing it does is it says here's the data that's going to be needed for each of these stages and these steps. And this is where in our next cut we're going to make it so you can load in your data sources.
So we'll actually tell you using your own data how you want this process to run. The next thing it shows you with pretty little pictures is here are all the different personas. Here are all the different people involved. There might be a compliance officer involved, right? There's the account representative. So it will actually tell you everybody that's there, and then it will create a document for you, a PDF that you can give to your compliance team and say this is how we plan to run the deceased account closure process. Do you like it? And if they don't like it, it's easily changeable. So it takes something that, to be blunt, used to take months, and you actually get a challenger approach to design thinking in a couple of minutes. So I and it's beautiful.
Now, the next bonus is there are two buttons at the bottom, only one of which works today. One is generate PDF and the second is feed into your Pegasystems. And if your customer, if this is a customer who has a Pegasystems.
He can't generate the PDF yet.
No, the PDF is kidding.
No we get it.
PDF is yours. It actually, as of this week, we're getting the Pega-generated.
So this is going to start generating it. It won't be your final version of your product, obviously, but this will start. Well, I don't know, maybe it is the final version of your product.
Well, it's a pretty so there are two things that are going on. One, our tagline as a company is Build for Change. So the idea that there's a final version of these things are unchanging.
It's adaptable anyway.
This stuff changes, life changes, this stuff all the time, but we are going to continue to build out all of the other elements that will make this a more and more fulsome product. The thing I told my customers at PegaWorld in June, and all of you should come to PegaWorld June 9-11 in Las Vegas this year. They have an investor session, I think, as well.
Monday the 10th?
I said, I expected that a year from then, so this coming June, based on the work we were doing with AI, that we would be able to double the productivity and speed of building and automating workflows in Pega. And when I said that, I had a number of my own internal staff go, why couldn't you just say 20%? But I will tell you, as I sit here looking at where I think we will be in June, I think we will be nicely past that 50%, but it's more important than that. The most important thing is not just this makes this faster. The most important thing is it stimulates the creativity of people to think differently about how they want to automate their processes and decisions. It does in a very dramatic way.
If you think about the two.
Hey, I'm going to you next.
Well, the two—just real quick—the two big risks, not just time, but the two big risks when you're doing something new, when you're thinking about implementing a new workload. There's two things. One is to take the exact structure that you have with the system that you're mothballing and copy it right, which is the tendency that clients have, right? Well, I have this; let's just build me that in a new. That's a risk. The second risk is if it's something new, it takes forever, right, because you have a big ideation process; you have to bring people in, then people go away, then you say you bring everyone back and they go, where were we? Oh, I don't think I don't remember saying that.
It's just the whole ideation process and Blueprint really helps to address both of those risks and the time element which it doesn't just it doesn't allow you to just say copy what I have and it also gets you so much further down the path and that's what GenAI that's the leverage leveraging GenAI certainly helps us but it's also the content. I mean what Pat didn't mention is when you saw it you'll remember when we did a use case that we had never seen in Pega before it looked a little bit more general right because it was taking information on the internet. Once we introduced a use case that we had done before it was incredibly robust.
It had, like, so the key is our differentiated content that we have as well at Pega that actually it's not just going to the internet. It's also the, as Alan mentioned, the decades of us supporting and knowing exactly how processes should work for certain use cases.
My question for you Ken was will this help you accelerate ACV growth?
There's no doubt that it will shrink the selling cycle, faster time to get things into pipe, and help clients that might have 30 projects that they're not sure which one to start get that ideation process quickly, because otherwise they're not going to look at all 30, and they're going to try to pick two or three, and then they're going to go through this, could be two weeks, could be 90 days, process of trying to figure out exactly what that architecture diagram looks like, and we're giving them a tool that they can do all 30 in an afternoon, right, to be able to give them, and that's if they actually have like a robust process, it would take the afternoon. It could take two minutes if you just wanted to do a version one.
So to me that's the most exciting thing that I have seen since I started at Pega is that ability to really allow the kind of the problem to solution be compressed and that's a big challenge for anybody selling enterprise technology right? And we are in that bucket.
Awesome. Okay. On to regular business. What's the comment on the whole Appian lawsuit at this point?
We had our appeal November 15. We were very pleased with what we heard from the judge's comments, but we're here waiting for the decision to be written and we have absolutely no control over when that comes out. I've been betting that it would happen in March but it could happen in April and I've even heard the May word used though I would not expect that. I think with yeah definitely within 60 days.
All right. two minutes for a question or two from our audience. Yeah please.
I've tried to work with Pega on sort of workflows that are amazing and incredible no matter what you want to try in terms of the process. How complicated is it for it to figure out what the existing process is in a company's sort of portfolio and then to sort of figure out whether that process is optimal or not? How do you change that?
Yeah. So the question is how can you use existing processes in a company to figure out how you want to change it? So we acquired about a year and half ago a company in the process mining space and the reason we did it was not to go out and try to compete with Celonis. The reason we did it is we wanted to really weave that in to Pega and the Pega tools. So we will have the ability to use the process mining as an input to what the Blueprint is able to do and really help you take but improve your current stages and steps in whatever technology you are. So that's. I'm sorry? I'm expecting it this year.
30 seconds. Yeah.
Super quick. Just with the value that Blueprint is adding for customers how are you thinking that Pega is going to get value as well? Like how's they going to charge for Blueprint?
So our plan is to put Blueprint on Pega.com for free so that customers and prospects both can create blueprints without charge. And if your objective is to create a blueprint and show it to your compliance officer, go ahead and knock yourself out. Now the benefit we'll get is our advantage in being able to take a blueprint and pull it in to create a running system. But if people begin adopting the Pega sort of design architecture as the way they describe processes and workflows in their business, I see that as only highly advantageous.
Yeah that's a win.
For us.
The way we monetize, yeah, just to hit that point really specific. We monetize based on volume.
Yeah. Okay.
Yeah. That was a really short answer. Good. Great.
Good. Thanks.