What changed in this filing

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Item 1. Business

2023-02-15 compared with 2022-02-16 · 69 added, 72 removed, 123 unchanged (53% of the section changed)

We develop, market, license, host, and support enterprise software that helps organizations simplify business complexity.

Our powerful low-code platform for workflow automation and AI-powered decisioning enables the world’s leading brands and government agencies to hyper-personalize customer experiences, streamline customer service, and automate mission-critical business processes and workflows.

We develop, market, license, host, and support enterprise software that helps organizations build agility into their business so they can adapt to change.

Our powerful low-code platform for workflow automation and artificial intelligence-powered decisioning enables the world’s leading brands and government agencies to hyper-personalize customer experiences, streamline customer service, and automate mission-critical business processes and workflows.

With Pega, our clients can leverage our intelligent technology and scalable architecture to accelerate their digital transformation.

Our client success teams, world-class partners, and clients themselves leverage our Pega Express™ methodology to design and deploy mission-critical applications quickly and collaboratively.

In addition, our client success teams, world-class partners, and clients leverage our Pega Express™ methodology to design and deploy mission-critical applications quickly and collaboratively.

To grow our business, we intend to:

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• establish relationships with new clients;

• continue to scale our marketing efforts to support the way today’s buyers discover, evaluate, and choose products and services.

• continue to scale our marketing efforts to support how today’s buyers discover, evaluate, and choose products and services.

Whether we are successful depends, in part, on our ability to:

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We are transitioning our business to sell software primarily through subscription arrangements.

Until we fully complete our subscription transition, which we expect will occur in 2023, our revenue and operating cash flow growth may be impacted.

Operating performance and the actual mix of revenue and new arrangements in each period can fluctuate based on client preferences for our perpetual and subscription offerings.

Until we fully complete our subscription transition, which we expect will occur in 2023, our operating results may be impacted.

Operating performance, revenue mix, and new arrangements in each period can fluctuate based on client preferences for our perpetual and subscription offerings.

See risk factor "If we fail to manage our transition to a more subscription-based business model successfully, our results of operations and/or cash flows could be negatively impacted" in Item 1A of this Annual Report for additional information.

Pega Infinity™, the latest version of our software portfolio, helps connect enterprises to their customers in real-time across channels, streamline business operations, and adapt to meet changing requirements.

Our applications and platform intersect with and encompass several software markets, including:

Pega Infinity™, the latest version of our software portfolio, helps build agility into our clients organizations so they can work smarter, unify experiences, and adapt to meet changing requirements.

Our applications and low-code platform intersect with and encompass several software markets, including:

• Customer Engagement, including Customer Relationship Management (“CRM”);

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It is designed to enable enterprises to improve customer acquisition and experience across inbound, outbound, and paid media channels.

It incorporates Artificial Intelligence (“AI”) in the form of predictive and machine-learning analytics, as well as business rules, and executes these decisions in real-time to evaluate the context of each customer interaction and dynamically deliver the most relevant action, offer, content, and channel.

It incorporates Artificial Intelligence (“AI”) in the form of predictive and machine-learning analytics and business rules, and executes these decisions in real-time to evaluate the context of each customer interaction and dynamically deliver the most relevant action, offer, content, and channel.

Customer Service

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Pega Platform, our software for Intelligent Automation, boosts the efficiency of our clients’ processes and workflows.

This technology allows organizations to take an end-to-end approach to transformation by using intelligence and design thinking to streamline processes and create better experiences for their customers and employees.

This technology allows organizations to take an end-to-end approach to transformation by using intelligence and design thinking to streamline processes and create better customer and employee experiences.

Intelligent automation goes beyond traditional Business Process Management (BPM) to unify technologies such as Robotic Process Automation (“RPA”) and AI and enable organization-wide digital transformation.

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• Customer Service :

we enable clients to streamline customer service and deliver better service experiences for their customers and employees, resulting in higher customer satisfaction and loyalty and reduced cost.

we enable clients to streamline customer service and deliver better service experiences for their customers and employees, resulting in higher customer satisfaction and loyalty with reduced costs.

• Intelligent Automation :

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We deliver our solution through our Center-out Business™ Architecture, enabling clients to transcend channels and internal data silos to achieve quick wins and long-term transformation.

This approach insulates business logic from back-end and front-end complexity, delivering consistent experiences to customers and agility to the business.

This approach insulates business logic from back-end and front-end complexity, delivering consistent customer experiences and agility to the business.

The key aspects of this architecture are:

Centrally-managed intelligence

Pega’s centrally-managed intelligence ensures AI and business rules operate across all channels.

Centrally-managed AI-powered decisioning

Pega’s centrally-managed AI-powered decisioning ensures AI and business rules operate across all channels.

Applications built on Pega’s low-code Platform leverage predictive and adaptive analytics to deliver personalized customer experiences and maximize business objectives.

For example, Pega Customer Decision Hub, a centralized, always-on “customer brain,” unleashes the power of predictive analytics, machine learning, and real-time decisioning across our clients’ data, systems, and touchpoints - orchestrating engagement across customer interaction channels.

End-to-end automation aligned with business outcomes

We combine human-assisted robotic desktop automation and unattended robotic process automation with our unified workflow and case management capabilities.

End-to-end workflow automation aligned with business outcomes

We combine human-assisted robotic desktop automation and unattended robotic process automation with our unified workflow automation and case management capabilities.

This combination provides our platform and applications the differentiated ability to automate customer-facing and back-office operational processes from “end to end,” connecting across organizational and system silos to connect customers and employees to outcomes seamlessly and easily.

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Our data virtualization automatically pulls in needed data in a common structure, regardless of source.

This capability gives clients the agility to build new experiences on existing systems, modernizing legacy systems without breaking existing processes.

This capability allows clients the agility to build new experiences on existing systems, modernizing legacy systems without breaking existing processes.

A layered approach to managing variation

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This capability allows initial deployments into a single department or region to seamlessly scale to manage the complexity of a global, multi-line enterprise.

In addition to our Center-out Business Architecture, Pega technology has been designed to be deployed rapidly, be changed easily, and scale across changing architecture needs.

In addition to our Center-out Business Architecture, Pega technology has been designed to be deployed rapidly, be easily changed, and scale across changing architecture needs.

Pega Express™ Methodology and low-code

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In addition, Authorized Training Partners (“ATPs”) support Pega customers in local languages, while our Workforce Development Partners let clients outsource their recruiting .

Strategic partnerships with these firms are important to our sales efforts because they influence buying decisions, identify sales opportunities, and complement our software with their domain expertise, solutions, and services capabilities.

These partners may deliver strategic business planning, consulting, project management, training, and implementation services to our clients.

Our partners include well-respected major firms, such as Accenture PLC, Amazon.com, Inc., Capgemini SA, Coforge, Cognizant Technology Solutions Corporation, EY, HCL Infosys, Merkle, PwC, Tata Consultancy Services Limited, Tech Mahindra Limited, Virtusa Corporation, and Wipro Limited.

Our partners include well-respected major firms, such as Accenture PLC, Amazon.com, Inc., Areteans, Capgemini SA, Coforge, Cognizant Technology Solutions Corporation, EY, Google, HCL Infosys, Merkle, PwC, Tata Consultancy Services Limited, Tech Mahindra Limited, Virtusa Corporation, and Wipro Limited.

Target Clients

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Our solutions achieve and facilitate differentiation by increasing business agility, driving growth, improving productivity, attracting and retaining customers, and reducing risk.

Along with our partners, we deliver solutions tailored to our clients’ specific industry needs.

Along with our partners, we deliver solutions tailored to the specific industry needs of our clients.

Our clients represent many industries, including:

• Financial services – Financial services organizations rely on software to market, onboard, cross-sell, retain, and service their customers, as well as automate the operations that support these customer interactions.

Our intelligent automation, customer service, account onboarding, Know Your Customer (“KYC”), payment dispute and exception management, collections, and next best action solutions allow clients to improve the efficiency of their operations and provide better service to their customers.

• Communications and media – Communications and media organizations need to address high levels of customer churn, growing pressure to increase revenue, and an ability to respond quickly to changing market conditions.

Our solutions enable organizations to reshape how they engage with customers and increase customer lifetime value throughout the customer lifecycle by delivering personalized customer experiences and intelligent workflows.

Our solutions are designed to solve the most critical business issues, including increasing cross-sell/upsell, improving customer service effectiveness, and automating work.

• Government – Government agencies need to modernize legacy systems and processes to meet the growing demands for improved constituent service, lower costs, reduced fraud, and greater transparency.

Our solutions deliver advanced capabilities to help streamline operations and optimize service delivery through an agile, low-risk approach.

• Life sciences and healthcare – Life sciences and healthcare organizations are looking for solutions to improve patient and clinician engagement, as well as deliver personalized products, services, and care while reducing costs, automating processes, increasing operational efficiency, and integrating front and back-offices.

Our customer engagement and intelligent automation solutions allow life science organizations to accelerate the research and development and product launch process, digitize clinical trials, transform operations, and provide regulatory transparency.

Our solutions allow healthcare clients to address the sales, service, care, operational, financial, administrative, regulatory requirements of healthcare consumerism, reform, and transformation to healthcare services organizations.

• Insurance – Insurance companies, whether competing globally or nationally, need software to automate policyholder acquisition, cross-sell/upsell, underwriting, claims, policy service, and retention activities across operations and distribution channels.

Insurers are also becoming increasingly sensitive to improving customer service and overall customer experience.

Our solutions for insurance carriers are designed to help increase business value by delivering customer-focused experiences and personalized interactions that help drive higher sales, lower expense ratios, and mitigate risk.

• Consumer services – Consumer services organizations provide services to a range of consumers in industries such as transportation, utilities, internet providers, retail, hospitality, and entertainment.

Our 1:1 customer engagement, customer service, and intelligent automation solutions help these organizations personalize their customer engagement and automate work to drive revenue through cross-sell/upsell and increase service efficiency while increasing customer satisfaction.

• Manufacturing and high tech – Manufacturers streamline their complex global operations and create more value for their customers, dealers, distributors, and suppliers while directly managing the performance, uptime, and impact of their connected products, equipment, and experiences.

Our manufacturing solutions reduce the complexity of enterprise operations in domains like supply chain, order management, quality management, shared services, customer service, and aftermarket services, including warranty management and captive finance, while minimizing the constraints on digital transformation caused by legacy systems.

• Financial services – Pega’s low-code platform for AI-powered decisioning and workflow automation is used by financial services organizations for Customer Engagement, Onboarding and KYC, Lending, Customer Service, Payment Exceptions, Bank Operations and Managing Financial Crime.

Our platform enables clients to increase loyalty and wallet share, reduce time and effort to close loans and open accounts, address compliance more effectively while simplifying customer experiences, resolve service requests across channels more quickly with less effort, and boost the efficiency of various back-office processes with fewer human touches.

• Communications and media – Pega’s low-code platform for AI-powered decisioning and workflow automation is used by communications and media organizations for Customer Engagement, Order Management, Customer Service, Service Assurance, Network Operations and Shared Services.

Our platform enables clients to increase loyalty and wallet share, simplify experiences while accelerating revenues and processes, resolve service requests across channels more quickly with less effort, drive a faster, simpler repair experience, and boost efficiency of 5G, fiber and cloud processes.

• Government – Pega’s low-code platform for AI-powered decisioning and workflow automation is used by government agencies for Enterprise Modernization, Licensing, Investigative Case Management, Grants and Financial Management, Acquisition and Supply Chain Modernization, and Citizen Service.

Our platform enables clients to modernize legacy systems and processes to meet the growing demands for improved constituent service, lower costs, reduced fraud, and greater transparency.

• Healthcare – Pega’s low-code platform for AI-powered decisioning and workflow automation is used by healthcare organizations for Consumer Engagement, Onboarding and Enrollment, Customer Service, Care Management Services and Core Admin.

Our platform enables clients to improve member and patient outcomes, loyalty and retention, simplify experiences with reduced time and effort, resolve service requests faster and easier across channels, advance efficient flexible healthcare coordination, and deliver streamlined, modern experiences for members, providers and employees.

• Insurance – Pega’s low-code platform for AI-powered decisioning and workflow automation is used by insurance companies for Customer Engagement, Sales, Distribution, Underwriting, Policy Holder Service and Claims.

Our platform enables clients to nurture and grow their book of business, increase agent sales effectiveness, power better partner performance and loyalty, automate application intake and processing with intelligence, personalize seamless policy lifecycle experiences, and improve claims handling efficiencies with more modern customer and employee experiences.

• Consumer services – Pega’s low-code platform for AI-powered decisioning and workflow automation is used by consumer services organizations for Customer Engagement, Supplier Onboarding, Customer Service, and Enterprise Operations in industries such as transportation, utilities, internet providers, retail, hospitality, and entertainment.

Our platform enables clients to enable more personalized real-time next best action, accelerate onboarding with simplified experiences, automate resolution of customer requests across channels with increased digital self-servicing, and streamline operations to rapidly reduce cost, time, and risks while increasing customer satisfaction.

• Manufacturing and high tech – Pega’s low-code platform for AI-powered decisioning and workflow automation is used by manufacturers to streamline their complex global operations and create more value for their customers, dealers, distributors, and suppliers while directly managing the performance, uptime, and impact of their connected products, equipment, and experiences.

Our platform enables clients to reduce the complexity of enterprise operations in domains like supply chain, order management, quality management, shared services, customer service, and aftermarket services, including warranty management and captive finance, while minimizing the constraints on digital transformation caused by legacy systems.

The markets for our offerings are intensely competitive, rapidly changing, and highly fragmented as current competitors expand their product offerings and new companies enter the market.

We compete in the CRM, including marketing, sales, and customer service, and DPA, including BPM, case management, decision management, robotic automation, co-browsing, social engagement, and mobile application development platform software markets, as well as in markets for the vertical applications we provide (e.g., Pega Know Your Customer TM for Financial Services, Pega Care Management™).

We compete in the CRM, including marketing, sales, and customer service, and DPA, including BPM, case management, decision management, robotic automation, co-browsing, social engagement, low-code application development, and mobile application development platform software markets, as well as in markets for the vertical applications we provide (e.g., Pega Know Your Customer TM for Financial Services, Pega Care Management™).

We also compete with clients’ internal information systems departments that seek to modify their existing systems or develop their own proprietary systems and professional service organizations that develop their own products or create custom software in conjunction with rendering consulting services.

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We have been most successful in competing for clients whose businesses are characterized by a high degree of change, complexity, or regulation.

We believe we are competitively differentiated from our competitors because our unified Pega Platform is designed to allow client business and IT staff, using a single, intuitive user interface, to build and evolve enterprise applications in a fraction of the time it would take with disjointed architectures and tools offered by many of our competitors.

In addition, our applications, built on the Pega Platform, provide the same level of flexibility and ability to adapt to our clients’ needs as the Pega Platform.

We believe we are competitively differentiated because our unified Pega Platform is designed to allow client business and IT staff, using a single, intuitive user interface, to build and evolve enterprise applications in a fraction of the time it would take with disjointed architectures and tools offered by many of our competitors.

In addition, our applications, built on the Pega Platform, provide the same flexibility and ability to adapt to our clients’ needs as the Pega Platform.

We believe we compete favorably due to our expertise in our target industries and our long-standing client relationships.

We believe we compete less favorably on some of the above factors against our larger competitors, many of which have greater sales, marketing, and financial resources, more extensive geographical presence, and greater name recognition.

We believe we compete less favorably on some of the above factors against our larger competitors, many of which have greater sales, marketing, and financial resources, a more extensive geographical presence, and greater name recognition.

In addition, we may be at a competitive disadvantage against our larger competitors with respect to our ability to provide expertise outside our target industries.

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Intellectual Property

We rely primarily on a combination of copyright, patent, trademark, and trade secrets laws, as well as confidentiality and intellectual property agreements to protect our proprietary rights.

We rely primarily on a combination of copyright, patent, trademark, and trade secrets laws, as well as confidentiality procedures and contractual provisions to protect our intellectual property rights and our brand.

We have obtained patents relating to our system architecture and products in strategic global markets.

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To protect our proprietary rights, we also control access to and ownership of software, services, documentation, and other information.

We also purchase or license technology that we incorporate into our services.

Sales and Marketing

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In addition, our consulting employees, business partners, and other third parties also conduct joint and separate marketing campaigns that generate sales leads.

Our sales and marketing efforts are premised on the strength of our products, both as they exist currently and as they will continue to develop in the future through our research and development efforts.

Research and Development

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We intend to maintain and extend the support of our existing applications, and we may choose to invest in additional strategic applications that incorporate the latest business innovations.

We also intend to maintain and extend the support of popular hardware platforms, operating systems, databases, and connectivity options to facilitate easy and rapid deployment in diverse IT infrastructures.

We also intend to maintain and extend the support for popular public and private cloud platforms, and integration options to facilitate easy and rapid deployment in diverse IT infrastructures.

Our goal with all products is to enhance product capabilities, implementation ease, long-term flexibility, and improve client service.

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As of January 31, 2023, we had 6,145 employees, of which 2,385 were based in the Americas, 1,457 were based in Europe, 1,953 were based in India, and 350 were based elsewhere in Asia-Pacific.

As a high technology company, our employees are critical to our success.

We strive to be an employer of choice that can attract and retain exceptional talent.

We aim to create a corporate culture that is equitable, inclusive, and diverse.

We believe that encouraging employee development will help achieve our goal of developing, expanding, and retaining our workforce to support our business.

We build our corporate culture through a variety of initiatives, including global inclusion and diversity, employee engagement, pay equity, and employee development.

Global Inclusion and Diversity

An inclusive and diverse culture contributes to our ability to deliver innovative products and services, which is critical to our success.

Our commitment to inclusion and diversity begins with a highly skilled and diverse board and includes our commitment to educate both managers and individual contributors about our corporate values.

We have made significant investments in furthering our culture of inclusion, including hiring a Global Leader of Inclusion and Diversity in 2020 and a Diversity Talent Attraction Partner in 2021.

We expanded our diversity recruiting efforts and delivered inclusivity workshops to managers and individual contributors at all levels.

We currently sponsor formal employee resource groups for the following communities:

As a high-technology company, our people are critical to our success.

We strive to be a place where people come to build a career in an equitable, inclusive, and diverse culture.

We believe that cultivating our talent is at the heart of engaging, motivating, and retaining our workforce to support our clients and our business.

We evolve our corporate culture through various initiatives, including global equity, inclusion and belonging, employee engagement, pay equity, and employee development.

Diversity, Equity, Inclusion and Belonging (“DEIB”)

We celebrate, welcome and foster diverse perspectives at Pega because we believe this will accelerate our ability to deliver innovative products and services to our clients.

It is critical to strive for representation of diverse backgrounds, but it is even more critical to create an environment where all individuals are respected, valued and supported, have access to opportunities, and feel that they belong.

Our commitment to DEIB begins with a highly skilled and diverse board, and includes inclusion and allyship programs amongst other investments.

We are continuously expanding our sponsorship of formal employee resource groups and are proud to share our support for the following communities:

women, veterans, Black, LGBTQIA+, Asian, Latinx, and persons with disabilities.

Employee Engagement, Health, and Well-Being

Our efforts to recruit and retain diverse and passionate employees include providing competitive rewards packages and ensuring active communication throughout the Company.

We regularly solicit and collect feedback to better understand and improve our employee experience and identify opportunities to strengthen our corporate culture.

In 2021, in addition to our employee survey and continuous feedback tools, we hosted check-in chats with our leadership team to directly address our employees’ questions and constructive feedback.

We are committed to creating an environment that supports our employees’ health and overall well-being, focusing on physical, emotional, financial, and personal wellness.

PegaUp!, our employee wellness program, includes awareness campaigns, fitness classes, guided meditation, as well as health, wellness, and financial seminars.

We compensate our employees for what they do and how they do it, regardless of their gender, race, or other personal characteristics.

To deliver that commitment, we benchmark and set pay ranges based on market data and consider individual factors, such as an employee’s role and experience, job location, and job performance.

We also regularly review our compensation practices, both in terms of our overall workforce and individual employees, to ensure our pay is fair and equitable.

Employee Development

Employee development underpins our efforts to execute our strategy and continue creating and selling innovative products and services.

We continually invest in our employees’ career growth and provide employees with a wide range of development opportunities, including formal and informal learning, mentoring, and coaching.

Pega Academy helps employees, clients, and partners gain and advance Pega software skills more rapidly.

To ensure our business’s long-term continuity, we actively manage talent development to fill the roles most critical to our success.

To support our current and future leaders’ development, Pega offers five programs addressing the development of people managers and leaders in a cohort format comprised of all functions and geographies.

We also provide educational resources and classes, career training, and education reimbursement programs.

In 2021, more than 4,900 of our employees participated in a formal education program.

Our efforts to retain and attract diverse and passionate employees include providing competitive rewards packages and encouraging active two-way communication throughout the Company.

We promote a culture of transparency, regularly seeking feedback to better understand and improve our employee experience, and are committed to fostering an environment where every team member feels connected at Pega.

We share the responsibility to preserve, strengthen, and evolve our culture while continuously reviewing the way we do things to propel us forward together.

In addition to our employee survey and continuous feedback tools, we host regular sessions led by executive leadership team where any employee can ask any question.

We are committed to fostering an environment that supports our employees’ health and overall well-being, with emphasis on physical, emotional, financial, and personal wellness.

PegaUp!, our employee wellness program, includes awareness campaigns, fitness classes, guided meditation, as well as health, wellness, and in 2022, we implemented quarterly global Wellness Days when our entire company takes a break for a day to recharge.

We compensate our employees for what they do and how they do it, regardless of their gender, race, or other characteristics.

To deliver on that commitment, we benchmark and set pay ranges based on market data and consider individual factors, such as an employee’s role and experience, job location, and job performance.

We regularly review our compensation practices, in terms of our overall workforce and individual employees, to ensure our pay is fair and equitable against local markets.

Talent Cultivation

Talent Cultivation is at the foundation of our people strategy and enables us to provide innovative products and services to our clients.

It is an ongoing, dynamic process that enables our employees to focus on both performance and development goals, receive continuous feedback, and drive their future path for growth.

We invest in our employees’ career growth and progression by providing a wide range of opportunities, including formal and informal development, mentoring, and coaching.

Pega Academy helps employees, clients, and partners gain and rapidly advance Pega software skills.

A series of leadership and management development programs equip our managers with the skills and knowledge to successfully build a culture of engagement and high performance.

Additionally, we provide educational resources and classes, career training, and education reimbursement programs.

Corporate Information

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1. Business