How the company’s salespeople do their selling has also plays a role; the company changed its sales tactics in recent years, and the effect seems to be working. They focus on business heads of individual departments who will use the products, rather than solely trying to romance the IT folks who will implement the systems and won’t truly realize their potential benefits.
“We target the businesspeople, not IT, and address the specific business problems they’re having right now,” Dynes says. Moreover, rather than trying to nail down megadeals, the Pegasystems sales team is going after piecemeal projects that — because of their smaller size — result in quicker turnarounds for clients. Plus, particularly during the downturn, these projects are more palatable for decision-makers in penny-pinching mode, according to Dynes.
To be sure, Dynes does feel some economic heat from customers, who are taking longer to sign deals because their own internal processes for approving projects has recently changed. Whereas clients would typically need the approval of three people before inking a deal with Pegasystems, now they need to get double the amount of signatures before giving their vendors the go-ahead. Tech companies more than ever need a “compelling case” to get clients to open up their tight spending budgets, and they have to go “through more levels of approval to get the deal done,” Dynes says, adding, “There’s been some changes in the market, certainly, as our customers are having a hard time.”
However, his clients are paying their bills for the most part. Dynes says he hasn’t seen much effect on his accounts receivable from the downturn and has in fact seen some improvements. Days billed outstanding, on a quarterly basis, was at 56 days for last quarter, down from 63 days during the same period in 2007. He attributes the improved metric to more tightly written contracts.
Dynes also has more flexibility these days with a thick cash cushion. Pegasystems has $167 million in cash and no debt. Three weeks ago, it issued a quarterly dividend of 3 cents per share.
As for the future, Pegasystems intends to build up its sales team so that the rosy revenue numbers will keep coming in, through 2010. Sometimes Dynes himself gets involved in selling when he is occasionally brought in to help negotiate a deal. He believes meeting with customers and seeing how his company’s products operate in practice supports his CFO role. “It really helps me explain to investors why we are continuing to sell software in today’s market,” he says.