Pegasystems to buy Chordiant, add CRM, analytics to BPM

Pegasystems has reached an agreement to buy Chordiant for $161 million, bringing BPM together with CRM, customer experience and analytics.

Pegasystems, a business process management software vendor, today made a tender offer to purchase Chordiant, a

CRM software and services company.

Under the agreement, Cambridge, Mass.-based Pegasystems will offer $5 per share for all outstanding shares of Chordiant common stock, bringing the total purchase price to $161.5 million, assuming all shares are tendered.

Pegasystems' business process management (BPM) software has been used by organizations to improve their customer experience initiatives and will be combined with Chordiant's predictive decision management software, according to Pegasystems.

"Chordiant has important assets in marketing, customer satisfaction and customer experience management, and we see some interesting ways to bring those to the existing Pegasystems client base and additional customers," Alan Trefler, CEO of Pegasytems, said on a conference call this morning. "Pegasystems' strength has been powered by automation. When we take a look at what Chordiant has done, they focused a lot on the customer conversation: How do you make sure the right thing is said to the customer? How do you make sure the best product is offered to the customer? We envision having something that will look to prospective buyers like a well-integrated concept and a more substantive offering than either of us offers today."

Trefler said he expected to have an integrated offering available to the market this year.

This is not the first time an offer has been made for Chordiant. CDC made an offer of $105 million in January.

The deal is a good one for Pegasystems, said Michael Maoz, vice president and distinguished analyst with Stamford, Conn.-based Gartner Inc.

"In terms of the offer, I think you have to keep in mind for Pegasystems, that Chordiant probably has half that already in ongoing revenue," Maoz said.

Additionally, Chordiant's customer base in banking and Pegasystems' base in insurance complement one another.

BPM technology has increasingly made its way into CRM systems. Today's deal is an indication of that, and Trefler said he sees a bright future for BPM in contact center technology.

"We've actually sold a lot of call center or multi-channel contact centers over the last 18 months," he said. "We've seen this as an interesting and important area for us. I could see that growing to be a very meaningful part of our business, where it grows at a faster rate than the BPM business."

In fact, while perhaps not recognized as such, Pegasystems was already in the contact center market with its real-time decision engine.

"They were often in it when they weren't seen as in it," Maoz said. "A lot of companies may have a homegrown or a Siebel interface for their contact center desktop, but underneath it you would have the Pega rules. All those rules are under the covers."

There are already customers using both products. Citibank, for example, uses Chordiant as the call center agent desktop and Pegasystems when there's a credit card dispute, Trefler said. Chordiant software supports when the call comes in and Pegasystems provides the business process logic when a dispute arises.

"We would handle the question of if we give you immediate credit or if you're trying to rip someone off and go out to the other banks and make sure credit gets there and it sticks," Trefler said.

The two companies will also focus on combining predictive analytics and process management with social networks, something Pegasystems has already begun and will be demonstrating at its upcoming user conference in April.

Chordiant's marketing technology is also a good fit for Pegasystems, Maoz said.

"Pega was pretty weak in marketing automation, something Chordiant is very strong in," he said. "Think of this closed loop marketing management. They can embed that in a call or email follow up. That's going to be a second important asset."

However, should the deal go through, the two companies are going to have to rationalize Chordiant's partnership with IBM. Existing Pegasystems customers should pay attention to their professional services.

"Pegasystems should make sure their own customers don't feel there's been any lessening of attention in services," Maoz said. "Pega has already stressed professional services. If they have a weakness, that's been it. There professional services have been spotty. Some have been excellent, some have just been ok. During [the merger] period existing clients just have to take some care to make sure they have the right people with the right skills for the job."

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