Ken Stillwell: One last point on that. The – about two-thirds to 75% of our clients have seen Pega Cloud now, meaning that they have at least one application or one environment for Pega Cloud. As that – there’s a natural momentum that as clients have one application on Pega Cloud, they look at moving all or other applications to Pega Cloud. So you do have a little bit of the flywheel on people buying more Pega Cloud, more clients getting exposed to Pega Cloud, which then will lead to the migration discussion that you mentioned. So I do think it’s really a good time for that to happen now.
Pinjalim Bora: Got it. Thank you.
Operator: Your next question comes from the line of Rishi Jaluria with RBC Capital Markets. Please go ahead.
Rich Poland: Hi, thanks. This is Rich Poland on for Rishi. Thanks for taking my questions. So I guess first one, Ken, just to clarify. I believe you said AI contribution embedded in the full year guide when it was provided was zero. So if we take a step back, can we just think about what needs to happen to achieve the guidance? And what kind of early adoption of blueprint or Blueprint accelerating the adoption curve, the upside to those numbers?
Ken Stillwell: Yes. So yes, your question is you guided at the beginning of the year 11% ACV growth. And we did say that we did not believe that factored in a noticeable impact to ACV from GenAI. Your question is if there was a noticeable impact, would that provide upside to the growth number. And that’s the sense of the question, which is what I read. I would say, yes, significantly faster adoption of GenAI and influence into the pipe and the conversion of pipe is certainly an upside opportunity.
Rich Poland: Okay, great. That’s helpful. And then one for Alan, you mentioned the industry expertise as kind of a differentiator around AI. Can you just kind of expand on that a bit and just what you’re seeing right now in terms of use cases in specific industries or just maybe any domain expertise that you’re infusing into some of the solutions there?
Alan Trefler: Sure. We took our industry experts, and we have them pulled together the templates that made most sense for common industry problems in the areas where we have a lot of experience, and we have a lot of experience, as you know, in banking, insurance and healthcare and government. And you can see that if you use Blueprint, we have before we go out and begin infusing the GenAI content into the analysis, you can see our standard template actually visible in the Blueprint sources you made. So if you say, hey, in banking or financial services and credit card, and I want to take a look at collections as a function, you’ll see a whole collection of our best practices of product. And so I think we’ve been able to use the things that we’ve learned about the industry.
The things we’ve learned about technology, which is how we’ve been able to pull this in. And I think the team has done a great implementation to be able to bring this together in a way that’s very tangible and will be the basis for a lot more coming.
Rich Poland: Awesome. Thank you.
Operator: Your next question comes from the line of Jake Roberge with William Blair. Please go ahead.
Jake Roberge: Hey, thanks for taking the questions. And great to hear about the hundreds of customers that are already using Blueprint. Just curious, what type of use cases are you seeing customers target with that solution? And then I know you have 20 or so other GenAI accelerators. Are there any other solutions that you’re starting to see customer interest pick up for?
Alan Trefler: Sure. We’re finding that the customers are creating blueprints all over the map, there’s a lot that are tied to particular service flows so things that you want to do in customer service. The onboarding and life cycle management of clients is another place where I’m seeing a lot of blueprints being done and being created, being able to think about how you can modernize the front ends to your SAP and other back-end systems is an area that central. So it’s really multitude of processes that historically, people have to go and sit down in front of a whiteboard and brainstorm, you can now ask our history and the Internet to come together and have to do in 2 minutes, what used to take 2 weeks. And I think that’s going to be pretty game changing, particularly as it continues to evolve.
Now other accelerators that we have. The ones that I think – one of the ones that I think most interesting is we’re going to be showing off at PegaWorld and have a client actually talking about the ability to do what’s called voice AI, which is to have the AI listen to the stream of literal conversation that’s going on and use that to both make sure the person is saying the right things. So if you’re in a regulatory business, you have to save certain describers to make sure those things are actually said, but also to default fields on the screens and really very, very substantially improved productivity, both through that and also through things like being able to summarize the call. So I would say there are lots of features out there in AI.
You have seen lots of vendors talking about future A, future B and future C. What I’m most excited about is not that we won’t have a great set of features. We absolutely do have and will have terrific features. But the ability to use the GenAI to fundamentally optimize the way the business runs, to be able to use it to build processes. I think it’s something I’m not seeing anyone else doing. And that makes me excited.
Jake Roberge: Yes, that’s very helpful. And then, Ken, great to see the improvement in Pega Cloud gross margins. Where do you think those ultimately trend over time? And are there any cost to consider in that metric as it relates to GenAI?
Ken Stillwell: Yes. That’s actually an insightful question. The second one. So the margins – we see the margins getting above 80 and I don’t – when I say above 80, I’m not talking about 5 years out, right? I’m talking about in the relative near-term. So we think we’ll get above 80. The question of once we get above 80, Jacob, the question is how far can you really push that? I mean if you look at like other companies in our space and that’s a class for a multi-tenant SaaS solution is probably like low to mid-80s. I mean, that’s about as good as I have seen companies get. For us to get above 80 at less than $1 billion of revenue, I think it’s actually quite good. But I think there is still room to optimize there.
