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Smaller government software contractors like Appian (NASDAQ:APPN) and Pegasystems (NASDAQ:PEGA) are eyeing new business opportunities as the Trump administration pushes for a leaner, more tech-driven federal bureaucracy, The Wall Street Journal reported Thursday.
The smaller firms must also be cautious. They could benefit from the shift or find themselves facing the same budgetary axe that’s trimming others.
Leaders from both companies have publicly expressed support for the aims of the Department of Government Efficiency (DOGE), a reform initiative championed by Elon Musk that emphasizes technological modernization across federal agencies.
Appian (NASDAQ:APPN) Chief Executive Matt Calkins said to the Journal that his company is actively collaborating with DOGE across multiple agencies.
Alan Trefler, chief executive of Pegasystems (NASDAQ:PEGA), echoed that sentiment, saying DOGE’s emphasis on digitization and cutting outdated systems aligns closely with Pegasystems’ (PEGA) core mission: automating workflows and eliminating inefficiencies.
DOGE’s efforts have led to job reductions, contract cancellations and a push for centralized control over government IT infrastructure. The initiative heavily leverages automation and AI, making it a major player in reshaping the way federal agencies operate.
This overhaul has put pressure on large federal contractors to demonstrate their value. For smaller firms like Appian (APPN), however, it’s a rare chance to challenge the dominance of entrenched, deep-pocketed vendors.
Calkins said his company in the past felt disadvantaged as a smaller company without legacy relationships.
Appian’s (APPN) software helps automate repetitive tasks, often referred to as process mining, and is currently used by branches of the U.S. military, including the Air Force, Army and Navy, for procurement-related tasks.
Despite DOGE’s vision seemingly aligning with Appian’s (APPN) offering, investor concerns linger. TD Cowen analyst Derrick Wood noted that DOGE’s scrutiny of federal IT contracts could potentially deem some services non-essential.
Calkins acknowledged that uncertainty during a recent earnings call, while pointing to the company’s significant federal footprint. One of Appian’s (APPN) Education Department contracts has already appeared on a DOGE cancellation list, based on data compiled by federal contracting site HigherGov cited by the Journal.
Pegasystems (PEGA), which also provides digital process automation tools to federal agencies, may see impacts from changes in government tech budgets, analysts at Citi have suggested.
DOGE has reported canceling about $30 million in contracts linked to digital modernization. Still, overall federal spending has risen under President Trump, according to the Journal.