Room 4561
						September 19, 2005



Mr. Christopher Sullivan
Chief Financial Officer and Treasurer
Pegasystems Inc.
101 Main Street
Cambridge, MA 02142

Re:	Pegasystems Inc.
	Form 10-K for Fiscal Year Ended December 31, 2004
	Filed February 25, 2005
      Form 10-Q for Fiscal Quarter Ended June 30, 2005
	Filed July 29, 2005
	File No. 001-11859


Dear Mr. Sullivan:

      We have reviewed the above referenced filings and have the
following comments.  Please note that we have limited our review
to
the matters addressed in the comments below.  We may ask you to
provide us with supplemental information so we may better
understand
your disclosure.  Please be as detailed as necessary in your
explanation.  After reviewing this information, we may raise
additional comments.

	Please understand that the purpose of our review process is
to
assist you in your compliance with the applicable disclosure
requirements and to enhance the overall disclosure in your filing.
We look forward to working with you in these respects.  We welcome
any questions you may have about our comments or any other aspect
of
our review.  Feel free to call us at the telephone numbers listed
at
the end of this letter.


Form 10-K for the Fiscal Year Ended December 31, 2004

Item 7.  Management`s Discussion and Analysis of Financial
Condition
and Results of Operations

Results of Operations, page 12

1. In the discussion of your results of operations, you refer to
various factors that have impacted results without quantifying the
impact of each factor.  For example, you refer to several factors
that contributed to the increase in selling and marketing expenses
in
fiscal 2004, but give no indication as to the relative impact of
each
factor. Explain to us how you considered Section III.D of SEC
Release
No. 33-6835.

2. You disclose that perpetual license revenues in 2003 and 2004
decreased due to the restructured agreement with FDR.  Please tell
us
more about your agreement with FDR.  Tell us how the agreement was
"restructured" and explain how the change in the agreement
affected
your revenue recognition.

Liquidity and Capital Resources, page 18

3. You disclose that you fund your operations primarily through
cash
flow from operations yet your discussion of operating cash flow is
limited. When preparing the discussion and analysis of operating
cash
flows, you should address material changes in the underlying
drivers
that affect these cash flows. These disclosures should also
include a
discussion of the underlying reasons for changes in working
capital
items that affect operating cash flows. Please tell us how you
considered the guidance in Section IV.B.1 of SEC Release 33-8350.

Financial Statements

Management Report on Internal Control Over Financial Reporting,
page
31

4. We note that as of December 31, 2004 you identified certain
deficiencies in internal control over financial reporting and that
your management was in the process of remediating these
deficiencies.
Item 4 in your Form 10-Q filed for the period ended March 31, 2005
provided no discussion nor referenced any deficiencies in internal
control. Tell us in greater detail the nature of the deficiencies
you
identified as of year end, including how these deficiencies were
identified, what remedial procedures were implemented and when you
no
longer considered the concerns to be considered deficiencies in
internal control over financial reporting.  Further, address why
you
determined these deficiencies did not rise to the level of a
material
weakness.

5. Explain in detail how, in light of the deficiencies noted, you
were able to conclude that your disclosure controls and procedures
and your internal controls over financial reporting were
effective.

Notes to Consolidated Financial Statements

Significant Accounting Policies

Revenue Recognition, page 38

6. Your policy indicates that you recognize revenue from perpetual
and term licenses upon customer acceptance, provided that no
significant obligations or contingencies exist.  Please tell us
about
these acceptance provisions and any other revenue-related
contingencies such as rights of return, stock rotation rights,
price
protection, and warranties. Describe the material terms of any
such
contingencies and describe their impact on your revenue
recognition
policy.

7. You disclose that when license fees are not fixed or
determinable
some license fees are accounted for on a subscription basis.
Please
explain your reference to "subscription basis".  In this regard,
please tell us whether these agreements include unspecified
additional software products.  See paragraph 49 of SOP 97-2.

8. It appears that your arrangements may involve multiple elements
Please describe to us all elements included in any multiple-
element
arrangements and explain how you allocate the arrangement fee to
each
element.   Indicate whether you determine VSOE for each element or
for the undelivered elements only and describe how your current
revenue recognition policy addresses these arrangements.

9. For multiple element arrangements that include term licenses,
please describe to us the length of both the license terms and the
related maintenance periods and explain how you determine that
VSOE
exists for the maintenance. As part of your response, address the
guidance in AICPA Technical Practice Aids 5100.53 and 5100.54.

10. You disclose on page 6 that you provide professional services
to
add new functionality to your software.  Please tell us more about
these services and the other professional consulting services
described in your revenue recognition policy.   It appears that
services are offered as a part of multiple-element arrangements.
If
these services are offered as part of multiple-element
arrangements,
explain to us how you have concluded that the services should be
accounted for separately. Refer to paragraphs 7 and 63 to 71 of
SOP
97-2 for further guidance.

11. We note your disclosures regarding fixed-price service
projects.
These projects appear to include several elements for which you
are
unable to accurately estimate the fair values until later in the
implementation process. It is unclear what revenue recognition
guidance you are following when recording revenue from these
contracts, e.g. whether you are using a proportional performance
or
completed performance model.  Please describe in detail how you
recognize revenue from these fixed-price service projects and
refer
to the specific authoritative literature that supports your
accounting. Further, tell us the nature of the direct costs
incurred
which you use in determining the amount of revenues recognized.
Also,
tell us the typical timeframe over which you perform under these
fixed-price service projects.

Form 10-Q for the Fiscal Quarter Ended June 30, 2005

Item 4.  Controls and Procedures, page 27

12. You disclose that as of June 30, 2005 your disclosure controls
and procedures were "not fully effective."  Tell us how you have
considered the requirements of Item 307 of Regulation S-K when
making
such statement.  In this regard, we note that this disclosure
should
clearly state that your disclosure controls and procedures either
were effective or were ineffective as of the date of the report.
Any
qualifications to this conclusion do not conform to the
requirements
of Item 307 of Regulation S-K.  Refer to Question 5 of the FAQ on
Release No, 34-47986 "Management`s Report on Internal Control Over
Financial Reporting and Disclosure in Exchange Act Periodic
Reports."

13. Please describe in greater detail the nature of the material
weakness you identified in your disclosure.  Tell us when the
material weakness was identified, by whom it was identified and
when
the material weakness began.  As part of your response, describe
to
us the specific steps you have taken (or plan to take) and
procedures
you have implemented (or plan to implement) to correct the
material
weakness. Indicate when each corrective action was completed or is
expected to be completed.

	As appropriate, please amend your filing and respond to these
comments within 10 business days or tell us when you will provide
us
with a response.  Please submit all correspondence and
supplemental
materials on EDGAR as required by Rule 101 of Regulation S-T.  You
may wish to provide us with marked copies of any amendment to
expedite our review.  Please furnish a cover letter with any
amendment that keys your responses to our comments and provides
any
requested information.  Detailed cover letters greatly facilitate
our
review.  Please understand that we may have additional comments
after
reviewing any amendment and your responses to our comments.

	 We urge all persons who are responsible for the accuracy and
adequacy of the disclosure in the filing reviewed by the staff to
be
certain that they have provided all information investors require
for
an informed decision.  Since the company and its management are in
possession of all facts relating to a company`s disclosure, they
are
responsible for the accuracy and adequacy of the disclosures they
have made.

	In connection with responding to our comments, please
provide,
in writing, a statement from the company acknowledging that:

* the company is responsible for the adequacy and accuracy of the
disclosure in the filing;

* staff comments or changes to disclosure in response to staff
comments do not foreclose the Commission from taking any action
with
respect to the filing; and

* the company may not assert staff comments as a defense in any
proceeding initiated by the Commission or any person under the
federal securities laws of the United States.

      In addition, please be advised that the Division of
Enforcement
has access to all information you provide to the staff of the
Division of Corporation Finance in our review of your filing or in
response to our comments on your filing.

	You may contact Christine Davis, Staff Accountant, at (202)
551-
3408, Marc Thomas, Senior Staff Accountant at (202) 551-3452 or me
at
(202) 551-3489 if you have questions regarding these comments.

Sincerely,



      Brad Skinner
							Accounting Branch Chief
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Mr. Christopher Sullivan
Pegasystems Inc.
September 19, 2005
Page 5