Good news for today. The leaders of two sectors join forces to create a new entity designed to offer assistance and online back-office services to companies established in the Eastern Europe. Acticall is the second French operator on the call-center market with 3000 positions. Acticall is at present the first provider for the CAQ 40 companies.

For its part, Pentalog is the leader of offshore/nearshore IT services in the Eastern Europe with more than 250 engineers on 4 production sites in Romania and one in Moldova. The group relies today on 295 collaborators.

The two groups maintain their partnership since 2002. Thanks to this alliance, Acticall will have the benefits of Pentalog’s expertise on the Eastern European countries (Pentalog is also present in Ukraine for consultancy activities). From our point of view, Pentalog will strengthen its BPO Business Line activities (contract management, content management, financial and accountancy operations…). The new company will be based in Chisinau, Moldova, who, thanks to the exceptional multilingualism (Russian, Romanian, French, English, Italian, and Ukrainian) caught the attention of the two partners. This joint-venture, named “Acticall Eastern Europe, a joint venture by Pentalog and Acticall” will be supervised by Pentalog’s executives. At present Pentalog is the 5th IT outsourcing player in Romania and the 1st in terms of expansion, with a 100% growth in 2007 and 2008.

With this economic crisis which get’s day by day more serious, I believe that it is crucial to foresee, after a first period potentially favourable to the low cost production modes, that these countries will also be affected by the economic slowdown. The Indians already know it since many giants have already reduced their workforce by 10% or more.

A number of our colleagues, Romania and Moldova, working for the U.S. or the UK (countries with an already major offshore maturity), know it. What should do the IT specialists in order to prepare themselves for the crisis? I see two key strategies: choosing an employer who knows how to manage his risk portfolio and to upgrade his versatility.

1. Choosing an employer with a strong commercial dynamic: many projects, many clients, frequent opening of new projects, multiple geographic origins, avoid companies too specialized or sector niche. Prefer outsourcers to software editors. Choose multi-specialized companies. Prefer a developing start-up on non-mature offshore markets (France, Germany, Scandinavia, Austria, Switzerland, Benelux..). Does this remind you of such a company? However, I truly believe in it. It’s an old technique spreading the risk. Although probably no sector will be spared by this crisis, some are more concerned than others.
2. Be more versatile: the IT specialists from low cost countries are often specialized to idiocracy. They are frequently trained by Microsoft during University (through partnership programs). They are often convinced that we can not be Java when we are dotnet or otherwise. Often they confuse language and technology. We recently had to let go two people REFUSING Java training. Can you believe it? An IT specialist saying “no” to training. As if their whole career will use only one language! Or that being trained to Java will exclude them from other Microsoft projects! I am on my third economic crisis since the beginning of my career. The one of 92-95 (after a burst of real-estate bubble), the one of 2002-2004 (the Internet burst bubble). We innovate today with a banking crisis. All I can say to everybody is that those who have crossed the most difficult years were those who knew best to move from one folder to another, no matter the language they used. It’s pure arithmetic, since there are fewer projects, we must be more agile to be part of it. We don’t choose a language as we were choosing our religion. Personally, I am very proud that I can speak French, English, German and Romanian and this allowed me to multiply by 3 the geographical origins of our client projects and likely to increase by 3 the commercial signatures. It’s the same thing with Java, PHP or Dotnet. Knowing several languages is certainly a way forward to the positions of manager and management techniques. Add that what I say about the languages may also be extended to different specialties: DBA, Business Intelligence …

The question now is at what point would the economics of IT offshore be affected by this storm, but its violence has surprised many countries in only a few days. Its spread is staggering. Therefore, it seems more appropriate to prepare before being affected! We belong to a profession that eludes most of the time more unemployed than others, but you must know that this rate has exceeded 10% for several months in the early 2000s! Offshorers, nearshorers, developers, analysts, administrators, let’s prepare for the storm! Maybe this will scare it off!

For the 3rd year in a row, Mircea and I, we are present, until this afternoon, at the stand of Romania at the IT trade fair in München. We learned that this would be that last fair edition, at least in this form. The München Messe GmbH announced at a press conference before yesterday that the show would be replaced from 2009 by 2 new events: one on security and one which we know nothing yet.

Officially, they say that this change is made in order to adapt to the changing IT markets and business expectations. They avoided referring to the number of exhibitors which, according to an exhibition neighbour attending this fair since 2000, was divided by 2 in a few years and the number of visitors (I have noticed myself and I frequented this show only the last 3 years) was constantly falling and so it was time to innovate a bit.

It is well known that the decline of interest in this kind of event is a general trend, partly because the site was right for them. But I think that it comes also from these events themselves. The firs time I went to CeBit in 2006, I was outraged by the impression of “fair”, in the negative sense, that the show left me. A noisy and colourful spectacle that seemed more for the general public than for the professionals. Without a stand of minimum 200m2 we were soon flooded in the mass. The SYSTEMS fair seems to have a more “pro” orientation, but it is obvious that this several decades old event needs a make-over.

All this to say that I find it unfortunate that trade show are losing so much speed. They are always a good opportunity, beside systematically providing new customers, to observe the competition, to listen to the clients’ positive or negative stories they have had with their offshore providers, brief to observe the market in order to be able to adjust our marketing strategy in order to fulfil expectations.

I’m curious and eager to discover the new concept that München Messe will propose for the next year. And I hope that the delegation representing the nearshore Romanian professionals will always be in the game.

Hanoi! On Friday the board of Directors decided that Pentalog would open its next office in the Vietnamese capital city. Several factors influenced this decision:

- the Asian location will complete the group’s marketing position
- it will bring additional benefits in terms of production costs compared to Ukraine and Romania
- Vietnam enjoys great political stability
- Hanoi disposes of a very good education system and is less glutted than Ho Chi Minh City
- the country has understood the importance of having very well-organized high level academic courses, all over its territory, through international partnerships
- Vietnam already has 3 investment poles of great interest for our future development.

About this last point, I believe that a second Pentalog office will be set up in the near future in Ho Chi Minh City. I am expecting it for the the beginning of 2009. Ho Chi Minh will also remain a luxury alternative in case of difficulties with our office in Hanoi. Of course we are definitely not closing the door to Ukraine, a country that is so close to us, but we consider that the Ukrainian people must urgently solve their political and financial problems if they want to attract new investors. I cannot expand in a country that hinders circulation of capital and has shut its eyes for 2 years to the crisis that was obviousls threatening it.

Back to our Vietnam project, we are going to get back in touch with the persons we met, the persons we have been talking to and those we are going to recruit…

You could read on this blog many news Fred wrote lately about Pentalog’s current development plans. There’s a lot of things currently happening on the international level. Plans with Asia, Ukraine, Germany…

Pentalog’s business model made the company one of the most innovative, solid and fast-growing-ones of its sector in Europe. Always one length ahead of its competitors, the group managed to make its offer evolve quickly in order to meet market evolution and seize new business opportunities, as well as to assert its position in the cities and countries where its offices have been set up. I think we can say without blushing that we have achieved a “global”
position in terms of service range, and we are now on the way to become a global provider from a geographical point of view also.

To sustain our expansion and growth objectives we expect to achieve in the short- and mid-term, we need to set up strong partnerships with IT companies accross countries where Pentalog has already started developing business relationships (Germany, Austria, Belgium) but also in new areas where we feel the Pentalog model may be successful. We think of countries like Sweden, the UK, the Netherlands, the USA, hosting top-edge mid- and big sized companies in the IT service sector. Those companies could find in Pentalog the ideal leverage to develop their offer and market shares in offshore IT outsourcing. The current financial and economical context is likely to lead more companies to turn to offshore to remain competitive. This should generate all the more new opportunities for outsourcing vendors.

In 2007 we already set up an R&D department through our joint-venture alliance with a French company that enabled us to improve our expertise in embedded systems, and now representing an important service range in the group’s activities (18% of the group’s turnover). In 2008 we created a commercial branch in Germany and gained 10 new clients since then, within 6 months. We are now about to create a new development centre in another country. We really have gained substancial experience in company creation projects in foreign countries, managing cross-cultural relationships with our partners and learning a lot out of it. We are definitely ready to apply our model on a much larger geographical scale now, involving new languages, new technical skills, new time zones, new climates…

I feel the coming months are really going to be an exciting period for all Pentalog team members involved in the implementation of the company’s international growth strategy. I am delighted at the thought of the Europe map on our corporate flyer turning into a world map with plenty of new dots standing for all Pentalog locations!

So if you think you are one of these potential partners we are looking for, please contact us

Our second day in Odessa…

I took the liberty to resume Fred’s first impressions about Odessa and also to state my own ideas about this second day of our trip.

The second day at the Odessa University gives us a more optimistic picture. Anyway, I wasn’t 100% agreeing with Fred. As an ex-professor at a Romanian University I profoundly disagree with any discourse so unconnected to the students’ interests. Being a teacher, as any other job, implies sticking to the rules. In those labs we visited yesterday, we saw that the professors were involved and they were putting the students’ interest on top. Furthermore they express a highly international openness. Still, as I have already seen in some other Ukrainian cities, the linguistic skills are not sufficient. I mean the students’ skills, who don’t sufficiently manage international languages, which restricts international university inter-connection. Anyway, I admit that Ukraine has big potential.

While I was writing these lines, Serghei informed me that the Ukrainian financial system is about to go bankrupt (Petru is attending a mission in Kiev for an important bank). In theory, the banks stopped refunding deposits and no money leaves the country. This is one more reason to re-think our future strategy.

Odessa is truly a magnificent city. More than 2 million people urging on the streets where the luxury competes with the most beautiful European resorts. Monica, Serghei and I have visited the Polytechnic University and tomorrow we will visit the embedded systems labs.

The meeting we have had this morning with the teachers made us a little bit circumspect. It is quite clear that some Ukrainian cities are still looking for their IT models. We mention our training needs; they propose an association with our production structures. The professors from the LLC are clearly not fairly paid by the local system. They hope to see the day of an association with Intel, Microsoft or I don’t know who else!

Well, I have already seen this happen. Half of the teachers from one of our locations are paid by Siemens (while the DHR of Siemens is a university teacher), on some other location is Continental who rules and on the third one is Nokia. And we cannot blame them. Eventually these “collaborations” are positive. In some cases these collusions become too aggressive. I know a case where a company tries any form of pressure on the competitors, a company with an outstanding ethical chart, with any doubt. Tomorrow we will spend some time with the students and we will try to make an in-depth analysis of the difficulties the local professors encounter. We really want to help them, even if this was not the reason for our trip.

I arrived yesterday in Chisinau, just in time to meet one of our best clients for one hour and a half; I discover today the new flagship of our Eastern fleet! It looks really great. Take a look at the two pictures. It’s Saturday and there’s almost nobody here. But it’s spectacular, one of our best achievements. We can accommodate here 120 engineers and BPO operators without any trouble.

Before leaving tomorrow for Odessa, I took this morning a little tour at the wine festival. That was 3 years that I systematically missed it. Not very successful, no tasting of fine wines. Too bad for them, because I bought only 3 bottles, whereof one of Moldavian ice wine. Again, I took two pictures.

I have just returned from Vietnam and I already have planned another trip. This Friday I will be in Chisinau (Moldova) with one of our clients who wants to visit our office that he didn’t see yet. On Sunday, Serghei, Monica and I, we will go to the Black Sea coast, in Odessa, in order to make an in-depth analysis of the Ukrainian port capacities.

I couldn’t have waited to make this trip for several reasons. First, because the ideas clash into fertile “little big bangs”. I want to expose fresh ideas and then to announce which will be the next implantation of Pentalog on identical analysis bases. I’m sufficiently familiar with Ukraine at this moment. The strong points of these two competitors are extremely different:
- dispose of an Asian position or not
- proximity / change of continents
- cultural unity / cultural rupture
- 1h / 5h of time-lag
- 600€ / 500€
And finally there’s the sheer provocation, which is very important… I’m sure you’ll agree.

No, we cannot be as blind as Louis XVI now that the central nervous system (the banks) is about to explode.

We just hit the low end rates. We just hit recession. Several major banks will disappear with the cash. The consequences on the IT sector will certainly appear in a few days or weeks. From now on, the banks will build their success on emerging economies only.

European governments, especially French and German, must quickly liberalize the economy if we don’t want to fall into confrontation with Asia. We don’t get rich, we speculate. The proof of this is this stupid real-estate bubble created by low rates. Far from me the idea that Asia doesn’t speculate, on the contrary, it gets wealthy.

The offshore sector will also be affected, at least those who work for the financial world (India is already particularly affected). However, there is still much to gain on industry and non-financial services. Perhaps the ratio between the prices growth and the offshore costs will reverse due to unknown context? The small countries are already affected by the monetary consequences. The Romanian Leu collapses, restoring the Euro-Dollar competitiveness.

Anyway, this crisis is not too convenient to anyone. The weeks to come, we should be extremely aggressive, conqueror and proactive.

Photos from Hanoi

Vietnam Airlines tomorrow night.

Pentalog signs the first big contract with Germany.

This contract doubles the actual operations volume we had with Germany. This contract will bring more than 1M€ per year. For now, I don’t know if I can reveal the name of the client, but let’s say it’s one of the major software editors in Germany. In several months, this contract will gather 20 to 25 persons.