Just a short explanation: a collaborator charged as opposed to a non-charged, is an employee directly involved in the production of a service charge, whether by way of commitment or performance. In the Pentalog vocabulary, rather they are called producers (technician, through engineering and up to project director).

Those not invoiced to the client, are all the others, whether they are accountants, in the marketing department, in the administrative system of Pentalog, director of Production, branch manager, and or the President.

I had a discussion on this subject, with an associate, a few weeks ago who expressed surprise that despite our speech about the efficiency of our organization, we have at Pentalog an “overhead” of 25% on sales while they turn around 21% (they have nearly 2000 employees).

Why then is Pentalog more expensive? In the two cases, we integrated all the costs, even to the CEO (marketing communications, management, office space, training etc.).

21% for the average invoice of a collaborator in this company is equal to 2000 Euros per month and for Pentalog 27% is equal to 1000 Euros.

Many smaller Parisian IT companies, spend 2500 Euros per month!

Everything depends on what we are talking about, because ultimately, the contribution of our overhead cost charged to the customer is less than 50% (in value) or 50 € / day: a trifle!
And at this price, the difference is that we have almost 100% of our staff in our offices and we have 60 people annually (between 15 and 20%) of our staff who are part of our in-house training programme and they contribute to reducing costs through payroll (with the trainee staff participating in the production).

After all, we have employees working in management, client relations, marketing in France and in Germany at the same costs of Western European countries. I believe that our “overhead” is 5 to 10% more effective since they allow us to be more profitable than other French SSII by 2 or 3 times, with a growth rate 10 times stronger, for a total cost of 2 times less in actual value.

I am going to be severe with my colleagues, but their gross profit margin, the only indicator they use, has seen its day! Yes, it is very simple to manipulate and allows easy incentives to commercial people but it is accompanied often by a total absence of financial management on the part of your non-invoiced revenues and here actually reside enormous reserves of possible savings if you are prepared to reduce the size of your commercial department and put into place a strategy based on e-business which is very much adapted to our business. No matter the efficiency of management there are dozens of decisions based solely on the gross profit margin which are made daily by sales people and branch managers.

Lets return to offshore business, I do not believe that overhead costs can be reduced significantly under 1000 Euros per month and per collaborator on a system that is maintaining itself between 100 and 500 collaborators, taking into account the growth and management of staff, and training. At the same time, even in this size of company, it is not acceptable to pay more than the price of an offshore services “entry level” for overheads only. I will say therefore that my “target” is not to exceed 900 Euros in 2009, and no one in the profession should go over 1300 Euros. I believe for 500 collaborators or more, this figure must be brought down to 700 Euros. At the present time I have not done the exact calculations to confirm this concept.

And for those who have not yet understood what I am saying, I will be even clearer! A small offshore company with local management where the manager has a payroll of 5000 Euros (I have not been mean here. If it is an expatriated person you will have to consider double or triple), plus one employee, plus an accountant, offices, and a telecommunications system…, and no representative in Western Europe, therefore no real commercial or marketing service, no training, and no quality supervision… and 10 collaborators to charge out with an overhead of approximately 1000 Euros minimum! If the manager is an expatriate you can go as high as 1500 Euros, even 2000 Euros for quality management and with little of the necessary internal services. Can you imagine how many small offshore companies like this exist? We have taken over one or two per year over the past few years, you can find them most anywhere in Romania, practically for free or at least for very little.