Here is an article that Livia Rusu asked me to publish:

“OPENi is a project organized to bring relevant and valuable impact on all its participants in terms of IT knowledge to which they don’t have access during their studies.
Professors, IT Companies and IT Experts have the opportunity to interact with each other and with students.

Aleth Delcenserie, our Quality Manager, had a presentation this morning on “Sensibilization to Quality in software development process”.

Don’t hesitate to follow also Monica Jiman, Pentalog COO – Vice President Business Development, online on http://www.privesc.eu/ at 4PM presenting “ITOO strategies for East Europe”.”

How long has this lull lasted? Thursday, the 4th february saw the return of fear in the financial markets. The debts of developing countries have created a lot of panic. Whether it’s in countries like Greece, Portugal or in Spain. What I find extraordinary when listening to JC Trichet (head of the ECB), Ben Bernanke (from the FED), the Spanish Prime Minister, or the Bank of England, is that they keep repeating the same discourse that we have been hearing from the bankers for a little over a year now. How pathetic. The same central bankers and politicians were demanding the truth from the banks concerning their actual situation. They must play fair and finally tell us the truth now. What will Spain do now with its 20% unemployed, with no budgetary room to maneuver? What will happen to American power if it loses its triple-A standing? The truth about markets, and the truth about power, is simply that no one is telling us the truth.

However, some members of Congress and Joe Bidden, the American Vice President himself, acknowledge the fact that the U.S. debt raises a national security issue.

The response of supporting the concept of consumption is fundamentally the most stupid idea that anyone could have been imagined. This demagogic shortsightedness will widen even further the deficits of developed countries and will simply strengthen the Chinese and Indian industrial and commercial machines. Fiat asked Rome to stop paying car scrap allowance! All for what? Gain 6 months, one year for something that will eventually happen? All these astronomical sums that today’s parents are transferring shamelessly on to their children! Do they really care for them or are they simply simple-minded, glued to the radiators of the Euro and the Dollar, in a class were the best would be the Brazilians, Indians and Chinese?

The financial and monetary wars are perhaps not very far away. Obama took a tougher stance with China last week, but isn’t it too late for America? Europe can still do it, but it has no economic government. So what will happen? Cyber attacks, massive sale of currencies, bull operations on the Brazilian Real, border closures… I do not know, but this is probably the most disturbing part of the crisis which is just now beginning. And when we see the politicians who have not been able to confront the banks seriously, how can we imagine they will be able to reform the state, in short, to reform themselves? Here, we are at the top of the pyramid in regards to responsibility. After this there is nothing. And courageous politicians, well, there are few of them around.
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In this context, deflationary pressures on intermediary prices and sub-contractors is not yet over. I return now to the realities of my management, tactics and strategy. Companies like Pentalog must remain focused on their business model and control their prices. The companies which benefit from government contracts and nationalized companies, everywhere, will see their orders drop and then collapse literally, starting in 2011 because of the failure of the states. Central banks are on the verge of running the printing presses at full speed. Otherwise, how does one support Greece? What to say, in the context of the huge volume of demand in our industry (Pentalog has never had so many requests for a month of January in its history)? But isn’t this just a “technical” recovery following a year of downturn? Certain projects must be started! We feel the febrility in every decision that our big accounts must undertake. Only those working in Asia are a little more confident in themselves.

I have no regrets over our past strategies that have enabled us today to dispose of an economic situation and financial margin which allows us to have significant growth opportunities. We will remain very attentive, torn between these tremendous opportunities and the obligation to be careful.

I never thought one day of attending business meetings wearing snow boots… In Russia, it is common. And rare are the few people who do not wear the fur hat, it is THE essential accessory for your survival on the streets of St Petersburg as well as in the Ural countryside in winter. There are hats for everyone, of all colors, leather, rabbit skin, felt, with brilliants, pearls, but in any case, always something that goes with your coat! Going up Nevsky Prospect in the early morning, amid all these people wrapped up in their own way, going to work with a firm step, reminded me of my literature courses in highschool, and the grotesque characters that Gogol portrayed in a satirical tone in his St. Petersburg Short Stories, which I reread at the moment of this trip: Akaky Akakyevich Bachmatchkine, petty official shivering in his worn coat on the way to the Ministry (The Overcoat) or Major Kovalyov who awoke one morning without a nose (The Nose)…

In Perm, after we had been introduced to the ritual of tasting the “Ruski Standard” (remember to drink only half of your glass and then leave it on the table is very rude to the person who invited you to drink), Denis and his colleagues talked to us about survival skills in the taiga, that we (thankfully) did not have the time to practice. Besides these very good moments that made me completely forget my prejudices about Russian austerity. Anyway, our friends both in Perm and St. Petersburg demonstrated to us their strong commitment to international development and improving their technical and business skills from every point of view. This was an encouraging attitude when thinking of creating a prospective partnership in this country, despite the past legacy which seems to continue to weigh heavily on professional relationships. One entrepreneur explained to us how he launched his business at the time you could read signs saying “No business is no good” in the streets. Today the dream of Russian entrepreneurs is to do business with France, Germany …

Fred spoke of the language problems in his post; it’s true that the use of English is not yet systematic amongst IT engineers. But after thinking about it, overall I didn’t feel any more difficulty in communicating than I did in India, where people spoke English well enough but with a “local” colored accent and with various expressions which I didn’t have the habit to use. I will not speak of French language (the “Alliance Francaise” courses in Perm seemed to be attended mostly by young women from well-to-do families) but on the other hand we met German-speaking people, which is an additional positive point. The language problem is of course less obvious in Saint Petersburg which is a doorway to the Western world, a very cosmopolitan and modern city of 7 million inhabitants, with 120 universities and engineering schools. It is probably the 2nd largest city in the world for engineering outsourcing, maybe even the 1st when compared to Bangalore in terms of the percentage of the population going to university.

So in conclusion, many interesting things to think about after this trip, both in terms of SAP, as well as embedded systems or the opening of new markets in Scandinavia. We were really impressed by the people we encountered. Russia almost seems an obvious choice for the future development of our business and the presence of Pentalog. These projects came at the right moment; the France-Russia year was inaugurated yesterday in Paris… We will return with great pleasure to these frosty regions, but so welcoming!

Pictures can be seen here: Perm & Ural, Saint Petersburg

December 08, in Iasi (Romania), December 09 in Bucharest and finally on the 15th of December in Orleans AFNOR auditors in charge of monitoring our ISO9001-2008 certification, which we acquired last year, came to make their first monitoring audit.

Development projects (our biggest one and 3 smaller ones), the Human resources process, Technical assistance services and facilities management but also the transversal processes (IS, sales ,..) were scrutinized. The findings were direct and unambiguous: 7 strong points, 0 sensitive issues, 0 non-compliance, and 4 process improvement tracks.

These results are very encouraging concerning our approach to quality. Our improvement loops (PDCA) will continue to monitor our development program to approach CMMI level 3.

This could not have been possible without the effort of everyone involved in executing the processes but also those who were audited and those who helped in the preparation. I would also like to note another key to this success: Aleth and her strong personal investment in her function as quality director.

The next set of guidelines has already been launched. I will soon write another note on a topic which I hold close to my heart: Change management and the training we will provide to Pentalog managers on this topic.

When Croissance Plus proposed to us this trip to the heart of the Israel Valley last July, I did not hesitate one second but without really understanding why. Was it for the leads and the potential partnerships that we had received in Romania and Moldova, from Israel? Or was my motivation the magazines or stories extolling the dynamic innovations coming from the Hebrew State? I really did not know until this morning, when I had breakfast with Frederic Beudin, the President of Croissance Plus. After spending the last 24 hours in a coma, laying on my couch in front of the fireplace, after a chauffeured limousine – goodness gracious! -picked me up at the Roissy airport, I really couldn’t figure out why I ended up again in Terminal 2A this morning!

Frederic then reminded me why we were going there, which helped me to better formulate a few ideas what I could expect from this trip. Israeli technology, he reminded me once again, was probably the second global source of IPOs on the Nasdaq and if these companies succeeded, it is because of the local venture capital that had the nose, and the balls and means, well… Perhaps also, there are incentives and innovations particularly efficient in terms of taxation. This is what we will look at tomorrow with Christian Estrosi, when he gets there. Because, if we can find a few good ideas there we will bring them home to France, and suggest them to our government. In this regards, without playing the alarmist, I must say I felt a lot of panic in the French entrepreneurial movement, whether it was with the Medef people in Hanoi or amongst the other members of the delegation. Whether it is the professional tax reform or the budget deficits, many fear the uncertainties of the government and the storm is far from being over. I saw many difficult moments between the political and business leaders. I saw tears in the eyes of a founding chief executive who is 70 years old or more, because he believes his group which had sales of over € 350M in 2008 but realized only 150 in 2009, may not get through 2010. I’m not allowed to share names, but I am speaking of a great innovator, someone that the recovery plan should have saved but has not. Because the recovery plan finances have already been invested in the automotive industry, at a pure loss!

Because the world is in bad shape and we know that France needs GOOD reforms, Croissance Plus is playing its part in finding solutions on the eastern borders of the Mediterranean.

I am going there also, because actually twice in the past two years we have been consulted in Romania and Moldova, by companies from Israel, whose leaders have remembered their family histories are also Romanian, Ukrainian, Russian or Moldovan. Pentalog has received an active partnership proposal from Israel and is considering with interest all the potential lines of distribution of its services and technology. A country that is so innovative cannot be ignored, especially when the opportunity arises.

The Israeli economy is now benefiting from an important effort in R&D in the public and private sectors which has been done over the past 15 years. The country has become a technology hub which has gained international recognition, with a sustained growth of 5% (average) per year since 2003. The French presence is increasingly being felt.

From 22 to 25/11 Frederic will be in Tel Aviv, with a prestigious delegation from Croissance Plus to meet with the Israeli High Tech sector. On the agenda: meeting with start-ups, potential customers and partners, R & D centers and local personalities.

For more information: http://www.israelvalley.com

- China verbietet Twittern zum Mauerfall (29 October 2009, netzeitung.de)
- Firms turn to IT outsourcing to lower costs (28 October 2009, Business and Leadership)
- Who do you trust when you’re spending your IT budget? (28 October 2009, Silicon.com)
- Die großen Widersprüche Chinas (27 October 2009, Financial Times Deutschland)
- Deutsche vertrauen der IT-Branche (27 October 2009, Silicon.de)
- British Software Industry Is Still Alive (26 October 2009, BusinessWeek)
- Zweistellige Wachstumsraten trotz Krise (26 October 2009, Computerwoche)
- Unternehmen wollen 2010 sparen (26 October 2009, Silicon.de)
- China ready for cyberwar, espionage, report says (23 October 2009, Computerworld)
- Africa to compete on outsourcing (23 October 2009, Offshoring Times)

- Gartner: flat IT budgets, but get ready for growth (08 October 2009, ComputerWeekly.com)
- Indian IT mid-cap firms to post mixed Q2 results (08 October 2009, CIOL)
- Deutsche Unis in weltweitem Ranking abgeschlagen (08 October 2009, Financial Times Deutschland)
- 60% of outsourcing firms hiring more this year: Survey (07 October 2009, Sourcingmag.com)
- How To Deal With Corruption In China (07 October 2009, Forbes)
- Mehr Intelligenz fürs Software-Outsourcing (07 October 2009, Silicon.de)
- Study: 54% of companies ban Facebook, Twitter at work (06 October 2009, Computerworld)
- Bulgaria Gets Real about Its Economy (06 October 2009, Business Week)
- Indien verliert an Boden im Offshoring-Markt (05 October 2009, CIO)
- China’s Statistical Setback (01 October 2009, Forbes)

- IT professionals fear ‘brain drain’ as UK opportunities dry up (5 October 2009, Computer Weekly)
- India to add more rules in IT Act soon (2 October 2009, CIOL)
- Europe finds flavour with Indian outsourcing (October 2009, Offshoring Times)
- China’s Online Censors Work Overtime (30 September 2009, Business Week)
- Germany Benefits from Global Recovery (30 September 2009, Business Week)
- India’s new outsourcing rival–Romania? (11 September 2009, cnet); missed that-one a few weeks before, but it’s very interesting…

What’s up?

- Phone calling coming to Twitter (17 September 2009, CNN.com)
- BPO-Markt Deutschland: Umfang der ausgelagerten Aufgaben nimmt zu (16 September 2009, CIO)
- IT soll Finger von Web 2.0 lassen (16 September 2009, CIO)
- How Russia could be more productive (September 2009, Mc Kinsey)
- Infrastructure outsourcing on the rise (15 September 2009, Offshoring Times)
- Outsourcing demand to pick up in H2: NASSCOM (15 September 2009, CIOL)
- Löhne: Arbeitskosten steigen stark (15 September 2009, CIO)
- Finland to set up tech innovation centre in Delhi (11 September 2009, CIOL)

“But even if that vision is taking shape, another danger lurks in America: unlike in the past century, America is no longer the sole center of attraction for the best brains in the world. A recent investigation of the Kauffman Foundation showed that 50,000 Asian immigrants have left the United States these past two years. A movement that has just began. The worst is that 90% of these people returning to their countries are postgraduates, attracted by new opportunities being created in their own countries.”

This small text is an excerpt from an article in the Echos that I twitted yesterday. It illustrates the reality of which we spoke about a few weeks ago. It also reminds me of a debate going on in Morocco where there are many people returning home also in large numbers. Monica recently confirmed to me that in Bucharest she had seen many people who had returned home from the U.S., Canada or Australia.

The article also forgets to add that even if there is a boost in the American economy, unlike in the past, it will be based on a volatile tax burden for years to come. Furthermore the quality of life poses many problems today, especially for non-Americans.

Maybe not striking enough … that’s what I said after the operation I started a few weeks ago in Moldova. We gathered a lot of information, super interesting which will be very useful for the second phase of this plan, when we establish contact and bring the collected information to the attention of the political and economic powers. Pentalog joined recently the board of Moldova Club France. We will make this presentation through this organization. For if our telecom operators and banks want customers, they must give consideration to the subject of emigration in general and that of Hi Pot in particular.

Not striking enough because it is easy to accuse me of walking on the dreams of others…which is nonsense. I never stopped saying how much I admired those who have the courage to go abroad and try something new. My own personal experiences attest to this.

We have already gained a number of positive results in addition to collecting opinions (which we probably will refine in the coming future). Some are simple. I received by mail, two letters from people who were hesitating, and who after reading and listening to the thoughts of those who have decided to stay or who have come back, have decided to remain at home. At a dinner, I said if I could convince one, I would be happy. I am therefore doubly pleased… But this does not satisfy me.

What was confirmed is that wages are not the main reason for emigration. We were not wrong on that matter. Monica mentioned to me the other day, while looking for a PM for the Bucharest office, she met a lot of people returning from Canada, the U.S., New Zealand and Australia. Those returning probably earned more there than what we propose today at Buc … although I’m not sure this is the case in Canada.

I failed with one person. I accept this defeat before my colleagues in Pentalog, who, like me, appreciate this boy very much. A member of Pentalog; I blame myself for it is partly my being absent that allowed this to happen. Because I think if I had taken more time, I might have been able to convince him to change his mind. But his reasons seemed to be unanswerable. Again, it was not simply a case of money, but rather the fundamental desire to have a strong and recognizable nationality. I know he will make a good use of it and his talents will go in the direction of his dreams. This is what we all wish for him after all these years spent together.

Before he left we had the opportunity to talk. I told him he was playing against time, given the political context in his country. He understood, but still, his quest was for a strong national identity, added to his Moldovan identity. Only now I have found the answer I should have given him. A technical answer based on the power of law.
Canadian nationality serves no other purpose than to live in Canada. It gives some advantages under NAFTA but its extraterritorial power has nothing to do with that of the smaller states of the EU. In Moldova, which inevitably will open one day to Europe, Canadian citizenship will be useless. Thus a Slovenian passport has the same power as a French passport or a German one. A Romanian passport is just behind and will soon have the same value. A Canadian passport will never serve anyone in Europe, while a passport of any European Schengen state will open doors around the world … including Canada. If you follow my train of thought, a Romanian passport has the same power in the world as a Canadian passport, maybe even a little more. A Slovenian passport has many more advantages. In a few years (normally two years only) Romania will be a part of the Schengen area, a Romanian passport having then much more liberating power than any North American passport. It will open doors all over the world, offering freedom of movement and settlement in the worlds first economic space … all next to Moldova and soon it will be accessible to all the Moldovan people.

And again, my personal experience. If in 2000, I would have gone through with my plans to move to California, what would the relationship between my past and my future be? I also ask myself another question: would Pentalog have been as strong as it is today? I think not, but at that time, for a few short months I thought that our growth would have been faster if I had started our company there.

The European economy emerged as the first investment space in the world, far ahead of the U.S., Japan or China. Direct foreign investment on European soil is by far the world leader. In 2006, the EU received 421 billion dollars of direct foreign investment while the U.S. received 136 and Canada was well below 5. France, for example, has received this year over 56 billion (2.5 times) for a population 5 times smaller. The United Kingdom received 131! That is to say that the first two European countries in terms of FDI alone accounted for almost 1.5 times the amount of North American FDI, with a population 2.7 times less! All these investments have led the EU to represent 33% of global GDP with less than 8% of the global population.

The creation of new wealth has nothing to do with it. But it is the possibility of wealth that pushes young ambitious people . In North America in previous years this difference was offset by the role the banking system played in investment. Will it be the same in the world of tomorrow? The declining purchasing power of the 2000s in the USA began to cast doubt long before this crisis and created a real problem in the minds of economists. But sustained growth does not create more purchasing power. I will not go further into this subject. It is very interesting, but it is not my purpose.

My last thought in regards to Moldova. Imagine a Moldovan who goes to North America to work in IT and returns one day, full of dreams. There are many like that. Can you name me one company owned by a Moldovan American that is bigger than Endava (Moldovan-British project) than Pentalog (Franco-Romanian-Moldovan project)? But the reasoning is the same in Romania. There is not one American Consulting and Outsourcing company that exceeds European companies. Talking about R & D, the Americans have shown little interest in developing R & D in Eastern European like we Europeans have already started to develop… It’s very simple and unavoidable: a European country has a European commercial logic and with a European political point of view.
At this precise moment in history, taking an American citizenship is a strategic error for a Moldovan who immigrates, (who is of course European), and who intends to return one day, because it will prevent him from becoming tomorrow’s citizen of a state in the EU. This choice closes the door of the European area as long as Moldova will not enter the EU (which is not for tomorrow). There is a good choice and it is accessible to all who wish to broaden their horizons. Time to obtain legal status within the EU is slightly longer but this choice is extremely accessible and far more promising in terms of international law and an economic project.
In short, for anyone thinking of returning someday, full of ambitions, choosing a U.S. citizenship, instead of a Romanian nationality, which will shortly be part of Schengen, is a choice that does not resist the economic, the political or the historical analysis.

In 2008 PeopleCentric became a spin off of Pentalog and subsequently has validated its way of operating. Raluca’s team works with important clients, such as 3M, a well known BDD software publisher, Romanian start-ups, and a number of customers who will add up to the list in the coming months. Pentalog of course will remain its main customer for the moment. A generic (white label) contract was signed with an interim company providing them with the PeopleCentric procedures and technology. This contract represents a real springboard for this start-up. I believe that other companies will sign similar contracts in the near future, and not only in Romania. The main reason being that it validates a business model, very different from those presently being used by the competition. In one year alone, PeopleCentric has become the No.1 IT Recruitment Center in Romania. This month PeopleCentric is looking to recruit more than thirty people. Not bad.

I’m not surprised that this new player is already amongst the top 5 Romanian recruitment centers, (all client sectors combined), given the number of recruits they are asked to find. In late August, Raluca, Elena, Olga and Andra have recruited over 100 people … in the midst of an economic crisis.

How is this possible? Well PeopleCentric is based on a simple idea that can work anywhere. We simply observed that the Pentalog Branch Managers spent 2 / 3 of their time recruiting. However, a Branch Manager is expensive. It would be better if he would stick to managing his team, meeting the clients, (or visitors if you are talking of Western Europeans), organizing the training … piloting the business, rather than seeing people he would probably never hire. Because here is the problem: as a responsible company we do not usually recruit more than 15% of those interviewed.
It is appalling to think that the Branch Managers spend 2 / 3 of their time for a 15% success rate. Therefore it is a huge waste of time to use the Branch Manager to recruit.

PeopleCentric started from one simple observation: the Branch Manager does not need to do 60 interviews per month; he simply needs to recruit 5 people per month. We set a recruiting target: 70% of those interviewed could be hired. The gamble paid off. For us, as well as for our customers, our venture was a success.
The issue of recruitment is very difficult when a company asks you to find 20 developers. Because of their education and being highly courted in the market place, they are almost as difficult to win over as it would be to hire top level management personnel.

Conclusion, the cost of hiring these specialized individuals is high! PeopleCentric developed a unique method, which has allowed Pentalog to cut its cost in 3, to find the right people and at the same time maximize the quality of technical validation.

Raluca is ready to spend a few months in France and we are already discussing with other French entrepreneurs, all this in order to launch PeopleCentric France. She believes that the French subsidiary could quickly make a million euros in sales given the size of the French Market. She is probably right.

What pleases me is that:
- Past Pentalog employees have great ideas, and at the same time we are giving them the support and help they need to make the ideas happen.
- A concept and a business model which succeeded in the Romanian market will now make its entry into the French market.
- A Romanian enterprise will create its first foreign subsidiary in France, with the support of Pentalog.
Isn’t this great ?

Returning from Chisinau the other day, I was struck to see in this country experiencing such difficult moments, how many of our employees are expecting babies. Later, Serghei, vaguely concerned by the topic of my article, has also talked about our employees whose wives are also expecting. In Brasov, Romania, the situation is almost identical.

What does this birthrate in Eastern Europe mean? I must confess I wasn’t very up-to-date about the current demography of these countries and I imagine that Romania takes advantage of the fantastic growth in the past years. Life in Romanian cities is more and more similar with the western models, although much remains to be done. However, in Moldova, even if we registered a real economic growth, uncertainty about the future has always been noticeable. Therefore, I am more surprised by this enthusiasm for parenting.

However that may be, I am pleased to see this wave of optimism, because one doesn’t bring children into the world so they could be unhappy. Could the Branch Managers tell us how many people in their offices are expecting a child or have recently become parents?

About Pentalog Vietnam, I already explained that we were looking for technical, industrial and commercial partners willing to share with a Pentalog joint-venture and management unit based in Hanoi, more consistent means that would allow to capitalize on a strong social branding in order to faster recruit the best people on the market. The purpose is to assert the position of a set of specialized companies, including all joint-venture subsidiaries of the Group, eveny using Pentalog’s management, recruitment and communication methods and tools. Because anyone who has been involved in the offshore business knows that the most difficult part is to BECOME a credible company.

It is what I propose to any company having a serious technological project in Vietnam. If you need more than 30 employees, if you have a REAL niche business and WANT an offshore subsidiary… then join the “Hanoi Pentalog Techno Park”. You will be supported by our management and recruitment teams, just like we did in Romania with the Ausy Group, and thanks to the generated economies of scale, your project may ensure the return on investment that you expect for your offshore investments.

I want to remind all those who are tempted by this type of offshore operation, that committed costs are often higher than the labour burden, especially during the first years, when the number of employees is still low while the needs for management and recruitment are really high. In fact, this is one of the main reasons why offshore location projects fail. I recently spoke to one of my clients who was surprised to find out that our overheads per employee were higher than EUR 1000/month. But the figure includes our “Talent Incubator” department, all business departments in France, Germany and Romania, the Quality Department, The Financial Department, the Technical Department, the Production Department and the Recruitment Department capable of recruiting over 100 people per year… This amount of EUR 1000 also simply corresponds to an expatriate who costs EUR 10 000/per month labour charges included (it is not the most expensive-one) for 10 collaborators in the first year (excluding accounting, recruitment services and even premises…). QED.

We are therefore launching a communication campaign targetting managing directors of software editing and engineering companies. If you are ready to launch out into one of the most promising areas in the world and your project requires more than 30 collaborators, then let’s do it together! Web 2.0 tools will also be part of this project as our partner research efforts will be developed on Viadeo, Linked-in and Xing… coming soon! However, I admit that the current period is definitely not favourable, but this gives you one more reason to adjust your costs and achieve economies of scale!

A couple of days ago we have launched www.pentalog.vn. It’s now the turn of http://jobs.pentalog.vn, the joblog of Pentalog Vietnam, to join the web. It will have the same role in the country as:

- http://jobs.pentalog.ro in Romania and Moldova (en Romanian)

- http://jobs.pentalog.fr in France (in French)

- http://jobs.pentalog.biz which includes all of our ads worldwide (in English)

These three joblogs receive about 10 000 visits per month. In the next days, we will write a blogpost on the social marcom tools we implement to Vn.

Eric is in Romania where he works for a Moldovan bank, as well as Thierry does. Grégory, from France too, manages the office in Iasi, Romania. Dan, a native Romanian from Cluj, now lives in Paris after having worked in the Pentalog offices in Brasov, Bucharest and Orléans.

Aleth, the Quality Manager of the Group established her HQ in Chisinau, Moldova. Sebastian from Brasov, one of the longest-serving employees of Pentalog Romania (9 years, Seaba!), will join Monica in Hanoi (Monica is also both head of the operational structure of Pentalog Romania and manager of the office in Bucharest). Monica is supervising the development of Pentalog Vietnam for the next 3 to 6 months.

Sophie, the Chief Production Officer and Manager of the office in Orléans will stand in for Monica during this time. What about me? It’s been a long time since I have spent so much time in France (I’m managing the office in Orléans!).

Also, I was told that Florent from Orléans might be leaving soon to Brasov.

Who have I forgotten? Maxime was recruited in Vietnam (in Saigon in fact) and joined us in Hanoi. He is Franco-American. Pierre has returned from Germany after several months and got back to the Iasi office. There’s also Cornel, who has worked in all our offices and who has become one of the youngest Technical Managers in Europe (for a company with 320 people). He has also just become a Moldovan resident.

I am sure I have forgotten many, but I didn’t want to indulge into an inventory. I realize that within our group, as in other international companies, long-term professional journeys often turn out to be the driving force of the best personal developments and I see several reasons for this:

- Cultural openness: if I live for a couple of months in a place abroad, I will have to be open to the others. This is great when you are about to become a manager (project, office, subsidiary, …)

- Different behaviour with respect to work. In these conditions my job becomes the mainspring of the personal experience I am having abroad. I am here to pass on experience from somewhere else too. My work becomes the basis of an exchange that will obviously go beyond the single professional framework.

- Progressing vision of the organization: Its logic becomes more comprehensible with increasing experiences. Natural criticism is then based on an enlarged perception of the group and of its business and therefore becomes more contributory.

- People travelling for professional reasons meet in various environments, which are a bit precarious for everyone. Thus, their interpersonal relationships get strengthened and they become members of the core structure.

Any other ideas?

When we opened Pentalog Romania in January 2000, the local labor cost (total wage bill) was about 9 times lower than in France.

In January 2009, within all Romanian offices of the group, the ratio was 2 for the salary and 3 for the total wage bill (4 weeks of paid leave instead of 5, no RWD, rate differences here and there …). This fantastic catching up might frighten us or our customers, especially when we know that at the same time, the prices charged by companies have increased “only by” 100% in 10 years.

Well maybe not. In 2008 Pentalog recorded the highest profitability in its history, both in sales figure and equity capital. Let’s say that the EBIT of the group is approximately 12.5% and the return on equity is around 60%. The first figure interests me as a CEO, and the second figure interests me as the President of the Board of Directors. I would like to recall that within Pentalog nobody, including me, is paid based on dividends.

Nevertheless, a figure of 12.5% in 2008 is about 60% higher than the average of French companies in the sector. Among the big companies, hardly any, except Alten, reached these types of values in the previous years.

But how is this miracle, worthy of the philosopher’s stone, possible? By productivity. I’m not going to take the year 2000 for a reference because we were software publishers, but the year 2003 which marked the transformation of our Romanian team into a “service” team. Then we invoiced about 30% of the available working days. Our competitors, just ahead of us then, invoiced between 50 and 70%. The remainder was composed of overrun on packages, training of juniors, customer disputes on the performance of dedicated teams… In 2008, the invoicing rate at Pentalog … reached an average of 97% while the company recorded a growth in human resources of 66%, immediately leading to a growth with 67% of the sales figure. If that’s not productivity…

We have given this speech, against all odds, to all our collaborators and interlocutors and each time it has won because it is armed for global competition when the wind blows.

Here’s where I am getting: the wage of Romanian developers has increased with 300% during the last 10 years, while that of their counterparts in Western Europe increased with about 25 to 30%. Of course this fantastic catching up is slower now and is mainly based on the “net” component of the wage. Emerging nations are more and more reluctant to deploy levels of social protection and paid leaves that obviously make Western Europe countries more vulnerable.

I believe that the compensation levels will continue to grow in Eastern Europe and in all new IT nations, simply because the projects will come here … even when prices will overtake those in the West, simply because Romania (20 million inhabitants) trains nowadays as many IT engineers as France does, and because Vietnam trains twice as many for 80M people.

What about India or China? Due to the lack of workforce, the core (dev activity) of the western European IT industry will simply disappear. If France, Germany or the U.S. prefer to send their dear children to the schools of cinema, psycho-sociology or styling, it’s their problem. Each nation chooses its own destiny by this kind of choice.

Meanwhile, my reasoning silences the marshals and the old-fashioned persons who are against globalization because our companies have made 10 times more to fix global inequalities than their benevolent speeches campaigning one day for cooperation, but who do not even want these economies to have access to production. Especially that, according to the Syntec, we have contributed only with 3.5% to the French IT economy.

For its development in Vietnam, Pentalog will take advantage of the experience already acquired with Ausy in Romania. In fact, at the end of 2006, Pentalog Romania set up a co-owned subsidiary with the French group Ausy.

This subsidiary was meant to satisfy the ambitions of both parties:

- Ausy wanted to have an offshore/nearshore subsidiary, under the management of an outsourcing specialist in low cost areas.

- Pentalog was looking for means to accelerate its growth in the embedded development area.

This project proved to be successful, since “Pentalog Technology, a joint venture by Ausy & Pentalog”, already employs more than 70 engineers!

Now we intend to use the same framework for the development of Pentalog Vietnam, by offering European IT companies the opportunity to take advantage of Pentalog’s experience and organization, in order to develop low cost engineering capabilities in a promising country.

We have two agreements that plan the setting up of a 50/50 subsidiary, which will eventually employ between 20 and 30 collaborators. Thanks to an equalization of overhead costs, this entity will generate an operating margin of 20 to 25%. The return on invested capital will be well above 100% per year.

However, some conditions need to be considered by potential partners in order to enter this collaborative mode:

1. They must have a true expertise in an area completing the functional or technical knowledge of Pentalog.
2. They must accept that the created company relies on the Pentalog trademark (so as to benefit from a unified social branding on the domestic HR market).
3. The subsidiary will have to employ more than 30 full-time collaborators.
4. They must accept Pentalog’s quality plan.

Before operational launch of the subsidiary, a preparation phase must lead to the signing of a protocol for the establishment of the subsidiary. This protocol will define operation and control rules.

If the Far East tempts you, but you don’t dare taking the plunge alone, please contact our CFO Virginie Picault.

But why? BUT WHY? After having tried to reduce the exposure of our production costs to the Euro zone (thanks to Moldova and Vietnam) and after having published our price catalog in Euros, we are now launching the USD version!

First, this is important in the field of offshore IT purchases for technology exporters to the US and Asia. This is part of ongoing requests from groups like EADS-Airbus, Sagem, but also start-up companies… And it is true that many providers do not dare charging in Euros and taking big risks of exchange losses between the purchase currency and the production currency. It will constitute a real differentiating factor in our sales and price policy. In concrete words, invoices may even be issued by our French company.

This is not an issue for us anymore. On the one hand because we already have ¼ of our collaborators based in the USD area (already 80 people in Moldova and Vietnam) and on the other hand because we are already used to dealing with multicurrency management.

We work on a daily basis with five currencies: Euro, Dollar, Romanian Leu, Moldovan Leu and Vietnamese Dong.

Moreover, it is a real opportunity for us to cut risks. This is where the paradox is and I will explain it. Who would have thought that, since the end of 2008, we would have had an interest in producing services in Romania, that are charged in USD? Who would have put $ 100 on this bet? Yet, there lied the winning couple! The dollar has been rising almost continuously for 6 months now while the Romanian Leu has been dropping, just like the Polish Zloty or Hungarian Forint.

I do not know yet what our volume of USD business will be and we may first limit that volume to a certain percentage of our monthly sales figure. Today I assert that it is a matter of balancing production capacities. I can sell in dollars a service produced in Romania, or even in France, because I am at the same time able to sell in Euros services produced in Vietnam.

Everything lies in compensation. All we need is a bit of cash to be able to choose when to change. That is what we’re already doing with our 5 currencies. Every day I am a bit more surprised to see how the offshore business has enriched our professional practices.

It’s been almost a year since the creation of the German branch of the group, formerly called “Lasnier & Popa GmbH”, now known as “Pentalog Deutschland GmbH”. Mircea, who is the head of the office in Eschborn (close to Frankfurt am Main), came to Orleans a few weeks ago to discuss the results achieved so far and the objectives to be set for 2009.

First, here are a few figures: the 8 clients of Pentalog Germany currently rely on 33 Pentalog engineers based in Romania, with a sales figure of EUR 700,000 achieved in 2008. The backlog amount has already reached EUR 1,400,000. The largest team dedicated to the German speaking market now has 11 persons and is expected to reach 25 members by the end of the year. The overall target is of 60 people, for a sales figure of EUR 2 million, which would represent between 15% and 20% of the group’s sales for 2009.

What can we say about the customers of Pentalog Germany? Most of them are leaders in their fields of activities, whether it’s Dionex Softron in the field of chromatography, APA, the Austrian press agency, or LHS Telekommunikation (Ericsson group), one of the world-wide leaders in the development of billing systems for the telecom sector.

Not bad if we consider the size of our German structure: 1 person and a half in 2008. In a few months time, alone Mircea’s sales force associated with the usual marcom tools of Pentalog have generated business representing almost 10% of the overall sales figure of the group in 2008. Besides, the German IT press is already talking about us…

In short, the German side of me is happy with these results

The challenges for 2009: we will try, despite the difficult economic context, to do our best from a commercial point of view in order to win a few more big customers such as LHS or KVB, to recruit one or two project managers based in Frankfurt dedicated to our customers in Germany/Austria, and to establish a partnership with a great company in the embedded industry, in order to rapidly develop this field of activity in the German speaking area.

Let’s go for it!

This is a sequel of the study of our competitors. The first two articles are dedicated to the human resources market. The last one will deal with our commercial competitors.

The first article was about Brasov and Sibiu.

3. Iasi, Moldavia (the Romanian part), is the third university center of Romania. Iasi has approximately 400 000 inhabitants and is located 500 km north of Bucharest.

Pentalog has been in Iasi since 2007 and reached a level of 38 collaborators at the end of 2008. This office represents our growth vector for the 14-2010 plan. The labour market is open. For the moment, there are only few real outsourcers and it’s hard to say how we position ourselves in comparison to them. Let’s say that our greatest competitors are Continental (but under the control of Siemens VDO) and two high-level software editors: Mind, operating in the field of billing systems for telephone carriers, and Embarcadero, operating in the field of database development tools. Those two employ over 100 persons. So, nothing spicy in Iasi… We probably belong to the top 10. It would be great to end up not too far from the podium, around the 5th place, by the end of 2009, namely around 65-70 collaborators. This is possible, considering that we already have a deal with one of our German clients, who requires us to provide almost 30 high-level J2EE developers.

4. Bucharest (3 Million inhabitants). The office in Bucharest is a little bit different because it is dedicated to higher-level activities than what our competitors do. There we stopped “entry-level offshore” two years ago. We focus our strategy on local customer support. We are involved within Orange Romania and BRD (the French “Société Générale” in Romania). Also, we are a provider of another bank, of Renault Dacia and many other companies. In fact, we take advantage of the Romanian growth. In addition, we go on offering offshore services on niche activities only. In short, our strategy is to search for value-added activities allowing us to draw and retain interesting profiles. In this context, we always succeed… but we only have 40 collaborators. In Bucharest, the giants are Oracle, Orange, Société Générale, Adobe… Pentalog is far behind but does not aim for the podium. We would need to have more offshore activities involving high turnover rates for this. This is what all companies experience. Our T0 is 3% while the other companies have to cope with a minimum of 20%. On the other hand, we still have an open fight with one of the largest local companies. They have identified us, but they cannot retort, because of their business model. At the end of 2009, we will have almost 50 collaborators, if everything goes well.

5. Chisinau. Capital city of Moldova (500 km away from Bucharest – 1 million inhabitants)

We arrived here in March 2005, after creating in Brasov a team of 7 young Moldovans who were ready to open an office in Moldova. We succeded and two years later, we were ranking at the 2nd place. In Chisinau, the largest companies are outsourcers. As we arrived, the leader was the British Endava, with already 150 employees. Today they have 200 employees in Chisinau, while we have 75. During the last two years, we have noticed the arrival of a new competitor, oriented towards testing. They came from Russia, but had only one (Franco-American) client. Now the two of us have almost the same size. Still, their testing activity makes things easier for them. On the other hand, they have taken some of our test scripting developers. We will get even anyway; given the fact that they have only one single client, who is operating on the trading floor, things may by themselves. Endava ist a first-class company. Until now we have competed very little. I believe they took 2 people from us and we took one from them… but a high level person. Anyway, Pentalog is one of the leading employers in the country. The other companies have 10-50 collaborators. Few of them have full time open-end labour contracts. In fact, the Moldovan market is clean in terms of competition. But beware, opening an office in Moldova may be a tricky adventure. There are plenty of traps (premises, telecom, and electricity, relations with local administration and property owners…) and existing between Endava and Pentalog may not be easy… but I’m a liberal I remember that when we arrived in Chisinau we were threatened by a French IT company based there; they mentioned how their acquaintances in the tax administration could harm us, not to mention the communist party. Today they have 8 developers, the same as they used to have 4 years ago!

6. Hanoi. I hope you will not blame me, but even though I have perfectly analyzed WHO our competitors might be, I do have no idea about their behaviour.

In conclusion and as a summary, I would say that our choice to spread all over Romania and Moldova shelters us from big predators. Today, there is no provider in Romania who is able to conduct a destabilization operation coordinated in 5 cities at the same time. On the other hand, in all those cities, we belong to large providers and the rest of the group is behind us. This allows us to attack a bigger company than us without the risk of a global counter-attack. I believe there are less than 5 companies that have more than 3 offices is this area. Another thing I would like to say, is that there are only western companies in Romania and Moldova. We know excellent competitors with Romanian capital. But the only-ones that have threatened us until now were French (twice) and German (once). This just goes to show that one may come from the West and have slightly Soviet practices. A word to the wise!

Now that we have opened an office in a new country, I’m wondering about the number of working days there.

In Romania, there are 7 public holidays in 2009. We get the same number for Vietnam, by subtracting Saturdays and Sundays. In Moldova there are 11 public holidays, out if which a Saturday and a Sunday, but in these cases the days are made up for. In France, there are 8 public holidays in 2009.

There is an average of 20 vacation days per year in Romania and Moldova. This totals 234 worked days for Romania and 230 for Moldova, in 2009. The French 35-hours annual system leads to 217 working days, whatever the number of public holidays.

Many of you know these European figures, but what about Vietnam?

Officially, there are 12 annual vacation days in Vietnam. It is customary for foreign companies to grant some extra days; therefore, for Pentalog Vietnam we have 15 vacations days.

This totals 239 working days for Vietnam, in 2009.

Comparing the number of employees in all Pentalog offices, Romania represents 55% of invoiced days, Moldova 28%, Vietnam 10% and France 7%.

For the sales figure, Romania represents 58%, Moldova 20%, France 16% and Vietnam 6%.

There’s an annual difference of a little less than EUR 10 000 between a working man-year in Romania/Moldova and Vietnam.

The low figure in Vietnam is calculated using a low-hypothesis. Still, with the large production capacities and attractive prices, we have all we need to do better.

Summary of public holidays in the Pentalog world
Romania
Thursday, January 1, 2009
Friday, January 2, 2009
Monday, April 20, 2009
Friday, May 1, 2009
Monday, June 8, 2009
Saturday, August 15, 2009
Tuesday, December 1, 2009
Friday, December 25, 2009
Saturday, December 26, 2009

Moldova
Thursday, January 1, 2009
Wednesday, January 7, 2009
Thursday, January 8, 2009
Sunday, March 8, 2009
Monday, April 20, 2009
Monday, April 27, 2009
Friday, May 1, 2009
Saturday, May 9, 2009
Thursday, August 27, 2009
Monday, August 31, 2009
Wednesday, October 14, 2009

France
Thursday, January 1, 2009
Monday, April 13, 2009
Friday, May 1, 2009
Friday, May 8, 2009
Thursday, May 21, 2009
Monday, June 1, 2009
Tuesday, July 14, 2009
Saturday, August 15, 2009
Sunday, November 1, 2009
Wednesday, November 11, 2009
Friday, December 25, 2009

Vietnam
Thursday, January 1, 2009
Monday, January 26, 2009
Tuesday, January 27, 2009
Wednesday, January 28, 2009
Saturday, April 4, 2009
Thursday, April 30, 2009
Friday, May 1, 2009
Wednesday, September 2, 2009

Our clients often ask this question. I will try to answer it, even though, in addition to being commercially dangerous (but I claim transparency as a weapon in the global economic competition), it is complicated because our competitors are extremely multifaceted.

First of all this depends on who speaks about competition. For our branch managers, competition may refer to the near-by company that operates on the same human resources market as they do. In nine out of ten cases, that company is not one of Pentalog’s competitors in terme of business. In the offshore sector, the near-by company may be working with the US or Sweden, while we work more with France and the German-speaking areas. First I will indulge into a competition analysis about the human resources market on a city basis. Later I will come back to the business approach.

1. Resources in Brasov (340 000 inhabitants – 160 km north of Bucharest)

With 90 employees, Pentalog is certainly the second IT employer in Brasov, the capital of the Carpathian region. You may notice that when talking about other cities, we are generally fond of this position of first challenger of a great competitor. Brasov is an offshore-type market. Practically 100% of the existing IT companies export their production. There are few exceptions and they are small companies. Then, who are our competitors and what do they do? Honour where honour is due, the first one is Siemens PSE, which has recruited approximately 500 people in just a few years. Note the margin that separates the first from the second one. PSE is the outsourcing subsidiary of the big German “Konzern”. Its resources support the company’s projects all around the world. The office in Brasov is especially involved in Austrian projects.
Are we really competing with this IT giant in terms of recruitments? Yes and no. On the one hand, we are competing with them for juniors. Siemens has a very important position within the University of Brasov and we need to strengthen our position here as well. However, these last two years, thanks to the Pentalog training program we managed to get away dozens of young engineers from them. As far as experts are concerned, don’t worry about that! All those who have potential leave Siemens in the first years and join companies that recognize their individual talent. PSE has generalized the salary scale, which is demotivating for the best-ones. And they have to cope with bench times that may bore experts in the long run and lead the others to laze around. Whatever the size of their recruiting operations, those have never deprived us of anyone so far.

Who are our competitors then? A myriad of operators who gather 2 to 50-60 collaborators. Among them, one Canadian company is interested in French resources. I believe they only have a few projects, which weakens them in the eyes of human resources. They have never taken anyone from us since we’ve been in Brasov, or even if they did, what they took was insignificant. Then I think about one of our excellent competitors, on the German market. But there the competition is not high, because of their German background. Pentalog has rather directed its German business operations towards Sibiu and Iasi. We had few confrontations with them and I don’t know to whose advantage these were.

This list has already ended, in so far as we’re talking about real outsourcers, that have at least ten contracts and dozens of collaborators. The other companies are either very small, or only have one client. We often refer to these as “captive companies” or “project-companies”. They may have a good technical staff, but their lack of strategy makes them vulnerable to predators J

We have taken advantage of them many times, in all cities. We have even eliminated one company. I remember a friend of mine had introduced me to the manager of this company, back in 1999 during my first visit. I remember him telling me to “keep out”. Today the market in Brasov is open. You don’t have to worry about threats or stuff like that. Even the relationships with the university are getting more open.

2. Still in Transylvania, let’s move to Sibiu (approximately 200 000 inhabitants– 230 km north-west of Bucharest)

Sibiu is not a “free” labor market when talking about IT resources. All newcomers have to pledge allegiance to the local “tyran” Continental. The manager “Herr Doktor what’s-his-name” keeps local companies off from taking its resources away. I don’t know what threat they use, because I refused any discussion with them. Why? First, because I don’t accept the concept of “trust company”. I am a free and liberal person. Second, because this proposal came after that several of the collaborators we were trying to hire, and who were Conti employees, have been directly threatened by them. At that level I say “stop”. Pentalog has come to Sibiu in April 2008 and already employs almost 40 persons. This ranks us as the second or third IT employer there. We will strengthen our position in the upcoming months because programmatically we are actually 50. Continental has approximately 300 employees in the R&D field. We have stirred up trouble by taking 10 of their people. However, the rules of silence are broken. Among our competitors, we also find a small operator on the German market, with approximately 30 collaborators.
They are nice and respectable. We haven’t had any confrontation with them so far. We compete with them for the second place.

All the remaining ones are small companies. Among them, there’s a nearshore office of a French giant. I won’t say its name, even though I would love to! They have threatened us when they arrived in Sibiu. Continental has really deteriorated the economic network. This French company came here thinking about the human resources at Conti. But the Doktor was on the watch and he quickly reminded them that in France they were providers for Continental… A Romanian employee working within that company told me this story. Then we arrived and we refused to be submitted to Continental. Shame on those who organize themselves into a cartel and then give morality lessons to the others…

A weak management, organized on a non-competitive basis, has “pushed” almost all their project managers towards us. They should have never forgotten that Romania changes and the Competition Council registers results that are more and more convincing . The follow-up of this article will be dedicated to our offices in Iasi, Chisinau, Bucharest and Hanoi…

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.

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.

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.

A lot of news coming from Kiev… but not only good-ones. I don’t want to tell my opinion yet about a possible outcome for this country where we have just opened an office, but let’s say that some of the latest news is rather negative.

1. Ukraine becomes an official member of WTO… this is good news. Without any doubt, for Ukraine WTO represents the step before EU accession. With 48 million inhabitants and a pro-western posture regarding strategic matters, it’s a bet we made with Kiev.
2. Inflation has risen above 30%. The 45% limit means hyperinflation which hinders international economic collaboration. Be careful dear Ukrainian friends, you are playing with fire. At that level, investing in Ukraine becomes highly risky and the local market we are mainly interested in may collapse.
3. Inflation is a bone of contention between the president and Timochenko, none of them willing to assume responsibility for it. The Prime Minister’s programme gives you the shivers and constitutes a true multiplier of this inflationary trend. They have to be careful about what might happen in the case of an institutional crisis that is coming closer each day.

As a conclusion, Pentalog’s strategy in this country could evolve in the months to come. We came to this country in the first place for the local market and its development potential, but an economic and institutional crisis which is really likely to happen, could lead us to reconsider our plans.

This morning I am in Marseille, visiting a true French innovator for whom I have great respect. We have been investing a lot together with this customer for the last 2 years. This small company innovates in a field where American firms from Silicon Valley or Boston usually rule the roost, apart from a few “small-ones” such as San Disk, Gemalto, Orange… Well, they confirm that in spite of millions of euros of fund raising, growing reputation, high standard premises in an exceptional Mediterranean setting and a particularly sexy technical environment, they are unable to find enough workforce. That is the reason why they chose to work with Pentalog, before thinking of cutting operational costs. And with us, they increased the size of their development team by 40%.
Another client of mine from Marseille, a little less “technically” developed, but great in terms of business model, told me yesterday that without our help he wouldn’t have reached his objectives. This client I am writing about is an Orange subsidiary.
We are witnessing an endemic, long-lasting lack of human resources, which yet does not affect 100% of the sector in the same way. It is true that the situation is already worrying in IT, but it gets even more dreadful when it comes to embedded software development or hardware conception… and it is exactly that segment that is expected to bring growth during the 21st century, isn’t it? So can you tell me what public authorities have done in the past years and why they have not tried to match education with the commitments they took in Lisbon a few years ago to develop knowledge economy?. It’s Western Europe that has to be a pacemaker in this field and I am afraid that in this context it’s not an easy role to assume.

The new “xPC” project I’m working on made me think about the problems linked to engineer demographics in Europe (everybody is talking about it), but even more in developing countries. I just held 3 business meetings in Bucharest this week with different major actors (IT companies). These 3 companies added to the one I manage expect to recruit 600 persons by the end of this year, while universities produce “only” 5000 graduates every year (and 50% of them will never work for the Romanian IT market).

In other words, most of the recruitment plans of IT companies are doomed to failure (in India, China or Eastern Europe), and turn-over rates will be higher than ever! But you guys from Western Europe should not show off about it, because you educate even fewer IT engineers compared to your population; also, you now have to face the gray boom and growing salary pressure. I will get back as soon as possible to the Western needs subject.

What is happening now in developing countries? They have to meet 4 strong trends:

1. Demand for low cost software development, an increasing trend (especially in Eastern Europe, more than in India or China). The economic crisis hitting the banking, insurance and industrial sectors will strengthen this tendency.
2. Domestic needs. These countries grow by 6 to 10% every year. They are burdened with runaway salary inflation which leads them to improve their productivity in order to remain competitive… So they have to computerize their companies and decayed administrations.
3. The third point is strictly related to European emerging countries. They are now going to benefit from high structural funds in order to catch up with the other countries.
4. In addition to offshore development as a means to cut operational costs, developing countries are being faced with a manpower demand that is due engineer demographics in Western countries. The German demand is particularly amazing, way more than the US, French or Canadian ones.

As a conclusion, the time has come to finally admit that without massive training policies, promises made by big IT firms will not be kept. Resources will be lacking, that’s for sure… but what will the consequences be?

I have been spending a lot of time in start up committees recently… And I love it! It has been a long time since I did this. We will soon launch not less than 3 companies within the Pentalog Group:

- One in Ukraine, together with Olivier. Because our business there is now really getting started. Today we just won our first project on the local market with a famous French bank. I’ll keep you up to date, because our international operations are booming (Swedish client in Romania, extension of agreements with local customers and a new prestigious reference in Germany). All this couldn’t have been done without the help of Serghei, Angela, Monica and Olivier.
- Another-one in Germany (where I am at the moment), that I have already written a lot about. We just held our first “German” management committee meeting. Virginie, Alex, Mircea and I have been working together for 2 days in a war room, on the same table, with our laptops. I really enjoyed it!
- And a third-one I will soon tell you everything about. It is a challenge, a totally new activity in the group. The head-office is of this project is in Bucharest but hopefully it will soon get a European dimension. It’s a pleasure… food for thought, combined with high standard technologies, and the birth of a brand new service market participant. A lot of work at night, after working days, in fine restaurants of the Balkan capital. And next to us, the wise, experienced managers, is standing a young, pretty and ravenous task force (hello Andy). All this in parallel with a European trademark registration and 2.0 web marketing and communication.

Finally, I already told about this a few days ago, I am preparing with our communication department the creation of a new brand, which will be totally dedicated to low cost services. We are working hard on this matter too, in order to be ready to launch it the next 4 weeks. Unfortunately I cannot yet tell you the name; I might not even disclose it on this blog, I still have to think about it. You are indeed about 2 000 readers who pay us about 5 000 visits each month. We systematically exceed 30 000 visits per month on all our websites together. From this train between Frankfurt and Paris where I am concluding this post, I would like to thank you all for your loyalty.

Pentalog’s German subsidiary was officially created a couple of weeks ago in Frankfurt. This branch will be a gateway dedicated to the development of the Pentalog group’s offshore nearshore business in the German-speaking area. And I think this is a very important step in our minds.

Entering the German market was not an easy thing, especially for a company with a French background, working mostly with French customers, even if are used to deal with interculturalism and multilinguism through our offices and activities in Eastern Europe. We had to work hard on the company’s international maketing, communication and sales capacities. It seems to me that we have now reached an encouraging level of international presence. I will not say a satisfaying-one because we are aware that we have to follow along the path we have paved to achieve even better results in the near future.

But for now a new contract has just been signed with an innovative company from the chromatography sector. Two young developers based in Romania just spent a few weeks on the company’s Munich premises with very posititive feedback from the customer. Another dynamic German company from the CRM sector just started working with the Pentalog Group. The team is likely to reach a level of 6 persons by the end of the year.

In addition already existing contracts were extended in Germany and Austria and those represent a sales figure amounting EUR 150.000. This is a good start for this newly created Pentalog office, isn’t it?

Right in the middle of the NATO summit in Bucharest (I am fed up with those noisy helicopters and traffic jams), which will determine if Ukraine and Georgia will become NATO members, I am wondering to what extent the accession to this alliance can influence the choice of an offshore destination.

I think that this depends on the subject. But for sure, for the aeronautics or defence sectors, this can matter. For several months, rumours about a possible military alliance in “the Eastern World”, between Russia, India and China have been going around. But some people deny them. Anyhow, since a certain time the positions of Russia and China have clearly aligned themselves, especially on the subject of oil supply of the world’s fastest growing economy, mainly coming from Iran, which is itself an important purchaser of Russian equipment and military technologies.

India’s position is slightly different, but above all less clear. Its dispute with Pakistan, a usual allied of Washington’s, makes this country totally unclassifiable for the moment.

Anyhow, this criterion only concerns aircraft and defence projects; the IT sector does not seem to be affected.

I just beat my absolute travel record during the last 4 weeks. I travelled the length and breadth of Europe (25 000 kilometers), visiting 7 countries I entered 15 times and took 17 flights in 27 days… I also managed to drive 3 500 kilometers accross Germany, Austria, Romania and Moldova! Stop now.

I will get back to Orléans this week and I will try not to make more than two trips to Paris. Elena asked me on Saturday evening if this amazing road show has been profitable. In principle, yes, it was, because it should allow us to allocate projects to 10 or 20 additional people, 4 to 8 of them for German and Belgian clients. Among others we have signed an agreement with a brilliant German industrial group, that I could not yet announce in my former post about our German adventures.

If everything goes well, in the coming weeks we will tell about another agreement with a prestigious German company that is quite unusual for the French…

Alex, Mircea and me, we have just finished an Austro-German little trip, who led us from Frankfurt to Wien, passing through Munchen. We met 3 actual customers of Mircea, in Munchen and Wien, and a pre-existing customer of Pentalog in Munchen. We also visited 3 prospective buyers: start-ups and grow-up and worldwide leader!

I would say that comparative to French companies, the German ones are more careful, even interested in our offers.

Back to Frankfurt (the headquarters of Pentalog Gmbh), we have 2 business extensions and 3 options from prospective buyers and from clients. The German and Austrian customers will represent, the days to come, a Pentalog recruitment of 14 collaborators (against 10 nowadays). Two references are particularly prestigious and important for the future: APA (Austrian Press Agency, 600 collaborators in Wien) and e-Circle, 180 persons in Munchen, the German leader of the marketing web.

The acceleration of our internationalization is particularly delightful, from the intellectual point of view as for the future promotion of our firm. Today Pentalog counts 27 collaborators full time who do not work for France: Romania, Switzerland, Germany, Austria, Moldova, and even Hong Kong (yes! we make in Romania R&D for a firm established in Hong Kong).

I strongly believe that the German zone represent the stable heaven of offshore IT and R&D. Germany, the German part of Switzerland and Austria offer many advantages:

- Innovative export economy
- Euro invoices
- An even more important RH crisis than in France
- More elevated prices
- The highest production cost from all over the world
- A more demanding market in terms of quality and price
- A market interested in East European proposals than Indian or Chinese

For Germany and Austria offshore production has to positively compete with the operational group margin. Our offer should moreover find easily its place between Polish and Czech companies, providers more expensive than us. Our range of products is permanently more favourable.

I believe that the German structure, now integrated in Pentalog group, with the help of all development means of our group (marketing and RH) should see a 100% growth that should also continue in 2009. Still, I don’t except an even higher growth.

For this we have to get started with these famous German SMB, which we already cherish in France, and with some great accounts.

A few days ago I read an interesting article about the long-term trend in computer science and engineering. It revealed a lack of engineers, regardless of the quality of the economic situation. This human deficit would become worse if a positive long-term economic tendency appeared.

Why? I think that it will be necessary to take a look from 2 points of view to find a valid explanation:

1. Trends in education: the time when becoming an engineer was a must is already far behind
us and Europe has educated many more managers than scientists in the last 20 years. This trend seems to be continuously growing since the 90’s.

2. Demography: youngsters who currently are on the labour market were born between 1980 and 1985, in other words in the active phase of the Western birth rate reduction. Eastern Europe will not have the necessary resources to compensate Western needs. Its birth rate dropped as well between 1985 and 2000.

Anyway it is becoming more and more obvious that we have to move to population areas that do not offer enough jobs: Eastern European mid- sized cities, emerging countries that benefit from a well-developed education system. This is what Pentalog has been doing over the past several years to draw an increasing number of colleagues.

In addition, the players on our market will undoubtedly be obliged to structure new education capacities, as they used to do between 1995 and 2000 – either through professional unions, or directly… a bit as Pentalog does with its training programme which trained about 20 young people in its first year of existence.

Unlike in the 90’s, the problem we are likely to face now is that we cannot rely anymore on other scientific fields (physics, maths, biology), because those are running idle as well. I am convinced that we will be obliged, at least in Western European countries, to call on not only foreign engineers or scientists, but also non – scientists… quite a lot of new stakes and hard challenges for education experts and recruiters.

I told you that we would crush the dragon!
I am glad to be ‘a blue one’! I hope that, in the following days, to receive good news from our national administrations, in accordance with the generosity that we’ve just seen express. I actually experience a true philosophical conflict with the institutions of the Republic. France does not understand a thing from the new international diffusion of business and continues to apply the XIX century rules on international migrations.
They obviously put spokes in our wheels in everything that has to do with the international collaboration of our subsidiaries (temporary relocation of collaborators, gibberish about the provision concept…). In the meantime, the Anglo-Saxons are snatching the human resources of developing countries. So, it is their companies that pull the chestnuts out of the fire on consultancy and software markets, that are absolutely indispensable for the XXI century economy and consume plenty of human resources.
On the other hand, the difficulty with recruiting Moroccan engineers in France, wanted worldwide, inspire pity. I am trying to recruit two super young guys who are currently under a French contract and it is a horrendous effort. Here are the immigrants from a twin country who grew up loving French and chose to study at an engineering school in our country and support our national teams with no hesitations … well, it is absolutely delirious to try to recruit them. I am anxious to see how this will end. I find it outrageous.
In the meantime, we do not find French engineers here … it goes without saying! And when I think that they get us bored stiff with the issue of deliberate immigration and that nobody knows how to pay the pensions. Damn, we are talking about engineers, Mister President!
Honestly-speaking, the spirit that I saw on Cardiff Stadium yesterday, was not in accordance with these stiff laws, from a different age. I will have to bear the consequences if things do not go according to my expectations in the weeks to come. Pentalog will, of course, continue to operate in France, but we will not be able to leave there the management of our international operations and so we will have to relocate our head-office to a country that is freer and more suitable for both our business ethics and development. The worse for France since we used to deploy 100% of our international results, it was not very reasonable from a fiscal point of view, but in accordance with our ethics. It is a pity, the invoicing basis will increase organically by 65% this year and we will continue. Who achieves such results in the hexagon …. apart from the rugby team of France?

ALLEZ LES BLEUS !

Brasov, Friday October 5,
I have not always taken the time to post, but the last WE was really rich for some Pentalogue-ians who, together with me, headed for the south of France. The schedule included: Romania-NZ and France Georgia.
Firstly, Toulouse, Saturday; Monica and I met old acquaintances from Bucharest business, who had come to offer their endless support to our other three-color team.

This experience reminded me the extent to which Romania is a part of me. I vibrated on the anthem, I was exuberant with the Romanians when they scored their only touch-down.
Several French around me, who were there to watch the game, were really having fun about the situation. ‘How can you support to this extent a team that is going to lose and that is not even yours ?’ ‘It’s very simple. It was not the Romanian government that offered me the chance, but the entire country, the entire nation gave me the opportunities that I’ve never found at home. So yes, it is true that on the day of the world-level rugby competition, my flag is made up of four colours and is slightly larger than the others.

But, how could it be different given that for the last 8 years I have spent more than 50% of my time in this country where I have so many brothers-in-arms?
Sunday, Marseille for France Georgia with Ludo, Aleth and Sophie. Georgia is a recent discovery of mine. What a people! What a history ! Playing rugby with the Georgians is discovering the first Europeans and fraternising with them in mud (actually the pitch was nickel obviously). Such a people is not satisfied with football only. What I like with rugby is that no matter the score gap at the end, you go away with the celebration in your heart. There I also felt the tremble the moment of the first clashes between the teams.. My dear old country, how I love you … all the French love themselves on a stadium ! It is magnificent. Our little ‘blues’ were cheered as if they had crushed the dragon. And tomorrow they will crush it!

Rugby, for me, is the whole of life at full speed: joy, screams, despair (not too long), even business is done with love!
And it is twice my size there are two hearts that beat!

I will post some photos during the day, as soon as I have the time!

I do not like complaining about anything, but Tarom is one bad company …
I am writing from Bucharest Airport, in the very base of the Romanian national company.
Having boarded in time, our plane tried to take off, but proved incapable of accelerating … mainly a problem with the left brake. Landing, then boarding 1h30 minutes later on the same plane. And there, times and times again, the same pattern, asthma-suffering plane. But the best is that they boarded us without performing the runway test … awful!
So the re-boarding … no drinks, no sandwiches for 2 hours, obviously no procedures.
It is the second time such a problem has happened to me in a month and 3 flights with this company. I discovered not being the only one on the plane. It is a classic issue, but my father had a luggage problem, that was not dealt with for a week. He had to send somebody to recover it in Bucharest.
In short, Tarom is a true shame for Romania.
No Tarom flights for Pentalog until new orders.

I have just found an article on a website, written by Lowendal Masaï Group, French and maybe European leader on consultancy for operating costs reduction, and Pentalog customer ((see the case study). This article refers to a study on the evolution of the customer/Low Cost supplier relationship.
He underlines that worldwide we are probably witnessing a true change in the trend of the relationship that binds the customer and the HCC (High Cost Country) are and the return of the LCC (Low Cost Country) Supplier. Even though all powerful, the HCC purchaser could see themselves benchmarked, having their own practices and thoroughness assessed, before themselves, as supposedly rich customers, to be selected by suppliers that may seem the poorer part of the business.
It seems that several years of worldwide increase of 5% have disrupted the habitual mechanics of the buyer. Yesterday exaggerated, disorganized and not very professional, under the circumstances of weak demand, the LCC offer has changed (at least for the LCC suppliers elite). In fact, we come across more and more prospects whose professional practices are quite inferior from a quality point of view to the companies that they assess. If, for most of them, it is all about a chance to seize, others step back in front of international organisations that are perfectly structured, polyglot and very quality-oriented.
We experienced such a relationship some weeks ago with a company that bore a very beautiful label. The internal roles were not clearly defined, the test specialists were terrible, our e-mails remained unanswered for days, or even weeks … so, we had to explain them that they were not able to work in offshore (despite the high interface level of Pentalog compared to other offshore/nearshore structures).
Practically, every day, offshore companies, given the circumstances of ever-increasing demand, convey the demands that make some HCC country companies tremble.
I think that what is happening is both strategic and predictable … good news ! The provision of IT and consultancy services is the growth factor for a world that is increasing the pace and the volume of its exchanges. In other words, we are talking about the most educated part of human resources in countries that increase by 6 up to 10% per year in a world that generates an increase of 5% per year. We are probably talking about an annual increase of low cost IT services that is higher than 25% ! That’s unheard of.
So what is so strategic about it? Well, actually, even if the situation in which IT needs in HCC increase does not reach the amazing rate of LCC, it still remains high enough. It is probably about 10% in OCDE countries whilst the capacities in this area do not increase at the rate of the demographic rate of such countries. And when one knows that the ratio of engineering certificates is quite low everywhere, one understands why offshore areas have beautiful days in store. What is strategic about all that, for Western companies, is that they understood that they would never get away from this logic and that they have to adjust their purchasing strategy as quickly as possible, accepting a relationship of equality in the process with other companies whose level of commercial practices, quality and equipment can be very high.