It was indeed one of the key functions of the Pentalog Group’s website galaxy and one of our main differentiating aspects in the context of the transparency policy introduced in 2008 with our first free download services catalog. Nothing is ever perfect, but we have thus unified our pricing practices, and pricing on a case-by-case basis, as all consultancy and outsourcing businesses usually do, has never been practiced by Pentalog.

We are equally aware of the fact that, thanks to this practice, we have brought our contribution to structuring offshore prices in Europe, North Africa and the Far East. Many of our competitors used this system to check their prices and adapt them according to the Pentalog scale. In this respect, we have played a special commercial role, even ethical. Downloading the catalog and using the estimate generator have amounted to 1,500 visits per month only for these functionalities!

But, our work has been accomplished by now, the offer is mature, and we now wish to provide such transparency to our “real” customers, partners and prospects only. In fact, our sites have been continuously copied in particular, but not only by British, Romanian and Tunisian companies for some time. They have systematically copied our services: offer design, recruitment, commercialization and pricing processes, etc.

Therefore, we have created a very user-friendly Web2.0 space which will enable us to control the distribution of our higher value contents and to deliver our quotations, to manage project and client-teams, contracts, etc. Based on electronic document management, it will also be equipped with conversational features close to those existing on professional social networks.

Thus, in the coming days, our good old price catalog will be available again in PDF format and it may be downloaded by real customers, partners and prospects, with real identities checked via our services portal. There are also contract models, ISO-compliant quality assurance plans , our future white papers, as well as the updates of all our project documents.

So, please pay attention, this space has already been open for all the aspects related to project management for existing customers and a few prospects. But, starting with next week, we are going to launch our updated price catalog which contains no fewer than 25 new services and competence types. In the following weeks, there will be summaries of Project Quality Plans, the services catalog and the training sessions provided by Pentalog Institute, the offshore white paper, then those related to e-commerce and embedded systems, etc. All these launches will be announced beforehand on our blogs, social networks and newsletters, and they will be available to all those who do not simply call themselves website looters.

A month after our return from Tunisia, our debriefing work has already been accomplished; in any case, it was much easier than that following our journey between Silicon Valley and New York.

Among the clear French-speaking advantage, undoubted education quality, but also political unrest and mass emigration, Tunisia combines at the same time good points and drawbacks.

I have been wondering for a long time why this little country couldn’t see its largest companies develop explosively on the international market, supported by an unfailing friendship with France, with a Mediterranean culture and an educational system that overshadows many European countries as well as its neighbors. I have always felt attracted by this country, but the events that took place here last winter have, once again, prevented me from coming here and looking for answers to our questions.

Our first meetings have given us the main answer immediately. The No. 1 issue of Tunisian IT is the national attrition rate. This means that the young Tunisian engineers continue to flee the country, as the local economy doesn’t fulfill their expectations. Therefore, we had a conversation with a very young entrepreneur, I don’t know him too well, but many consider him opportunistic. I will not make any moral judgement, as it would be extremely simplistic to hold him alone responsible of the problem related to retaining Tunisian engineers. Each year, he supplies the French IT services companies with 300 to 400 people, for a revenue of about 1 million euro. His system is so well-honed that he says he has only 3 employees and his profitability is thrilling. 100% of his revenue is made in France. Officially, Tunisia issues 10,000 computer engineering diplomas per year, but, according to all the people we have met, among which several members of the domestic IT employers’ associations, the number of those actually “usable” doesn’t exceed 3,000, far from the official discourse delivered to the French press. The competition against Morocco around this figure resembles the statistical match which opposed the USSR to the USA in the fifties! But we can already notice at this stage the huge impact this person could have on the development of the Tunisian IT sector.

I must add that he doesn’t send any beginner to his French customers, but he carries out his “sampling” from the senior section, starting from 3 to 10 years of experience. I must add even further that, no matter how organized he is, he is not the only one who lives out of this population displacement, many candidates manage to find jobs by themselves and certain French IT services companies hire them directly on their own. Among the means used, I could mention the secondment of employees that local branch offices of French IT services companies or specialized offices practice, at times on the borderline of legality. Therefore, we can assume that, in total, the number goes beyond a thousand people per year. At an average offshore rate in France, this population displacement costs the Tunisian IT services exporters a little above 30 million euro per year, while the migration business accounts for “only” 2 to 3 million. And each person recruited by a French IT services company only generates income once, by definition, while local service provider continue lacking in human resources on a permanent basis. Thus, it is not against the 30 million euro that we must compare the 2 or 3, but against the average period these people will stay in France. There is a strong likelihood that the net loss for Tunisia reaches 100 to 200 million euro for several years. In contrast, the French IT services companies earn, for an average rate, either about 90 million euro as revenue per year, or 270 to 450 for an average of 3 to 5 years. For a developing country, it is quite a hefty sum, not to say staggering.

From an operational viewpoint, how could new entrants in the local IT economy be assimilated, if the confirmed and senior staff, expected to become experts and middle managers, disappear from the system for several years or forever? This is the reason why the Tunisian IT economy is not at the commercial level one would expect. There is also an enormous productivity reservoir that is lost.

Extrapolation? There are other figures which support my statement. While the Tunisian offshore sector is about 10 years old, there is said to be between 7,000 and 20,000 active IT specialists in the country. The figure of 7,000 corresponds to the population of offshore outsourcing centers, while the 27,000 people represent the network technicians of the administrations bodies and the local IT employees (27,000 people representing, however, 0,42% of the country’s total population, which is a proportion two times lower than in France). In any case, these figures show that, obviously, the Tunisian IT economy does not retain its graduates and that this financially bled dry country trains engineers (and doctors) for rich countries! More and more people are leaving the country for the United States, Belgium and Canada, besides France.

For the defence of our entrepreneur who is taking advantage of the exceptional market conditions, we should note that he is not to blame if local companies do not fulfill the population’s aspirations. As he has told me, “after two years in France, they become the clients or team managers of Moroccan or Tunisian offshore centers”. Moreover, our guy thinks bigger, as he has begun recruiting directly from top French IT services companies’ offshore centers… in Morocco.

Here is the basis of an incestuous relationship in which the major French IT services companies and their clients play the part of the consenting victim. They are the ones who invest in the offshore nearshore outsourcing centers, robbed by smaller-sized players who undermine their productivity efforts. In fact, our guy’s clients are not Atos, Cap Gemini or Steria… We have to look for them among second, if not third-level subcontractors of the first-level companies.

What is there to be changed to impose order in all this? The “chosen” immigration policy dear to our President of the Republic? This is said to have been done for only a few weeks and that IT development specialists are taken off from the list of jobs that are difficult to fill. Or should first-level IT services companies and their clients exclude from their sourcing the companies which rob them? This is not easy. For all I know, some of my excellent Tunisian colleagues deserve the best conditions, as they invest heavily in a ruined local software economy without compensation from the players who do not invest a single euro and simply suck out the youths who dream of France. It is alarming and too easy. Where is the moral limit that was shoved down our throats ever since we started talking about offshore and nearshore? As for myself, I know well the situation in Romania, where the same type of recruiting sergeants licensed by the French hospital administration and liberal medicine, come and shamelessly rob the country of its last doctors and nurses.

The manager of an IT pillar of Tunisian economy has revealed that he has been working on the root of the issues, meaning on the dissatisfaction of Tunisian engineers, jumbling up employees’ salary contribution, bonuses and various advantages meant to retain his staff. Until recently, this company, which ranks among the most respectable-ones, had an attrition rate of between 35% and 50%, according to my calculations. Starting with this year, their policy enables them to reduce it significantly. During this time, and in spite of the number of 200 newly recruited people per year, this representative of a flagship Tunisian IT company hasn’t exceeded 500 employees for several years! You have probably already calculated this, just as I have.

In the end, being a French-speaking country doesn’t actually make Tunisia an easy offshore destination for French players on the market. The size of existing companies confirms that, despite an excellent pool of candidates, it is not easy to grow.

As far as we’re concerned, we think we master the HR management instruments which enable us to reduce attrition rate to below 10% for years, in countries which are characterized by very high attrition rates. We are, therefore, considering opening a branch office in this magnificent and very promising country in order to benefit from the excellent opportunities it provides. In the coming days, we are starting discussions with business partners interested in the values, methods, and commercial success of the Pentalog group, which registers an organic growth between 25 and 50% each year, and whose staff will soon exceed 700 employees (see the CVs of our employees’ online).

Following this trip, despite local difficulties, we confirm that we are considering starting up a software unit which could hire more than 100 employees in 3 years . However, this decision is postponed pending the outcome of the ongoing electoral process. A member of the Board of Directors will start consultations in a few days.

Sophie, Eric and I are going on a trip to Tunisia with the purpose of making local observations. Pentalog (IT services company) has always regarded Tunisia as one of the most appealing countries of the French-language nearshoring field, but the company’s commercial calendar, followed by the recent events which occurred in the country have prevented us from planning on opening a new office here. By “commercial calendar” I mean that our recent deployment to Germany (we have clients in Hamburg, Hanover, Frankfurt, Mannheim, Stuttgart, Berlin and Munich), or even to Switzerland and Austria, constantly turn us towards Central and Eastern Europe. Whether we like it or not, German-speaking countries turn to the former Austro-Hungarian Empire as naturally as France turns to the Maghreb. We have therefore continued opening nearshore units in Romania (where we currently have 460 employees) and in Moldova (120 employees). Vietnam and France have 60 and 30 employees, respectively.

When we recently decided to open our 5th Romanian delivery center, Tunisia and Poland represented strong alternatives to this option. But we rapidly needed a new site for supporting our growth (an additional 5 million euros in 2011), and the events in Tunisia determined us to remain in Europe this time, as well.

With 60% of our sales figure in France (and 10% in Wallonia and Romandy), the use of the French language remains one of our major preoccupations, and a more peaceful Tunisia would undoubtedly be an interesting solution. As we have just opened a new nearshore unit a few days ago (which already had 15 employees yesterday), we will not open a new office in the following months (we will probably start considering this over the next 6 to 12 months).

So, the main purpose of this trip is to make a calm and patient analysis. Eric, one of People Centric’s major shareholders, will focus on the availability of human resources in this country. This IT recruitment specialist is both a recruiter (300 people in 2011) for his clients and a genuine strategic consultant in a context of growing scarcity of resources. Therefore, Eric aims at analysing how this country can meet the needs of his European and French customers in particular.

The boom in web models brings about great changes to the economic exchanges. They can provide purchasing services with a great potential for efficiency and with considerable strategic opportunities. However, the purchase of offshore services remains confined to an unadapted local information process, which is too much related to the purchase of local consulting services, due to national listing agreements. Nevertheless, the offshore sector includes numerous strategic methods for reducing the customers’ capex. The productivity of commercial departments of IT companies, which hasn’t changed over the last 20 years, affects prices and customer satisfaction. A few thoughts about it…

If I had time… oh, another post which begins with an incantation! So, if I had time, I would like to carry out a detailed study on the appropriateness of IT service purchasing models which are currently used in the European IT sector. Indeed, I am regularly surprised to notice that among our prospects who visit us, those who always pay the most for their trip and their stay are those who have a purchasing department, having listed providers for at least one year. At a time when the web is gaining in popularity and there are less and less intermediaries, and guaranteed income is called into question, this type of practice is absurd, as there are always promotions that their listed travel agencies do not offer them. Very often, they pay between twice to four times more than us for a trip that they bought on the same day from the same company. Whenever this happens, they protest against this waste, but this scenario is invariably repeated all over again. There is a typical tendency to avoid making fundamental changes.

In the offshore sector, internalization performed by the service provider reduces the clients’ capital expenditures and boosts R&D and maintenance operational expenses

The same thing happens when purchasing IS and offshore-nearshore R&D services. We regularly receive requests from major groups in the form of average daily rates for juniors or seniors, even though it is obvious that the offshore model cannot be reduced to the price of the manpower. They ask us for the average salary, the related local expenses and try to skip infrastructure costs… whereas the difference between Paris-based IT companies and their offshore counterparts lies in the location of work, the integration of security aspects, mass training, logistics, internalized staff management… Their way of thinking resembles that of commercial managers of local IT companies, i.e. from a gross margin perspective. In the offshore sector, internalization performed by the service provider reduces the clients’ capital expenditures and boosts R&D and maintenance operational expenses! At a time when the strategic criterion is execution speed, that makes all the difference. The purchase service, which has been formatted for several years, refuses to understand this and puts its internal clients at a disadvantage by excluding the true offshore pure players, the ones who make investment efforts. Offshore stakes are, in many cases, not known. In the US, where the offshore rate is estimated at around 40%, the first questions that you are asked pertain to intellectual property, the telecommunication platform and its security, the quality process etc. In short, the subject has been understood and I truly believe that there is work to be done within the purchase departments in the offshore sector. Excuse me for smiling at the thought of the numerous Moroccan and Indian offices (which may be a part of partnerships or not) of average French IT companies which are listed de facto because their mother company sells time and material services in Paris!

Paris listing agreements do not guarantee offshore-nearshore quality

In this case, listing agreements act de facto as intermediaries (a word which is hated by buyers), which, as with airplane tickets, should regularly go through the rich and renewed offer which appears worldwide. The web can thus play a role in reducing the number of commercial intermediaries just like it did in other sectors of activity. Generally speaking, clients understand the internationalization of purchases and global engineering better than IT companies. Therefore, they have much to gain from this. The clients’ security and purchase departments might want to visit the offshore resource suggested by their referenced partner. I remember seeing an offshore project of a major aircraft manufacturer in which 3 developers out of 10 worked during the evening for another company of the same sector. Of course, this small company benefitted from the listing agreement of a referenced French IT company. In Vietnam, I saw the team of developers of a major French company within one of the important players of the country, which is known to be working for the Vietnamese army… They worked on security programmes for European borders. Paris listing does not guarantee the quality of offshore-nearshore services. No more comments.

I am sure you have understood what I mean, despite the fact that I am biased. But the difference between these companies and ours is that at Pentalog, I am the one who makes a commitment, not a sales manager who has worked for 3 employers over the last 5 years! However, I haven’t finished my criticism. The last aspect does not concern the offshore sector in particular. It is rather general. The purchasing processes within IT companies have allowed clients to exert pressure on prices for quite a while. This is a fair fight and everyone has this aim, after all.

The productivity of sales managers in IT companies has virtually made no progress

Nevertheless, I am wondering about the impact on the commercial organization of IT companies which, in order to gain this much-coveted listing agreement and then support it, end up with expensive and excessively large sales teams. On average, major IT companies have one sales manager for every 20 employees, who represents 5% of the services sales figure. This is just the direct salary-related cost. The entire sales environment weighs between 20 and 30% of the sales figure of traditional IT services companies, with a level of technology-related capital expenditures close to 0. I think that here lies an important performance and productivity stake for all of us, both clients and providers, as this figure cannot be justified in a world where technical assistance amounts to more than 50% of invoices. Even though in comparison with the beginning of the 90s the demand has skyrocketed, the average sales achieved by a commercial employee of IT companies seem to be blocked under the 2-million-euro threshold, which, if my memory serves me right, is the same as the figure which was usually achieved when I began my career in ‘93! In other words, despite the volume effect and the contribution of new technologies, the productivity of a sales manager in an IT company has not improved. This represents a lack of creativity in the management of our sector.

The experiments that we have carried out at Pentalog and Invelia in terms of virtualization of commercial positions show that this figure can easily be tripled. Pentalog has only one sales manager for every 150 employees! Clients and providers in our industry might want to give this some thought. The cost of sales positions (25 to 30%) has a considerable impact on the purchasing price, quality, profitability and social satisfaction. At a time when the service purchase framework must be reviewed in order to better integrate an offshore component which will reach between 30% and 50% of committed man-hours, isn’t this an opportunity to ask ourselves a series of questions on the efficiency of our client-provider relations?

I have taken the decision to join my friends from PeopleCentric on their trip to Tunisia in May (around the 20th) in order to try and analyze the situation on the spot. My trip companions are going to meet students and professionals who are interested in engineering positions in France. A few months after the Tunisian revolution, I want to analyze for myself the qualities of the Tunisian IT offer and maybe meet potential partners who might be interested in Pentalog’s operational capabilities in Europe.

In Eastern Europe, more particularly in French-speaking Romania (18% of its population, i.e. 4 million people are French speakers), client companies started to arrive a few months ago in order to create a backup for their North-African teams and, in some cases, even to replace them. In Warsaw, one of the most important BPO players in North Africa told Monica last week that they needed to urgently set up a BOT (Build Operate Transfer) team of approximately 50 people in Eastern Europe, for one of their prominent clients.

Two weeks earlier, at the Spring Campus of Croissance+ in Avoriaz, the owner of a Tunisian-based call center told me that she considered the Tunisian electoral process to be a major risk, both before and after the elections, and that she was already migrating some of her teams to other French-speaking outsourcing destinations in North Africa and the Indian Ocean. “First of all, I think that this is a necessary part of my risk management activities. Secondly, my clients are demanding it” she said.

At Pentalog, we have identified two or three clients who joined us in the first quarter rather than choosing other nearshore outsourcing destinations, such as Morocco or Tunisia. We have also lost a client who banked on major price reductions on the other side of the Mediterranean following the recent events.

In short, whether it is to search for new partners or better understand our competitors, it is time I made this trip.

I don’t know how things stand with offshore call centers, but in the IT industry it is not uncommon to be somewhat influenced by personal attachments, more so than by cultural reasons, when making decisions with regard to the geographic location.
The Moroccan, Tunisian, Vietnamese diasporas, but also the Romanian diaspora (which is rather small in France, but much more significant in Austria, Canada or the USA), sometimes hold important jobs and can find themselves in the position of arbitrating a confrontation between their country of origin and other competitors.

At Pentalog, we have taken advantage of this aspect on a few occasions, whether through our Romanian employees or through people of Vietnamese origin. Of course, the sincerity and professionalism of their selection criteria are not called into question. However, I can honestly tell you that this choice allows employees, if not to reduce old scars, at least to fill a void, especially when these people are from the second or even third generation.

I won’t complain, because the involvement resulting from both sides represents a particularly efficient mechanism when launching together a complex international system which relies first of all, and in principle, on a more or less significant cultural gap. A very short while ago, a few Romanian IT professionals that we didn’t even know introduced us to one of the most powerful groups of the French web industry, to which we have already made several propositions. We have also lost a deal managed by a Frenchman of Vietnamese origin, who has chosen another Vietnamese company without consulting similar offers in other countries. The Technical Director and Project Manager, both Vietnamese, from another Parisian company, chose us in January in order to manage all the development projects of their company. Only Vietnamese companies had been previously consulted for these services.

These subjective reasons invariably lead to success, as the decision-makers in question pay a great deal of attention to the provider that they choose. Without realizing it, they invest a part of themselves in these choices. I would like to thank them on behalf of all the members of our teams, from all the countries where we are based. We are aware of the importance that this choice has for them. As this heart-driven reason is, after all, the most important, we are striving not to disappoint them.

Faced with a boom in demand for nearshore services over the last few months, the Pentalog Group has decided to open its 5th production unit in Romania. Pentalog has chosen the city of Cluj, the most important university centre of the country after Bucharest. Cluj boasts the presence of such companies as the Emerson Group, Siemens, Nokia, HP, Endava, Iquest, Continental etc.

Pentalog has been facing a considerable increase in market demand for its European nearshore outsourcing services over the last few weeks. The group had 630 employees at the end of January after having recruited more than 200 people in 2010 and had until now planned a similar staff increase for 2011. But the number of new contracts (8 new clients and 11 projects) signed during the first 6 weeks of 2011, as well as the opening of new negotiations have determined the company to completely change its plans and to aim at doubling its recruitment capacity by opening its 5th Romanian production unit. This is the 7th unit worldwide (other Pentalog offices are located in Vietnam and Moldova), in addition to the four commercial offices in Orléans, Bucharest, Frankfurt and Tel Aviv.

“We are currently looking into the reasons for this acceleration in demand and are considering two possibilities” declared Frédéric Lasnier, the company CEO. “The events which have recently unfolded on the southern banks of the Mediterranean have brought us two customers who used to collaborate with Moroccan and Tunisian companies. Geopolitical conditions of the nearshore market have witnessed a harsh change and we have had to further postpone the opening of a nearshore outsourcing office in the Maghreb”. But the reason which seems even more convincing is related to a growing lack of IT human resources in Europe, and especially in France. Market-leading companies are now finding it increasingly difficult to recruit staff, which offers a glimpse into what is happening in the second and third tiers and particularly in French IT companies. According to Frédéric Lasnier, we are now returning to the situation of 2006-2007 when the demand for nearshore outsourcing services could mainly be accounted for by capacity-related tensions.

Pentalog, the leading player in the field of IT consulting and services in Romania and Moldova (the two neighbouring countries speak the same language), which employ more than 500 out of the 630 people working for the group, has chosen the city of Cluj, the second Romanian university centre after Bucharest, and is planning on recruiting between 100 and 150 people in this unit, based on group practices, over the next 2 or 3 years. If we add this potential to that of other branch offices, the annual recruitment capacity of the group could reach 400 people as early as 2011. The early recruitment stages are entrusted to PeopleCentric, a strategic asset of the Group in the recruitment field which leads the Romanian IT recruitment market and is about to become a leader in France, as well. In these two countries, PeopleCentric estimates an annual recruitment capacity of 1,000 employees, which is currently used at half-potential. Let’s add the fact that 18% of the 21 million Romanians speak French, which thus places Romania well ahead of Mediterranean countries in terms of the number of French speakers. The city of Cluj, formerly called Klausenburg, boasts a rich Germanic culture and will thus be a considerable asset on the German market.

Through these new means, Pentalog intends to remain the European nearshore leader and to support the growth in demand on its two major markets, France and Germany.

The world is moving at a staggering pace. A few weeks ago, I lost myself in a political and economic analysis of the emerging world. Could I have been mistaken? Whatever the case may be, the tragic events of Tunisia, where people are dying today, are putting into perspective this geopolitical, or even geostrategic criterion. What about the wikileaks? Shouldn’t we fear that, sooner or later, this model will affect international companies which often indulge themselves in secrecy and political schemes that the politburo is claimed not to have denied?

All types of fears are surfacing:

1. The fear of technological plunder
A proof of this are the numerous and alarmist speeches on the risks inherent in technological transfers. Renault (a company which has fallen into the trap of a Chinese subcontractor) gets a rap on the knuckles from the state, while in the last few days, the Chinese army was carrying out the first flights with its stealth fighter-bomber (!), which is fueling justified fears related to the level reached by Chinese R&D. After all, the Rafale fighter jet made its first flight around 1990 if my memory serves me right. There is no doubt that the large offset contracts, in the weapons and civil aeronautics field, are transferring, in the narrowest sense of the word, a know-how that has been acquired over decades, thus enabling beneficiaries to make enormous shortcuts on the road to technological progress. Of course, offset contracts don’t have much in common with offshoring activities… which are being carried out in parallel. Competition on the aircraft market is so fierce that industrial manufacturers are going to greater and greater lengths to find more and more complex subcontractors, or even sub-assemblies. Isn’t the result analyzed today based on the emergence and boom of Embraer, of the Chinese C919 model or of the 100-seat Russian plane? Whatever the case, after having cut down on costs, aircraft manufacturers will now have to share their benefits. Louis Gallois gave a reminder in the press today that the world market of 100-200-seat aircraft would not be able to support the six competitors operating today.
As regards the “ Renault Gate”, it will probably not be the last. The culture of business relations has not reached the same level of maturity in certain regions and local court decisions on the breaches of confidentiality clauses discharge the guilty employees in almost all cases. For the time being, international groups have almost no control in this respect.

2. Instability risks
Due to regional tensions in the Far East, in the Arab-Muslim world and in Africa, all those who intend to establish long-lasting partnerships in these areas are having second thoughts.
Acts of violence against Christians in Egypt, the events in Algeria and Tunisia, in Niger or in the Ivory Coast, all of this does not encourage anyone to outsource services in the Maghreb or in Western Africa. In certain regions, when conditions become difficult, it can become virtually impossible for technological equipment to be passed across the border… except by offering a more or less substantial financial enticement. Pentalog had this experience in Moldova two years ago. Events lasted only for a few days but everything became a lot more complicated during that time. We only had to face a one-hour power cut and several hours at most without internet. The never-ending power of the old and weakened presidents of Tunisia, Libya and Egypt could bring about complex scenarios that could spread in the whole region. What about Libya? Won’t the USA try something in order to push the old dictator down the history ladder? Will Uncle Sam remain insensitive to Algeria, with its generals, its Islamists, its oil and its old president? In this context, Morocco, the only monarchy in Northern Africa, has undoubtedly become more popular. But let us keep in mind that not even Morocco is completely safe from the great interests that seem to draw to Northwestern Africa Islamists from all over the world, the French army, the Chinese… and the Americans who are only waiting for a French failure.

3. The legal criterion
The questions related to the movement of people, goods and equipment within the EU plead in favour of European nearshoring. I have already expressed this opinion in writing on several occasions.
But this criterion, which is the first to come to mind, isn’t the only one! Even the European tax system is about politics! While R&D operations are booming at Pentalog, French companies are making more and more requests for their services to be included under the research tax credit system, thus eliminating the competitive edge (price) of certain regions outside the European Economic Area. In certain fields, it so happens that, research tax credit included, our services are cheaper in Romania, which somewhat affects our strategy… but it is meant precisely for that.

At the end of the day, it is up to every offshore customer or investor to choose their constraints, needs and ambitions in terms of cost reduction. 2011 will be the year of Eastern Europe in France, I am almost sure of that. Actually, this is the region with the highest boom today, exceeding by far the other areas. India is clearly declining, while China is exploding. My best shore remains Romania, surpassing Bulgaria by a little, whereas Poland and Hungary are close behind. Therefore, I am placing EU in the lead. Outside its borders, former Soviet Union countries are leaders on the English-speaking work market: Russia is on top, followed by Belarus, Ukraine and Moldova. In the Far East, I find India to be a more inappropriate solution than ever for French companies. Its tariffs are high and its services must practically receive the same amount of support as in China or in Vietnam. Therefore, the last two hold an advantage, as their markets remain particularly stable for the moment.

Over the last three years I have travelled to 30 countries, most of which are emerging countries, and I have thus begun to reflect on the way I see democracy evolving throughout the world. But it was the debate weekend in Dubrovnik with Eric Orsenna, Daniel Cohen, Boris Cyrulnik, Michel Maffesoli and the Academy of Entrepreneurs that has determined me to put it in writing. Although not the subject of debates, a parallel between a presumed fall of the West and that of the value of democracy was drawn several times. I started this reflection on Facebook and I take this opportunity to thank Olivier, Sébastien and Ivan who have helped me a little. Feel free to follow the discussion if you are interested.

My recent trip to Dubrovnik together with a group of French intellectuals and the Academy of Entrepreneurs allowed me to better understand and express in words a growing doubt that I feel more or less often, depending on my destinations.
Then, last Sunday, next to a French fireplace, this thought came back to me and determined me to go through the notes I had taken that weekend.

The idea was first mentioned by Eric Orsenna and was resumed by Michel Maffesoli and even by Boris Cyrulnik (!)… They didn’t talk specifically about democracy, but their speech included, here and there, mentions on the value of democracy, a cornerstone of western values. I felt that, in their opinion, it might no longer be a fashionable concept, as it would become weakened due to the declining western domination.

My goodness! This is exactly what I felt when questioning our young Vietnamese employees or a few Chinese students a few years ago! All of them answered that democracy was neither a priority, nor something to aspire to, but they rather saw it as a western invention, which could not be adapted to the Far East, and even regarded it as a threat. First of all, in their opinion, democracy implied, by its very nature, a division of the nation, of the great family, without enabling it to reunite after the electoral process. This perception, well-founded in numerous countries, is irreconcilable with confucianism. In fact, which are the so-called democracies of this part of the world? I can only name two: Japan and South Korea. Besides the criticism that the average westerner will aim at these countries with regard to the respect of human rights and the conflicts of interest reigning there (on the contrary, the conflict of interest is often considered there as a proof of harmony and logic in the organization of the world), I will say that neither one is a spontaneous democracy. The current regime was imposed on the two countries at the end of the war by the USA, a kindly occupant which was especially interested in establishing new powers that would enable it to organize the future business trends. A simple spark in the middle of the ordinary regional geopolitical unrest would suffice to bring either country under dictatorial and even more nationalist regimes, whose greatest representatives are to be found in China and Vietnam.
To all those who would doubt my demonstration and would remind me of the recent Chinese Nobel prize or the oppressed bloggers, I would ask the question: who would have thought in ‘89-’91, after Tian’anmen, the fall of the Berlin wall and the collapse of the USSR, that 20 years later China would still be under communist dictatorship? In ‘89, western values were strong and democracy was the most important of all. We were the winners and we seemed invincible.

And the Middle East? Let’s get serious… Do you actually think that Syrians and Jordanians dream of the Lebanese democracy? Do you actually believe in the joke that democracy is being established in Iraq and Afghanistan? The only two democracies in the region are Iran (!) and Israel… but I do not intend to enter into this kind of geopolitical details.

The most serious problem is not that the working masses of these countries do not feel the need to vote or create political parties (in fact, there isn’t any place where people have this need, in my opinion), no, what is more serious is that these young people, who are the educated elite, some of them having studied in our universities, do not dream at all of, and are not “contaminated” by this concept of democracy that we thought was irreplaceable. Why did I write “the most serious”? After all, why do we care that Laotians don’t like democracy? Isn’t “the most serious problem”, and I will have to expand on this idea, the fact that in 2010 we are no longer capable of contaminating them?

When I teased the subject on Facebook last week, I actually noticed that several of my French friends regard Europe as a power at the end of a cycle. In their opinion, Europeans don’t consider democracy more important than most Chinese people do. Of course, this is the sort of exaggeration that is typical to social networks. Nevertheless, the loss of comfort and of the belief in a better future could reinforce this hypothesis.

Continuing on with our subject, I have just come across another hypothesis which is even more interesting: it is dictatorships that are getting better! And I don’t think this is completely false, however provocative this idea might be. The economic and perhaps social (?) results of the emerging, non-democratic world are astounding and can very well seduce the new young globalized elites who are anxious to obtain quick personal and professional success. In short, why persevere and waste time over an insignificant and outdated legal concept, when a dictatorship which is more and more tolerable allows people to focus on essential expectations, on the short and medium term? Could Voltaire’s thought be embodied today in Russia, Vietnam, Morocco or China and could we, almost 300 years after his death, come up with the concept of enlightened dictatorship? I have my doubts.

I am under the impression that the democratic question is regularly raised, that everybody is speaking about it as a digression from other subjects. The first time that I truly felt it was on returning from my first trip to Israel. I realized that nobody cared about the Israeli argument, defending the only democracy in the Middle East. Even though it worked not so long ago, I realized that it was no longer acceptable in the press, including in the American press. Do we already find ourselves “beyond democracy”, in another value system?
Even today, I saw our Minister of the Interior condemn a court decision regarding police officers who had an innocent person incriminated by breaking their oath. Isn’t this a dangerous statement for democracy? This question was also raised during the ramblings on Roma camps last summer. But we have all seen the result: nobody cares. This could turn into a long list and I don’t see what purpose it could serve. Changing in tone, let us turn to international trade, where the complacent behaviour displayed in the name of pragmatism by certain western countries (especially those which sell planes and nuclear power plants) towards wealthy dictatorships clearly contributes to the depreciation of democracy in the eyes of everybody, both in the East and in the West. The Chinese regime, ceremoniously received in Paris, which hosted the Olympic Games, just like Russia and Qatar will host the football World Cup, is becoming more and more common for everybody. This is undeniable. There isn’t a day that goes by without this principle of economic pragmatism being reminded to us. After the inhabitants of emerging dictatorships, those of western countries, it is the political regimes, particularly the European ones, that would also accept this depreciation of the democratic principle in the name of business.

This article could go on forever as I am still gathering new opinions. However, I must put an end to it. In the West, we face a historical shortage of important figures, while President Hu Jin Tao will undoubtedly mark the history of his country and perhaps even the history of the world. M6 is presenting the Moroccan growth, as well as the old Ben Ali in Tunisia (to whom France has just sold an extraordinary brand new A340). Lula, democratically elected, of course, is also changing the style of the triumphant West. If our democracies no longer motivate us, it is because they have taken power away from us. Neighbourhood associations in Hanoi are perhaps more participatory than our old town councils. Could it be that Far East dictatorships are beginning to focus on the well-being of their citizens, while our democracies have lost contact with theirs? It is possible, indeed. Everything could come down to a simple inversion: a positive (but alas, insufficient) orientation of things in certain regions of the world (in the south and in the east) and a negative orientation in other regions (in the north and in the west). In France and the USA, we have built industrial and commercial empires based on universal values whose power we felt was indisputable, probably without realizing it. What would American cinema be without the pedestal of Western values? And what about us, the French? What will the impact on tourism be if the Japanese stop dreaming about Victor Hugo and the Enlightenment disappears from all school curricula? How many stock market points would we lose?

Is it all quiet… on the Western front? Maybe it is, but I cannot make a difference between what is right and what is wrong. We are witnessing a partial increase in awareness. For instance, I don’t think that anti-globalists make a good promotion of Western democracy. They have a ridiculous discourse that is completely ignored by emerging countries, which are also desirous to have their share of Blueray technology, triple play and iPhones. They even contribute to destroying the myth. But they express such a lack of faith in the future that they could also contribute to rekindling our values. Wikileaks are demanding our all-knowing politicians to stop taking us for simpletons. Globalization is turning many of us into parallel diplomats who are striving a lot harder to bring peace into the world than chancelleries and AOC canon dealers! All those who are supporting Assange today want more truth. I do, too, although I disapprove of the insane risks that he makes many people face. I hope that they will be listened to because we will die from political correctness unless we do it ourselves. Isn’t it for this reason that a country like France is allegedly impossible to reform? In the end, our political regimes are both distant and dishonest, and inefficient. Why should we trust them? The value of democracy would never have been so degraded, as this is a virtuous dynamics for world development. For countries that fuel or used to fuel the dreams of many, like France or the USA, this is an intangible and fundamental economic asset, more than for other countries. We must urgently realize this. Otherwise, I don’t see any other new myth that the West will be able to develop on, just like, for the time being, I don’t see any substantial alternative to asserting oneself in emerging areas.

I don’t have an answer to this question. On the other hand, I know that the number of engineers available or in training in the so-called developed countries won’t be enough to meet their resource needs. Offshore outsourcing could become so common that the words “offshore” and “nearshore” will have completely disappeared.
Germany is looking for 200,000 engineers and scientists before 2014. This will be a massive appeal that could destabilize certain economies. Therefore, in this context of declining demography, of inexplicable abandonment of scientific and technical professions and of near deflation, the use of offshore resources could witness a dramatic increase. Countries like Germany, Canada, the USA or others will be looking to “import” these highly skilled emigrants.

Almost two years ago, Eric, Virginie and I met in Brasov for 36 hours of reflexion on Pentalog’s potential progress before 2010 and from now until 2013. Two plans were developed. The 14-2010 plan is in its final months. It has proven our ability to conceive a near future, to understand our strengths, our qualities and to implement series of rational actions in order to achieve an objective. We will exceed it by 15-20% in terms of sales figure. Leaving figures aside, we are satisfied with our good shape because JVs are reinforced, Pentalog Deutschland is a reality and is performing very well and with the fact that our strategy in Germany is recognized by the most important companies. 60 Romanian engineers are already providing services to our German clients on a daily basis. Very prestigious projects are being prepared. We had also decided there to open our Vietnamese office which now has 55 collaborators, provides services for 5 French clients and takes over a part of Pentalog’s internal developments.

The 30-2013 plan was a different and very innovative exercise for us. We listed growth concepts that could be taken into account in order to reach this figure, among others the launch of new JVs. We also enumerated our long-term weaknesses and started to work on them. Training witnessed a great boom, especially for management staff, in countries that are often criticized for their poor management abilities.

We have reassessed our former long-term plan, which therefore becomes our short-term plan. This means that we must consolidate it, materialize the actions to be carried out and recalculate it. I would like to let you know that by 2013 we will have opened at least one more office in Romania, one undoubtedly in Maghreb, a second one in Vietnam and will have made commercial propositions in new target countries. Among others, we must absolutely include the high German demand into our growth plans. Thus, we could soon have to open offices in Poland, Estonia or elsewhere. The current French and German offshore market is still in its early stages. I have been stating for a long time that the offshore volume in outsourcing will easily exceed 15% and could even reach 30%. Demography and abandonment of the scientific field will play a much more significant role than cost reduction in this process. We confirm our intention to continue to grow by 30% a year while making as few acquisitions as possible.

What about 2016? A change in methods, financing, products and services, in identification, briefly – in strategy. Acquisitions could play a greater role. Like offshore, the word “cloud” will have almost disappeared… because we will find ourselves surrounded by it. The Pentalog Group will still have to have a future. Will it reach a sales figure of 50, 75, 100 million or 1 billion euros? Virginie, Eric and I are going to present our thoughts to the Board of Directors. It is up to the members to offer their feedback.

What I can say is that growth and profitability will continue to be our main preoccupations. In the context of a European resource shortage, we will therefore have to rely more than ever on our productivity and more and more on innovation.

I answered the questions of a Jeune Afrique journalist a few weeks ago and I found his article. Although I share many of his conclusions and confirm that Pentalog will soon embark on a tour of North Africa, for the obvious linguistic reasons that one can imagine, I would have insisted, however, on the fact that the offshore outsourcing market is not represented ONLY by France. If we take a look at our Moroccan colleagues’ sites, the “reference” page is self-explanatory. Virtually all of them have ONLY French references. The competition with the important offshoring countries can only be supported by a single client country. It will not be possible for Morocco to find uniquely in France the reasons for its large investment plan. Moreover, not collaborating with countries that are ahead of France in the O&O field is to deprive oneself of the best customer experiences. Morocco will even find it difficult to take off because of this and will drag along this monocultural image for a long time. Multiculturalism is an essential part of globalization, a substratum of the O&O. The offshoring corporate buyer is naturally “globalized”.

Wider use of English is indispensable in North Africa. I would also gladly add German to my list. Coming from Paris or Frankfurt to Casablanca or Tunis is exactly the same thing. We are well aware of the fact that we boost our German business by appointing a German-speaking project manager here and there.

Finally, as usual, and I have already stated this somewhere else, I think that the studies carried out by companies delegated by the states which are interested in the O&O market have no value at all. Wait a few weeks and Gartner will produce a study which will show that Tunisia is less expensive than Morocco, and then Romania will be next with McKinsey…

Elaborate your Offshore project with the European leader in Offshore Outsourcing!

Surprisingly enough, Henry Paul and I had never met face to face. He had been described to me as a man of culture, but the person that I met is completely up to date with Romanian economic affairs. Of course, I talked to him about the constant efforts made by Pentalog in teaching French to its employees, like I always do when I meet a representative of the French Ministry of Foreign Affairs. In all our offices, we provide constant foreign language training, French being the main language taught. 80% of Pentalog employees speak fluent French. In Romania, this figure rises to 90%, making Pentalog the most dedicated company in this respect, all sectors combined.

Being particularly sensitive, as an ambassador, to the language question, Mr. Paul showed me the connection between the language of a company and its identity, reminding me that, at a time of crisis, the most resilient companies are the ones with the strongest company culture. The recent Pentastock festival, celebrating 5 years of Pentalog Moldova and 10 years of Pentalog Romania, has made a deep impression on people in this regard.

He asked me what I thought about the importance of the French language in asserting the culture of Pentalog. I had never asked myself that question. Then, after reflecting on the matter a little more, I attempted an answer. We are an international company which was founded in France. It is, therefore, a French company, and French is the language of all management bodies. Encouraging and supporting its development is not only a commercial imperative, but also a true question of management. French is a political and diplomatic language; it doesn’t simply express our decisions, it “envisages” them and projects a larger meaning in minds. Is this far-fetched? Is it a discourse serving the French interest?

The answer is no. Not having a filter or linguistic intermediary between management decisions and the people to whom they are addressed or those who must apply them helps to build a common culture… Translation doesn’t convey the whole meaning. Isn’t this blog, where each article is first written in French, another expression of this company culture? Would it be the same if we wrote articles in English first? You will not be surprised to find out that the second country in terms of the number of people reading the French blog… is Romania

In order to prepare for this article, I asked my Romanian friends and colleagues a few questions. For them, Pentalog is probably a more international company than its local competitors. Using Molière’s language is enriching for the entire management system, which thus necessarily becomes multilingual. This choice of not having to use English as an official language determines us to speak several languages. Considering the hundred collaborators who don’t speak French and the nature of our events and meetings, we regularly use English and Romanian internally, as well as German, including in meetings with French people. I have just seen Eric passionately hold a meeting in Romanian (Romanian can only be spoken passionately). We do not use Vietnamese and Russian for professional communication, even though they are spoken by numerous employees in our company. Moreover, some of our collaborators also speak Hungarian, Hebrew, Ukrainian etc.

A company which speaks ONLY English is naturally not multilingual and will not be able to easily adapt to new markets and their cultures. I doubt that it will naturally be more open than a company which has chosen to keep its original language and to recognize the languages of the national and ethnic groups that it consists of and to which it targets its production.

Therefore, I will answer unhesitatingly to Mr. Paul’s statement. He is right. Preserving and developing the original language of a company strongly contributes to asserting the company identity in a business world which would like to speak only English. This becomes an essential distinctive symbol among everybody. This desire of the business world doesn’t lead to efficiency. It is too simplistic and doesn’t broaden people’s minds… which is what the business world and the international stage need the most.

Calculate your offshore budget with our price maker

- Global IT spending to rise in 2010: Gartner (04 December 2009, CRN)
- IT Outsourcing: Legal Mistakes That Can Cost You Big (03 December 2009, CIO)
- Why Benchmarking Cloud vs. Current IT Costs is So Hard (03 December 2009, CIO)
- Twitter Alternatives That Are All Business (04 December 2009, CIO)
- What to consider before outsourcing functions (01 December 2009, Business Africa)
- IT infrastructure outsourcing on the rise (06 December 2009, Offshoring Times)
- Defizitsünder: Deutschland und Frankreich bekommen Frist bis 2013 (02 December 2009, Handelsblatt)
- Hightech-Branche blickt optimistisch ins nächste Jahr (02 December 2009, ZDNet.de)
- Gartner-Markttrends 2009: Die gefragtesten SaaS-Angebote (04 December 2009, CIO)
- Software-Entwicklung: Agile Industrialisierung (04 December 2009, Silicon.de)

- The Other Side Of Outsourcing (02 novembere 2009, Forbes)
- Technology doesn’t isolate people: U.S. study The survey was sparked by a 2006 study (06 november 2009, CIOL)
- Industry to develop cloud computing code of conduct (04 november 2009, itnews)
- Indian outsourcing companies eyes Latin America (04 november 2009, Offshoring Times)
- The next step for Twitter Lists — Entire countries (4 november 2009, Techcrunch)
- Anwender kennen ihre Sourcing-Kosten nicht (02 november 2009, computerwoche)
- Outsourcing-Umsätze in Europa fast halbiert (02 november 2009, CIO)
- Wie sieht die IT nach der Krise aus? (02 november 2009, computerwoche)
- IT-Nachwuchs will weg aus Deutschland (05 november 2009, CIO)

In a conversation with one of our JV partners last week we spoke a bit about the geopolitical and strategic nature of offshoring. For a few minutes, we considered the global outsourcing map.

We came to the conclusion that the “Eastern Europe” demand was responding to social and cultural issues and kept both parties between protectionism and competitive relocation.
“Asia” is mostly a matter of cost reduction, when constraints of time shift, flow of goods, people and culture are not obstacles.

I am stating here what has been obvious for years. Besides this simple mapping, which already requires the construction of a complex network of production units in order to be exhaustive, I realize that there are also regions with specialties that are related either to old technological specialization of these countries, or to a perfectly contemporary desire to develop their business portfolio.

Let’s say that among the offshore countries, everybody does business data processing but not all in the same way:

- small countries in Eastern Europe (Slovakia, Czech Republic, the Baltic Countries, Bulgaria, Moldova) are mostly involved in small projects. They are often strong enough to support an innovation process or small maintenances. Few human resources often lead to prohibitive cost levels (except Bulgaria and Moldova).

- large countries in Eastern Europe: Ukraine, Poland, Romania, Russia. They have the power to build project platforms with dozens of collaborators (including more than 50). But they are also involved in small projects. They often have a catalog with important specialties, whether in infrastructure or large applications (SAP, Oracle, BO, ETL …). This allows them to exceed the standard typology of usual offshore development project (Java / Dotnet +1 DB).

- Asian countries inspire us by their ability to upload hundreds of collaborators but worry us because of functional aspects and communication.

In embedded computing it is much more complex because very few countries actually do it when the demand explodes. Choosing a production area in this respect is not easy because the client often requires a high level of expertise. I’m saying EXPERTISE AND NOT JUST EXPERIENCE. This expertise is often acquired by participation in projects in the industrial field of reference for each client.

So where can we make embedded aeronautics? Of course where we build aircrafts: in Russia, a bit in Ukraine and Brazil. But the Indian policy is also starting to be successful, because from now on there are real capabilities. However, be careful, because on this market, membership to NATO may be decisive.

Where can I make embedded telco: where we have been strong in telecom for a long time. In Russia, Romania, India, Poland.

What about automotive? Romania, Poland, Russia… and India.

In conclusion, wanting to offshore or nearshore today, is no longer enough, because the promise of cost reduction does not satiate contractors anymore. Offshore countries had to specialize, to become more professional. Nevertheless, we cannot achieve progress without a thorough analysis of the national logics of competitiveness and excellence, that are developed both on the legacies of the past and on development policies.

In this context an offshore/nearshore player will determine its choices based on the offer he intends to deploy. One has to admit that, to date, only India offers a full specialties chart; Russia is not far behind. On the contrary, both have serious problems when working in too precise areas or when the communication process becomes complex, including, for example, round-trips between client and suppliers, or the understanding of specifications written in other languages than English, many years before offshore outsourcing.

For all these reasons, I conclude that the offshore world is forced to make choices dictated by what I call “geopolitics of service supply”. I don’t know how one can be a complete low cost outsourcer nowadays, without having offices in Europe and Asia. This seems to be the minimum requirement. Yet, several units on both continents may be necessary in order to have a portfolio of specialties that tend to be exhaustive.

I think it is an early analysis of this constraint that allowed Pentalog to dig a gap with its competitors. We have first implemented it at the scale of Romania-Moldova, and later on in Asia. The benchmark hasn’t not finished yet. Romania is not the nearshore of Sweden (we will therefore go to Petersburg and Riga), India requires compensations in engineering when we sell them Airbuses (therefore we will think about India), the explosion of BPO could bring a smile for Morocco… ITO, BPO, EDO, are never-ending stories!