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Will we still be talking about IT offshoring in 2016? 36 hours of reflexion on the future in Chantilly, at Château de Montvillargenne, together with Virginie and Eric.
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.
Jeune Afrique dedicates an article to the offshoring in Maroc
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…
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Meeting with the French Ambassador in Bucharest: is there a connection between a language and corporate culture?
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.
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Press review week 50/2009
- 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)
Press review week 46/2009
Offshore / Nearshore: The Geopolitics of IT
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!
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