The first weeks of 2012 have been very intense and do not seem anything like a regular start of the year. For instance, in January, production has not registered the slump to which IT services departments are so accustomed during this month when annual renewals are long coming. This year, January will be a month of high production. On the other hand, we are witnessing a high degree of anxiety in many clients. So, we are not envisaging the intense period of newbiz that we experienced in Q1 2011, even if we are expecting some confirmations to this effect. Also, several of our customers have lowered their business volumes with us. One has left us, a small-scale one though. Fortunately, this is not the attitude of the majority of our clients. Quite the contrary, our forecast for Q1 is rather of a strong growth thanks to those who have increased their demands for Pentalog’s services. It is thus difficult to see the forthcoming evolution.
In addition, there are the new very high-scale demands which I announced in December. We are thus remaining very prudent on one of the giant businesses on which we are working at the moment. If it is concluded, we could reach, as I already mentioned, around 1,000 employees in 2012. The first option that we have already signed for this client does not guarantee yet the implementation of this large project.
As you can see, making forecasts in such a period is not simple at all. Monica shall deliver this tricky task in the following few days.

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.

In 2011, Pentalog has taken the extraordinary initiative to invite all the employees who started working for the company in 2005 and a few outstanding employees who joined the company after this date to take part in an unprecedented event. Together, these employees have acquired 92% of the capital belonging to one of the most flourishing IT companies in Europe! All the participants invested in the company’s share capital by buying shares at their 1993 price! This unprecedented operation has enabled about 20 more people to attend the General Assembly. The dividend paid several months later granted them a 50% “refund” of their investment! Obviously, shareholding situations are eventually different from one another, as several employees hold less than 0.5% of the capital (however, this amounts to a theoretical value between €100,000 and €200,000) and I have reached 28%. But that’s the spirit! Certain people have cashed several thousand euro since their first participation. I am very proud of this operation which makes Pentalog stand out from other companies, in developing countries and elsewhere. In my view, there is no concrete way to better reward company loyalty. The company founders felt great joy on this occasion!

It is not our business policy to speak about potential contracts before signing them. However, these 3 particular business deals have a highly significant meaning. Their respective volume, in countries which are very far from each other, prove to what extent our nearshore service brand has henceforth become well-known. In Romania, Pentalog brand stands out as a national leader whose name is the first conjured up by those who want to carry out significant projects in sectors like software and internet. In Germany, our IT services company holds a place which can be henceforth comparable with the one held in France, not so long ago, in 2006 or 2007. We have gained our position in less than 3 years and we can see that things are definitely evolving. At the end of 2011, Pentalog is known practically throughout the EMEA area, as one of the main players of the Eastern Europe nearshore.

How much are these 3 contracts worth?
At least €11M overall per year. In a more optimistic view, these 3 business deals could yield €17M sales figure per year for Pentalog, which equals roughly our sales figure for 2010. These 2 contracts would have a minimum life span of 3 years… so this could mean a total amount of as much as €33M to €51M!
If I’m talking about it, it is because in 2011 Pentalog managed to sign a few contracts worth several millions. In addition, there are also smaller offers, which are still under negotiation. Therefore, I am fairly more optimistic as to 2012 than my colleague Monica, who shows more moderation .
Then of course, we might sign none of the 3 contracts… and this has to be considered. Or, on the contrary, all 3 ? The smallest is worth 2 millions per year and the biggest up to 10 millions. I consider that, whatever the case may be, although 2012 is heralded as a very difficult year, Pentalog’s position and market share on its areas of choice will record new progresses and that our company will become even more appealing, thus continuing to attract the best employees in the countries where it operates. We remain one of the few platforms in Romania which is able to develop projects involving up to 100 employees and which allows our project managers, Delivery Center managers and project directors to benefit from a 40% average annual growth in the last 4 years.

Therefore, keep an eye on our recruitment offers in case we sign these contracts as they will bring great technical and management opportunities. And in case we don’t, well, we’ll be happy to have been considered for so highly rated projects and it will be just a matter of time until we make it!

I wish you all have lovely winter holidays and a great new year in 2012!

Q4 is very similar to the previous quarter, being also marked by a strong boost in project renewals for 2012 and fairly higher new biz order intentions.

In France, just as in Q3, the growth is mainly due to the extension of existing contracts and very few new contracts signed in Q4. Our strategic trend towards e-Commerce has been strengthening , our efforts and the projects we have undertaken have assured us recognition as European experts in the field. The orders from a web services and e-commerce leader on the French market announced in Q3 have already increased by 25%. In Belgium, we have concluded a new collaboration agreement with with a digital native service company, for several .NET and Sharepoint projects.

We have recently signed our first contract with an Italian client in the field of embedded R&D. At the end of 2011, this amounts to 10 countries where we have sold our services this year! The fact that we have local presence in 6 countries and commercial teams in only 3 of them is an unquestionable proof of effectiveness for the commercial virtualization (Digital Salesforce) strategy undertaken in collaboration with Virtual Fanatic.

In Germany, 2 new clients have started their collaboration with Pentalog (IT services company). The 1st one is the e-commerce department of one of the largest European media groups, with more than 100,000 employees worldwide and a sales figures of 15 billion euro. They have entrusted us with the development of modules such as “payment gateway”. The 2nd-one, a German IT consulting company, has chosen our services for developing its Business Intelligence applications.
Another German software publisher in the health sector, in Microsoft technologies, has practically doubled its investment with Pentalog.

The sales activities undertaken in Vietnam and coordinated by the former Delivery Center Manager in Hanoi, Tuan Nguyen Quoc, are beginning to bear fruit. A first project, albeit small, for an insurance broker has been agreed upon at the beginning of this quarter. We target Vietnamese or foreign privately owned companies in the banking, industry, telecommunication and insurance sectors. Furthermore, we are in the process of developing on regional markets such as Japan, Korea, Singapore or Malaysia by preparing a roadshow during the first quarter of next year. We have recently attended the ASEAN forum at Kuala Lumpur. Our aim was to meet not only potential Malaysian clients for nearshoring, but also French-speaking companies who want to enter the Asian market, for offshoring.

In accordance with the Q3 forecast, we have reached 700 Pentalog employees in Q4!

The delivery center in Cluj will reach a number of 35 employees by the end of January. It is the delivery center which has reached its break-even point in the shortest period of time in our history. Bucharest and Iasi have constantly increased their workforce. Therefore, we have exceeded the number of 700 employees in 2011, without reaching the originally forecast number of 770 employees. This downturn is definitely related to the new economic crisis.

Although the growth rate in S2 has reduced by 50% comparing to S1, once again we have maintained a double digit profitability level. Our annual growth under the Pentalog brand name amounts to 26%. It even exceeds 33% if we take into account the Pentalabbs’ (Incubator) contribution. There has been a commercial boost in December. Given the sharp increase of our recommendation rate which has reached a record of 94%, it is by no means surprising to see new leads emerging. We were pleased to welcome two of our major clients who visited us during Q4; they insisted on thanking the teams in person and on presenting their strategies for 2012, including the roles of Pentalog’s teams for accomplishing these strategies.

2012 is expected to be a difficult year in our sector, and we approach it with prudent optimism, but with serenity. Our equity capital and our cash position have reached a record level and our profitability level is constantly 30% above the average in our business sector. Our key strategic elements remain focused on innovation, quality and ongoing effort towards customer satisfaction. We always bear in mind that these clear policy lines enabled Pentalog to outpace all its competitors in terms of growth and profitability in 2009, a dreadful year for many companies in the IT sector.

On account of liquididy stringency we are all facing in Europe, companies encounter greater difficulties in finding financing means for their big infrastructure and R&D projects. As the greatest IT services consumers under normal circumstances, banks are the first to lower their ambitions related to new projects in order to save their famous equity. In this high risk aversion context, the loans granted to companies will be curtailed as well.

Venture capital was already showing signs of weakening during the first semester, prior to this summer’s crisis deepening. Undoubtedly, there were early warning signs of a trend that is not likely to change before the end of 2012.

Being a strategy enthusiast and investor via Pentalabbs (company incubator), I asked investment funds a few questions concerning their own perspective during this difficult period. They have all reinforced my understanding from the media. They will primarily invest in e-commerce, and, more cautiously, in B2C web services. The majority of them keep away from B2B and the idea of spending money on financing hefty software R&D operations seems terrifying. Under the circumstances, software publishers, except for the firmly Cloud based-ones, are likely to encounter financing difficulties.

The conversations I had with two major investment funds and a leading investment banker in Paris, whom I met at a fund-raising event at Audencia, sustain the strategy our IT outsourcing company has pursued for several years. First, we focused entirely on software publishing, which has been technology funds’ darling for a long time; then, we happily embarked on the M2M adventure, and, more recently, we provided web services (social networks in particular) and e-commerce solutions. The latter two sectors account for 70% of our profit growth in 2011. M2M has practically doubled its preponderance this year (!), at a time when the banking sector has registered a drop of 35% and when the telecommunication field has remained stable.
We are all aware of the fact that, with its forecast organic growth of about 22% in 2011, Pentalog registers its worst performance in the last 5 years, but I can say that this performance could have been even lower should we not have strengthened our position in these areas and their specialized technology. In 2011, we have earned 4 major e-commerce and social network budgets, amounting to an annualized total of €2.5M. Actually, there are many reasons to be satisfied with the pursued strategy if we add the M2M profits (€1M, but from existing clients).

Naturally, PHP technology requests have boomed in 2011. The demand for these expertise services exceeds by far Microsoft.net and matches Java demand for the first time in history! But we have also made progress in expertise knowledge, with know-how in the video field (in Drupal), commercial animation (in Magento), SEO constraints, and social networks (Drupal and mobile). In these business sectors, we are acknowledged as consultants and experienced contractors. Moreover, we are currently considering the proposal of two professional cloud, e-commerce and social networks offers based on Magento and Drupal for the software layers and on specialized consultants for the service layer.

We are counting on the converging cloud computing, mobility, e-commerce and social network expertise directions to ensure a reliable growth engine for Pentalog in 2012.

As I already announced this summer, Pentalog appointed a second managing director, Monica Jiman. For someone like me, who loves basketball and rugby, it is rather like when a basketball team plays with two leaders or a rugby team has resorted to a second fly-half. Since we are in the midst of the World Cup, I’ll stretch this rugby metaphor even further, wishing that Monica and I had the same fate as Catt and Wilkinson, crowned world champions in Australia in 2003!

Throughout the summer, Monica and I worked on our selection, and, believe me, given the quality of our options, it was difficult to make choices. But we managed to build our major team at the end of last week. We have thought through all the aspects of this issue: pure immediate effectiveness, policy (nationalities, town of origin, technical and functional backgrounds, partner/non partner, etc.), long-term strategic issues (knowing that the uncertainty level has never been so high), and, of course, we had to take all these into account. However, there is one thing that hasn’t changed and which we claim once again: reliance on organicity, more precisely on finding as many in-house solutions as possible. Everything is possible when supported by a team of 700 enthusiastic people with an average age under 28.

Monica (Deputy CEO-RUN) will chair the Group’s Executive Committee instead of me. She is a member of the Chairpersons Committee as well. Being in charge of the back lines, she will be supported by several company seniors (in alphabetical order):

- Manuel Damian, who joined Pentalog in 2002, is promoted from the position of Delivery Center Manager in Brasov to COO (Chief Operating Officer) of the group, in charge of the Delivery Centers, production management, recruitment and training. Being a partner, he becomes a member of the Executive Committee.
- Aleth Delcenserie, founding member, former Quality Manger, still holds her position and takes over the R&D method (for production) and the software information system under a new name: BIS (Business Intelligence Service). Aleth is a member of the Executive Committee and of the Board of Directors.
- Aymeric Libeau still keeps the Group’s technical infrastructures management and the Corporate Services. As he is an acknowledged specialist in infrastructures, additionally, he takes on the development of the Pentalog Group Cloud Computing offer (several news items will be published in the following days and weeks). He is a member of the Executive Committee, Chairpersons Committee and of the Board of Directors.
- Virginie Picault, CFO, remains in charge of Pentalog’s finances, without any changes, she is a member of the Executive Committee, Board of Directors and of the Chairpersons Committee. She will continue to work with me on corporate finance needs and management of equity participation (Pentalabbs).

We were overwhelmed by uncertainty in the process of finding a replacement for Manuel in Brasov. I appreciate the aspirations that you have expressed. We have acknowledged the qualities of each of you. In the end, Mihai Bejenariu, from Bucharest, who joined Pentalog a year ago, will hold the position of Delivery Center Manager in Brasov.

The training department formerly under the responsibility of the Technical Manager, will be managed by Manuel Damian from now on, in close cooperation with the Delivery Centers. Beatrice Stanescu strengthens her position by becoming Program Manager of the Incubator. Moreover, the technical management team received extended tasks in the context of company’s expansion (see below).

Frédéric Lasnier (CEO-DESIGN&BUILD), will chair the Board of Directors and the Chairpersons Committee. In charge of the front lines, my smaller team, will consist of the following:

- Madalina Gavrilita for Internal Audit (reporting directly to the Chief Executive Officer)
- Alexandra Mondanel for International Operations (reporting directly to the Chief Executive Officer)
- Sophie Lelarge, founder, member of the Executive Committee, will be responsible for the company’s global offer, which will regroup under her personal management the Sales, Technical Management, entrusted to Cornel Fatulescu, the Business Lines represented by Pierre Peutin and Mickael Hiver (no changes), and the Project Directors.
- Grégory Rondin becomes the “Pentalabbs” Incubator Manager. He also becomes member of the Chairpersons Committee, in charge of reporting on incubation activities and acquisitions of holdings.

Following our clients’ requests, our Technical Management must provide specific offers within the scope of the projects. Therefore, a complete pack of services for production environments will be sold, as well as Technical and Methodology Consulting regarding software production, technical audits and occasional support for implementing solutions. Thus financed and without the training dimension anymore, its specific technological means will increase and diversify. Several new experts will be appointed Technical Management Consultants in the days to come.

Therefore, the whole consisting of sales, project managers, Business Lines and Technical Management is regrouped in a wide offer department entrusted to Sophie Lelarge, founding partner. Under the title of “Sales and customer Support”, she will coordinate all the contract management means, as well as offer development and drafting.

The marketing management will become a new company. In fact, it will merge with People Centric to set up a unique structure of Digital Marketing, a Pentalog subsidiary in the IT field: Virtual Fanatic. I will write an article on this topic in the near future. There is a short-one already on www.pentalabbs.com.

There are still several small modifications in the process of being validated, but they fall within the logic presented here. The current organizational chart comes into force on Monday, 26th September. The marketing teams still remain part of Pentalog at least until mid-November.

- University challenge: using IT to improve services and reduce costs (September 08, 2011, ComputerWeekly)
- How to write a contract to protect you against out of control IT projects? (September 09, 2011, ComputerWeekly)
- 9/11 Continues to Influence IT Strategy (September 08, 2011, CIO)
- How To Mitigate Risk in an Overheated Outsourcing Market (September 09, 2011, CIO)
- Cloud Computing: What You Need to Know About PaaS (September 08, 2011, CIO)
- Amazon/Kindle Part 7: The End Of The Road For Outsourcing? (September 09, 2011, Forbes)
- Deutscher Wirtschaft droht Einbruch Ende 2011 (September 08,2011, FTD)
- Kampf um Neukunden beginnt (September 12, 2011, CIO)
- Womit verdienen Firmen in zehn Jahren ihr Geld? (September 09, 2011, Computer Woche)
- Green IT: So viel Strom genehmigt sich Google in einem Jahr (September 09, 2011, NetzWelt)
- Fukushima-Schock schiebt Cloud Computing an (September 06, 2011, CIO)

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.

Here’s the IT press review for this week!

- Air-cover: Innovation’s secret ingredient (August 29, 2011, Forbes)
- Google to shut down Slide social apps (August 26, 2011, Computerworld)
- Lack of soft skills training is curbing IT career progression (August 26, 2011, Computer Weekly)
- Organisations failing to implement hypervisor security, says cloud supplier (August 26, 2011, Computer Weekly)
- Gartner figures show BPO contracts on the rise with Asia Pacific suppliers in the lead (August 22, 2011, Computer Weekly)
- Chinese Android startup offers low-cost, high-spec handsets (August 29, 2011, ZDNet Asia)
- Should You Sue Your Offshore Outsourcing Provider? (August 26, 201, CIO)
- The 1st Annual Telematics Brazil & LATAM will Discuss the Way Forward for Telematics Market (August 26, 2011, M2M)
- Cloud-based infrastructure provides connections for M2M (August 29, 2011, M2M Now)
- Cloud wird die vorherrschende Disziplin (August 29, 2011, CIO)
- Die Hürden zum Enterprise 2.0 (August 26, 2011, CIO)
- Social-Media-Knigge für Arbeitgeber (August 29, 2011, Computerwoche)
- Der Mittelstand bleibt bei Unified Communications skeptisch (August 24, 2011, ZDNet)
- 10 junge IT-Firmen, die jeder Surfer kennen sollte (August 23, 2011, Netzwelt)

Pentalog Group, through its Board of Directors, decided to change the organization chart and to divide its General Management activities in two sections: one dedicated to strategy, international issues, business development and marketing, and the other dedicated to operational management, including production and production structure management, financial management and reporting, management and development of existing partnerships, information system management, technical management as well as the incubator.

Within this framework, Frédéric Lasnier, French, 41 years old, current CEO, President of the Board of Directors and founder of the group will be in charge of the first section, while Monica Jiman, 34 years old, Romanian, formerly COO, will assist him from now on in his duties by becoming Deputy CEO. She will be in charge of the second section.

This new organization of the group aims at adapting the group to the ever-increasing client demands and to its geographic expansion. On these grounds, in the following weeks, the organization chart will be modified accordingly. As a reminder, Pentalog Group, No. 1 in the fields of software R&D and offshore IT Outsourcing in the European Union has offices in France, Romania, Germany, Vietnam, Israel and Republic of Moldova. By the end of August 2011, the group’s number of employees will have gone up to 700.

Around fifty mobile phones, the world N°1 for telecom billing software, the most important accounting platform for German SME (3 million licenses!), the most important French POS and its Retail Management version, the N°1 European software for management of tertiary spaces and distribution, the world N°1 for utility metering systems, both for connected equipment (embedded) and for servers, a management platform of security cameras and many others in the M2M sector… In total, there are close to 200 product lifecycles, the outcome of our clients’ imagination, which have been entrusted to us, either totally or partially.

These prestigious platforms, which are sometimes used by several hundreds of millions of users from all over the world (mobile phone baseline, for example) rank Pentalog high among the best engineering companies in the European Union. With a recommendation rate of 90% (!), Pentalog enjoys the favors of a large network developed by word of mouth on the old continent and this recognition is on the rise.

This very rapid development of our R&D and PLM references make me think about the opportunity of making a change in our organization. Why indeed, rather than splitting our offer in 2 business lines (Embedded systems and Information Systems), shouldn’t we organize the activities related to “products” into one single Business Line, “R&D” and “PLM” and the “service”-oriented ones into a services or “ITO” BL, or even “Build and Run”…? As a matter of fact, I wonder what is the best means of making the market understand that we are an accomplished player on the market, capable of supporting or taking care of the whole lifecycle of any software product. We are ready to do that from a legal point of view (we have strong knowledge in this area and we have three full-time legal experts in three countries), we are prepared for this from a technical point of view (we master the technology road maps and we avail ourselves of Technical Management with their own benchmarking and R&D activities), in the field of human resources (ramp up capacity at the highest level and full ISO 9001 certfied), but also in managing PLM (software platforms).

In any case, these reflections should help us become more aware of the achievements of these past few years. We have “single-product” clients who do not hesitate to entrust us with 100% of their future and there lies our main asset , in the trust of our clients and employees.

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?

As Alex revealed to you last week, PeopleCentric was referred to many times in our meetings in California, both with regard to its role in Pentalog’s growth and success, and regarding its own potential. We will necessarily resume the latter aspect in the following weeks, in the scope of the capital increase launched by the French-Romanian start-up.

Today, I will rather talk to you about the growth potential detected by Pentalog in terms of outsourcing demand. Indeed, everywhere we went, we encountered the same issues concerning the lack of resources in start-ups, as well as in major companies. We visited Salesforce, we talked with Apple employees, former HP staff members, all of whom confirm that developers are rare and, in some cases, very expensive. The most talented of them, who use the most popular technologies and work on algorithm cores, can claim salaries of more than $200,000. And this is not an average. On the other hand, wages offered by start-ups are often supplemented by a payment in shares. This is also a simple way to temper down cash claims. The larger of these companies make use of this instrument to pay smaller salaries in the end by making their employees bank on the quality of the business plan.

Thus, outsourcing tendencies are becoming widespread, to the benefit of the major Indian companies, of course, but not only them. Eastern European companies are indeed very appreciated and promote themselves rather as emerging technological companies. Ukrainians, Russians and Belarusians in particular are widely represented here. Several Romanian IT companies are also present, as well as Chinese, Philippine and Vietnamese providers. Vietnam and China have a very bad image, mainly because of their communication difficulties and their teams’ lack of interest in the clients’ projects. This does not fit our view of the country, even though we share this opinion as regards their linguistic problems.

We have not taken a formal decision yet in terms of opening a subsidiary in the USA. Obviously, Pentalog’s numerous assets, like the Incubator or its fast ramping capabilities, are quite appreciated here, as high quality offshore companies are not so numerous. The marketing operations to be deployed are considerable. The small time difference, which is one of Pentalog’s assets in Europe, is irrelevant here, as well as our use of the French language, which, of course, is quite irrelevant to American companies. Therefore, we need to find something else. Pentalog’s impressively low human resources turnover rate project a favourable image on the company, as well as our participatory model resembling that of American companies, or our QMS and our satisfaction and recommendation rates.

In fact, our first feelings are excellent. We have no less than 4 commercial propositions to make following a presence of only one week. I can already envisage a next trip to California in the near future, somewhere between August and November, for instance. Will we have made a first closing deal by then? It seems difficult but, after all, why not?
This adventure is very demanding for me as it is part of an overbooked agenda. But isn’t organization a talent that I am supposed to have !? Many people tell me that American subsidiaries cannot be created as long as the business owner does not make a long-term journey in the country. I simply answer them that I am going to think about it and that it is not an easy decision. The transfer of the headquarters is also taken into account in certain cases: Talend, Business Objects, Viadeo are some of the French examples.

Alex and I would like to kindly thank all the people whom we met or who assisted us in organizing these exciting discussions. I am thinking of Carole Granade from the French-American Chamber of Commerce in San Francisco, of Rémi Vespa who was a colleague of my father’s at the end of the 80s and who has lived in SF since 1995. I am also thinking of Anthony, Frédéric, Anselme, Matt, George Haber (a major Romanian veteran in the Silicon Valley), Gwendal, Carlos, Jorge… Finally, I would like to express my deep gratitude towards my colleague Jean-Michel Fournier, who was my client at the end of the 90s, and especially a true friend at the beginning of my career, just like I was his friend. He became a Pentalog associate just when he left for the USA to build an outstanding career as an executive VP for major companies (HP, Unisys, United Health Group), he has remained my friend and provided us with a great welcome and useful advice. Thank you…

In 2006, Pentalog employees had an average age of approximately 25 years. This average has now risen to 28 years. As we faced a high turnover, we had to come up with an employee retention policy which included a remuneration system based on the recognition of our employees’ efforts. The problem is that the very notion of effort is not the same for everyone and, moreover, recognition of what is considered an effort or not varies with age. Considering that I myself am not an early riser, as everyone knows , I could well understand that it might be difficult for 25-year-olds to be punctual in the morning. Nevertheless, briefings and scrum meetings require the presence of the entire team. Thus, taking into account the young age of the staff in our IT outsourcing company, we decided to turn morning punctuality into a bonus criterion. I can tell you that the earliest risers among Pentalog managers could not be easily convinced

Objectivizing recognition

Likewise, we have always preferred recruiting rational and creative individuals who are able to come up with propositions for their clients, in addition to respecting the production processes, draw up the reports which enable us to invoice, to document their work and many others, which are seen as constraints by talented developers. If nobody at Pentalog questions the efficiency of the ISO 9001 quality system, that is because it is closely linked to a remuneration system which includes regularity and process follow-up.

The end quality of the delivered product and the respect for deadlines are also included in the financial rewarding system.

Whatever the case may be, the bonus system seemed like the most obvious objectivization method of employee recognition. In total, there are no less than 40 criteria which are taken into account on a daily basis by our PMs in order to determine the individual monthly bonus of each member of their teams. We are fond of this type of management innovations which render us different from other companies. Indeed, even though management costs related to such a system are significant, especially with a workforce of 650 employees, it offers us a considerable advantage when it comes to attracting and retaining human resources and renders Pentalog one of the best offshore nearshore companies in the world, with record satisfaction and recommendation rates, both in the East and in the West. Our latest internal satisfaction survey supports this claim. We are on the same tendency of permanently looking for harmonious systems designed to continually improve our performance. The waiting lists that we have in almost all of the cities stand as a proof.

From recognition to the sense of belonging

The other essential element that we promote, in agreement with the sociological studies on the Y generation, is the sense of belonging. Whether by searching for common values, joining innovation programmes or taking part in important holidays, we consider it of the utmost importance to support the project team, which is the elementary group of any IT company. Pentalog has a secret weapon for this – Team Beering! We have a small budget, which is limited because we don’t want to encourage alcohol consumption , which is designed to enable our project teams to go out for a drink together every once in a while, according to their own planning.

Finally, at a higher level, i.e. the office, the delivery center, the unit which is shared by over one hundred people, we allocate a small budget for different activities, like renting football fields, karting, the Christmas party or the collective holiday week which is so dear to our Vietnamese team. I actually heard that the latter were about to set off for a trip to Thailand. I would like to take the opportunity offered by this psychological and sociological article to wish them a good trip and a pleasant stay! Which just goes to show that expectations are not the same among the countries in which we have offices

The last point refers to online social networks. Both Pentalog and PeopleCentric display their values, their good or bad mood in complete transparency. Pentalog employees are quite active online. The Arab spring has shown everyone of us the political or rather cognitive importance of social networks. But Pentalog employees had already experienced this in Moldova, which witnessed the first Twitter revolution. Therefore, our online presence is quite natural, as these networks embody a world in which individuals experiment at great speeds their new preferences and new means of expression in harmony with the other members of their generation… Y, of course.

The Pentalog Group significantly increased its M2M revenues in 2011 through the arrival of two new major clients, one from France and the other from Belgium. All the other clients have placed additional orders and most of them are increasing the volume of their projects.

Pentalog developments for these clients focused on embedded applications (especially iPhone and Android, but we have also worked on low layers), as well as on control servers or intelligent network reporting servers (Mesh). In addition, we take over the development requests of NMS (Network Management Systems). Most embedded developments are carried out in C, while server applications are rather based on Java or .Net.

For Sierra Wireless, one of the global leaders in the equipment sector, as well as for the global leader on the commodities metering market, our activities aren’t limited to the mere development, as we have fully-equipped product certification laboratories (pre-production testing) in Chisinau (Moldova) and in Vietnam.

The currently booming M2M market will go up by more than 50% within Pentalog’s sales figure this year.

Connected microscopes, network crash test devices, oscilloscopes, an acoustic chamber, a TV studio, an editing system and video mixing consoles, 10 local and central datacenters, an ergonomics and design laboratory, satellite antennas, online stores, a steering room etc.

Pentalog, an IT services company, is equipped with incredible technological assets which allow it to continually improve its production. Of course, not all of this equipment is ours, but it enables us to gradually master it and, eventually, extend the field of our knowledge.

What other European IT services company oriented towards engineering or consulting can boast an acoustic chamber destined for the needs of mobile phone companies, a TV studio and multimedia laboratories and mobile features designed for our e-commerce customers? Except on our clients’ premises, I have seen this type of technological configuration only in major Indian companies which are ages ahead of Western European engineering companies. The latter continue to offer only man-hour-based services, whereas clients expect a genuine engineering solution which is fully integrated and industrialized.

Pentalog is now a technologically-rich multi-specialist firm, which collaborates with major companies and uses Open Source solutions, and is capable of providing a lot more than just code and third-party software maintenance services, without of course underestimating these activities . Thus, we can make product or service demonstration films, edit video sequences, produce augmented reality, but also test consumer electronic products, simulate M2M environments, test satellite connections, measure the quality of video servers, generate network crash tests, develop all the software layers of a mobile phone.

In all cases, we use the best specialists in the countries where we operate, who feel that Pentalog offers a rich environment for personal fulfillment. At a time when the focus is on convergence, Pentalog represents a great tool for its employees and helps its customers understand and deploy the most daring multi-channel strategies.

Pentalog pursues its efforts with a 29% growth in Q2, thus continuing the trend of Q1 (31%). This growth is half due to the extension of existing contracts, unlike Q1 which had seen the signing of an unprecedented number of new contracts which were immediately launched into production. Before returning to contract extensions, let us salute the arrival of at least six new clients, while the second quarter is still not over: three in France, one in Germany and two in Israel. One of them bears a strategic importance as it consists in taking over the developments of a future star of the French e-commerce sector, following a financial operation which didn’t go unnoticed on the Parisian market. This is a strategic operation also because it confirms the results that Pentalog already obtained in the electronic commerce field, especially with Magento. Moreover, one of the global leaders in social networking has chosen Pentalog for its development needs. Thus, the online selling platforms developed and set up by Pentalog will soon register an annual sales figure of approximately 1 billion euros. In Germany, we salute the signing of a Business Intelligence contract with a recognized clothing company, Gerry Weber. Following its Q1 record, the group boasts 16 new clients who have already launched their projects since the beginning of the year.

As regards extensions, Pentalog reports a second development since the beginning of the year of the operation carried out for the Telecom Billing software editing branch of the Ericsson Group (former LHS). This operation, which is being developed in Iasi, was launched in 2008 and will involve over 36 employees in a few days’ time. Likewise, one of our major real estate clients has just included more services in its request to Pentalog, while another customer operating in the same field has extended its contract with our company. In addition, the technological branch of one of the largest French energy groups has prolonged the contractual relations initiated in January with Pentalog in the M2M (machine to machine) field.

As for the Pentalabbs incubator, start-ups continue their fast-developing trend as they register a growth rate close to 100% in Q1 and Q2. They will develop by more than 50% in 2011. Their sales do not fall within Pentalog’s financial analysis scope.

For Q3, Pentalog expects yet another substantial growth, but at a lower rate. It will probably be between 12 and 18%.

The semester will therefore finish with an organic growth of approximately 30%, thus confirming both our international strategic options (Israel, Germany, Switzerland, Belgium) and the specific specialization efforts. E-commerce, M2M, embedded development in the mobile telephony sector continue to grow a lot faster than the rest of the market.