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The purchase of IT services must be adapted to the offshore environment
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?
IT offshore press review week 15/2011
Welcome to this week’s IT press review! It seems that the Russians are concerned by something. Find out why!
- Russian secret service “concerned” by Gmail use (09 April 2011, ZD Net)
- Facebook shares its data-center secrets (07 April 2011, ZD Net)
- CIOs need IT governance rethink (08 April 2011, Computer Weekly)
- CW Security Think Tank: What’s holding up the cloud? (06 April 2011, Computer Weekly)
- IaaS providers not up to enterprise challenge says Gartner (07 April 2011, Computing)
- IT Outsourcing in Latin America: 9 Things Your Vendor Won’t Tell You (06 April 2011, CIO)
- How Cloud Computing Promotes Business Growth (11 April 2011, CIO)
- Japan-Krise perlt an deutscher Wirtschaft ab (6 April 2011, Handelsblatt)
- IT-Services: Kosten steigen, Qualität sinkt (11 April 2011, CIO)
- Die Schweizer Wirtschaft und ihr Verhältnis zur IT (7 April 2011, Inside IT)
- Was kostet die Cloud? (7 April 2011, Silicon)
- Deutschland ist führender Standort für Botnets (6 April 2011, Silicon)
- Hier entstehen die meisten IT-Firmen (5 April 2011, CRN)
- IT-Komponenten ,,erobern” die Produktion (5 April 2011, Automotive IT)
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Offshore / Nearshore: the return of geopolitics?
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.
Press review week 06/2010
- IT industry fights tax changes (02 February 2010, Misaustralia)
- India Telecom outlook for 2010 is stable to negative (02 February 2010, CIOL)
- Asset Protection Offshore! (03 February 2010, PR Inside)
- Cairo ICT to reflect dynamism of the IT sector (08 February 2010, Yahoo News)
- IT recovery on, India ranks high (03 February 2010, Yahoo News)
- How will the Carbon Reduction Committment affect IT outsourcing? (03 February 2010, Computerweekly)
- IT Outsourcing: Why It Pays to Appraise Your Contract (03 February 2010, CIO)
- 10 best IT jobs right now: Source: The Industry Standard (02 February 2010, The Standard)
- Rumänien: Der Lockruf des Karpaten-Goldes (03 February 2010, Die Presse)
- Russland nach der Krise: Wütende Bürger trotz Wirtschaftsaufschwung (02 February 2010, Handelsblatt)
- Europäischer Outsourcing-Markt stark gewachsen (05 February 2010, Inside IT)
- Deutsche Sprache – schwere Sprache: Neulich in …Bangalore (03 February 2010, Computerwoche)
Vodka & suit + snow boots
I never thought one day of attending business meetings wearing snow boots… In Russia, it is common. And rare are the few people who do not wear the fur hat, it is THE essential accessory for your survival on the streets of St Petersburg as well as in the Ural countryside in winter. There are hats for everyone, of all colors, leather, rabbit skin, felt, with brilliants, pearls, but in any case, always something that goes with your coat! Going up Nevsky Prospect in the early morning, amid all these people wrapped up in their own way, going to work with a firm step, reminded me of my literature courses in highschool, and the grotesque characters that Gogol portrayed in a satirical tone in his St. Petersburg Short Stories, which I reread at the moment of this trip: Akaky Akakyevich Bachmatchkine, petty official shivering in his worn coat on the way to the Ministry (The Overcoat) or Major Kovalyov who awoke one morning without a nose (The Nose)…
In Perm, after we had been introduced to the ritual of tasting the “Ruski Standard” (remember to drink only half of your glass and then leave it on the table is very rude to the person who invited you to drink), Denis and his colleagues talked to us about survival skills in the taiga, that we (thankfully) did not have the time to practice. Besides these very good moments that made me completely forget my prejudices about Russian austerity. Anyway, our friends both in Perm and St. Petersburg demonstrated to us their strong commitment to international development and improving their technical and business skills from every point of view. This was an encouraging attitude when thinking of creating a prospective partnership in this country, despite the past legacy which seems to continue to weigh heavily on professional relationships. One entrepreneur explained to us how he launched his business at the time you could read signs saying “No business is no good” in the streets. Today the dream of Russian entrepreneurs is to do business with France, Germany …
Fred spoke of the language problems in his post; it’s true that the use of English is not yet systematic amongst IT engineers. But after thinking about it, overall I didn’t feel any more difficulty in communicating than I did in India, where people spoke English well enough but with a “local” colored accent and with various expressions which I didn’t have the habit to use. I will not speak of French language (the “Alliance Francaise” courses in Perm seemed to be attended mostly by young women from well-to-do families) but on the other hand we met German-speaking people, which is an additional positive point. The language problem is of course less obvious in Saint Petersburg which is a doorway to the Western world, a very cosmopolitan and modern city of 7 million inhabitants, with 120 universities and engineering schools. It is probably the 2nd largest city in the world for engineering outsourcing, maybe even the 1st when compared to Bangalore in terms of the percentage of the population going to university.
So in conclusion, many interesting things to think about after this trip, both in terms of SAP, as well as embedded systems or the opening of new markets in Scandinavia. We were really impressed by the people we encountered. Russia almost seems an obvious choice for the future development of our business and the presence of Pentalog. These projects came at the right moment; the France-Russia year was inaugurated yesterday in Paris… We will return with great pleasure to these frosty regions, but so welcoming!
Pictures can be seen here: Perm & Ural, Saint Petersburg
Pentalog, Russia, an SAP proposition
Alex and I took the road to Russia recently. We were very far away from what we know as the geographical borders of Europe, at the foot of the Urals, to assess the possibilities of a relationship with one of the leading Russian specialists in SAP.
I would first like to thank them for their incredible hospitality. We did some ice fishing in a frozen river, visited an ice cave… drank lots of vodka, and ate very well wherever we went. In this regard, I would like to emphasize the quality of Russian cuisine, with salmon and other fish, pickled or smoked, caviar, and delicious meats. In short, even the most demanding gourmets among you would not have been disappointed in Russia.
Professionally, we really appreciated, again, the quality of the people we encountered. I would first like to thank Evgenia, Denis, Maxim, Evgeniy and Victor for having accompanied us every hour of our journey. Their professional availability was incredible and I would like to note this amongst these young developers, project managers and managers.
Yes, there were a few difficulties and if I did not mention them, you would not believe me  Both Alex and I noticed the same difficulty with foreign languages, as I have previously mentioned concerning Morocco and Ukraine. English is not yet the universal language and we definitely need to encourage the use of the French language if we are to go further… you see were I am going? Anyway, I can assert that nothing in the world, reaches the level of Romania and Moldova when it comes to finding people who can converse both in English and French.
I cannot in fact, help thinking of our 100 Moldovan employees, of whom 80% are francophone, almost 100% English-speaking… and 100% speak Russian.
Before starting the SAP adventure, I promised myself to prepare a “killer proposition” for this market. We will only propose the best-in-class services, whatever their nature. Otherwise, we should not get involved. Have we found this offer for SAP? I do not know yet. Alex and our market intelligence team are still going through the pre-qualification stage looking for at least one other operator in another geographical area, before making a final decision, whether to go or not to go for SAP, and / or, whether to go alone or accompanied?
What will we do in Perm, Russia?
Alex and I are on our way to Perm, at the foot of the Urals. Why?
Without saying too much for the moment, we entered into a relationship, a few months ago with several companies established in the ERP sector in several regions of the planet. Pentalog is not really inclined to develop its own department in this sector, relations with the editor is generally restrictive and very slow to build. However, considering our current size, and for our future, we must be increasingly able to answer all the queries of our customers. Thus possibly it is necessary to consider tightening our relations with suppliers. ERP is a sector in which Pentalog has not yet filled and possibly should be considered.
Moreover, this type of service is often synonymous with higher tariffs, often misunderstood by the customers. Thus wages in France, but also in Romania, India… for these skills go beyond the logic of these various local markets. To go so far into such an unexpected region also is for us a way to compensate the exaggeration of this market. Is this a good calculation? We shall see. For now, the idea of working with a few French or German consultants, working on the front line and completed with our new Russian friends seems interesting and the motivation of a partnership seems very strong. We are entering into the operational phase of the process.
Pentalog in Russia?
After the trip in India that Frédéric and Alexandra made at the beginning of November, they will be traveling to Russia for an on-site study of the possible destinations that could accommodate a new entity of the Pentalog group.
As before, the aim is to make an assessment of the country’s ability to serve clients in computing, including embedded, in the following sectors: aerospace, defense, automotive. They always keep in mind the question of the Francophone, so we invite all Russian engineers, emigrates and entrepreneurs Francophone who read this text to contact us.
They have not yet made a final decision about cities to visit. After a quick stop in Perm, they must decide between Moscow, St. Petersburg and Novosibirsk.
The trip will take place from January 21st to 28th. Don’t hesitate to contact us if you think you can play a role in our project.
Press review week 47/2009
- inCode’s Top 10 Telecom predictions for 2010 (10 november 2009, CIOL)
- Xing grows revenue while profit falls – and no LinkedIn takeover likely (13 november 2009, Techcrunch)
- What Matters Most in Outsourcing: Outcomes vs. Tasks (16 november 2009, CIO)
- Why are Indian outsourcing companies such bashful suitors? (6 november 2009, Silicon)
- The Global Innovation Migration (9 november 2009, Business Week)
- Outsourcing on the rise (10 november 2009, Global Times)
- Europäische ITK-Markt blickt optimistisch in die Zukunft (9 november 2009, Silicon.de)
- Europas 100 größte Softwarefirmen (10 november 2009, ZDNet.de)
- Outsourcing: Deutsche Konzerne lockt die Ferne (11 november 2009, Silicon.de)
- Mieten statt Leasen, Outsourcing statt Eigenleistung: Warum klassische TK-Anlagen out sind (16 november 2009, Computerwoche)
Press review week 39/2009
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!
Are offshore outsourcing and democracy compatible?
I asked myself this question last night while I was assessing the situation in Moldova… which has nothing amusing in it. However, I made this reflection, namely that all offshore countries without exception were dictatorships and that nearshore countries were already, almost all, democratic. You may think I satirize, but the following short list gives me reason:
- Nearshore: all countries in Central and Eastern Europe, that are EU members, are democratic; they don’t dislike those who only know what a dictatorship is. Argentina, Chile, Uruguay are nearshore US countries and pose few problems to their inhabitants. In Europe, the exceptions have all the same characteristic; they are the former RSS (Moldova, Belarus, Ukraine). Happiness does not return quickly where the imperialism of Moscow has passed through. The prize goes without doubt to Belarus, which always has a leader of the Cretaceous era (the era of morons?). Morocco is not a democratic country and it is quite possible that France has contributed to this situation. Tunisia is not a democratic country either and wants to play the nearshore card as well.
- Offshore: Madagascar has one for a while now, but is India a democratic country when 80% of its population lives an unspeakable fate that nobody wants to improve? China, Indonesia, Malaysia, my dear Vietnam are not examples of respect for human rights either. Finally, I find no democracy in the offshore area.
So does this mean that democracy is too expensive for our industry? In fact it is not impossible, although simplistic yet. As recently as last week, one of our competitors in human resources in Moldova, wanted the Communists to win the election “so that nothing would change.” I will not give my opinion on the Moldovan election because I’m not legitimate. Indeed, for me, the problem is not that the Communists win or lose this election. The real question is what the regime will be, which, by its policy, will ensure the country’s economic development and respect for basic rights to education, health, vote with respect of democratic procedures. Here are the real issues. I explained to these people, that we, the software companies, would have to pay our payroll taxes, as true corporate citizens, if they were going to ask for fiscal measures for us and our employees.
I then explained what everybody knows, including themselves, that people would leave this type of country for the living conditions rather than for the wage (what most of the time, leaders do not know). I’M REFERING HERE TO OUR BUSINESS ONLY. But this guy refused to understand me and explained the benefit of his wage system, based on the use of a tax heaven to pay its employees. I will return to this topic one day.
I believe that, in fact, it is not democracy that it is costly in itself. Nobody questions the strength of Canadian democracy and yet the work is much cheaper in Luxembourg, Sweden, Germany and even France.
I am not absolutely looking to fall on my feet at the end of this difficult exercise, but I would say that these countries need the revenues that we generate. I would also say that we are demanding companies, in terms of educational and technical infrastructure. Our companies are, by nature, open to the outside world through their customers. I fully felt the emotion of those who shared this difficult week with us. They were interested in what was going on and discussed with the teams. The employees of offshore companies, either Moldovan, Belarusian or Moroccans are often at the democratic forefront of these countries and often share much higher expectations than the rest of the population. We often offer them the only solution to put their knowledge to use while remaining in their country.
In conclusion, I would say that no one, for these reasons, could settle in the worst dictatorships, regardless of the wage cost. Who offshores in North Korea or nearshores in Libya? Thus, the presence of IT offshore activity could be used to measure the degree of hardness of a dictatorship! Isn’t this amazing?
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