I wanted a long time ago to write about this, but I continuously postpone it; little because of lack of courage in front of such a hot subject as unpopular.
And then suddenly last week, travelling through Tunis, Laurence Parisot, the President of the Movement of French Enterprises (the largest union of employers in France), gave me the free pitch, declaring that externalization creates opportunities for the West. Even better, she called (I took it for myself) to better explain the value added chain… I could not stand back anymore. Thanks Laurence!
In my field, I could say that globally, even in France, the concept of globalization is tolerated, even recognized, but from here until to consider it honourable, we won’t have to go too far.
Still, I see at least two series of reasons for which France would have to think about the unappeasable depression: industrial and fiscal.
- Industrial reasons: France lacks engineers as well as qualified workers nowadays. Who saw an unemployed engineer? Who saw a R&D developer or a software developer unemployed? I have to be very clear about this subject. France, as well as Germany, has a deficit of labour force which suppresses the creative and the productive capacities of our companies. Are you aware of the fact that France could arrive to the state of not being able of delivering the nuclear power stations it sells so easily, due to the lack of engineers?
The capacities which the French firms mobilize abroad come to be inserted into a French process of creation of value. In other words, jobs produced abroad, as part of a global production process, will benefit of the added value chain and will there be sold for better prices which will allow firms to pay better their employees, to remunerate French stockholders, but also to pay higher taxes as if they would have had produced more expensively but local. (yeah..)
To this we add the fact that none of my clients, and I have some experience as an offshorer (you can take a look at this list of success stories, but not all of them are offshore treated), discharged any of his employees after having entrusted us an externalization contract. Even better, this allowed them to lighten their software production. In return, this liberates the experience acquired by the previous generation of developers, in terms of creativity, comprehension, project planning, architecture, so liberates it from finally avoidable tasks of production and management. I don’t even speak about testing… services economically incompatible with the Western Europe production costs, since we speak about competitors with products established in the Extreme Orient. It’s a matter of value creation capacity, through innovation, which will grow by matter of activity transfer… which will allow to developing economies to know the benefits of our great occidental world.
A last question, as a conclusion: what country predominantly supplies the Indian production of software? You found it, isn’t it? Is this country threatened in its capacity of software innovation? Are these firms on the point of disappearing? In parallel, this year, France has just lost one of its rare representatives at the end of the food chain of software package: Business Objects, in the deepest silence. At this level, it comes to mind, only Dassault Systems.
- The fiscal level now: the explication is shorter, because it derives from the whole industrial level. France and its lack of labour force, but also the lack of competitiveness of its systems, is in need, from the fiscal point of view, of revenues that French companies will generate abroad. For France, these companies externalizing their production enlarge the fiscal cake. It’s the ground 0 of being an economist.
I don’t have to go far to search for an example. Pentalog France generates, by its production capacities, a profit of 2%… not because we try to reduce it, but because France has the highest social costs from all over Europe with the smallest price level of consulting (and I speak now from experience, because I know really well the functioning of European consulting markets).
For 2007, we will declare in France, thanks to Romanian and Moldavian production, a turnover 5 times higher than the one generated by the French team and a 7 times higher profit and taxes.
Is it okay like this, Laurence?