Well, no it isn’t yet the New Year for us

Vietnam (and other countries across Asia) is celebrating the New Year following the lunar calendar. In Vietnam this period is called the Tết. The first day of the year usually falls in January or February depending on the year. This year it will be Sunday 14/02 (and yes, a promising year for love!)

Tết is a special time for all Vietnamese, whatever they do, wherever they are. All Viets want to go home, and spend time with their family, relatives, and friends. Just look at the number of Viet Kieu (overseas Vietnamese) returning back to Vietnam during this period of “chaos”: there are many people traveling on the roads now because all those who work in big cities return to their hometown.

I would like to use this post to wish you all a great year of the Tiger, only happiness, success, and health. I wish that the Tiger will be with you in this exceptional year.

Chúc mừng xuân Canh Dần 2010!

Pentalog is now working in 5 countries, which have different levels of practices and types of wage scales. Thus, in addition to the question of salaries, there is a genuine “large difference” between the gross annual salary in France and the salary in Vietnam which is very complex, incorporating a premium (bonus) of the New Year, which can change the monthly salary, from 1 to 3 or 4 times because of the additional earnings.

In Romania and Moldova, with patience, we succeeded, like most businesses, to impose a contractual gross wage scale. The constant changes of taxes and social charges have condemned our ability to establish fixed net wage scales.

The average remuneration scale in these 5 countries are very different, we should not hide this fact. A German company will pay a higher gross salary than that of a French company… but the net earnings are very similar, because of the impressive tax system in Germany. The Romanian wage scale varies greatly from what is established in the capital, to the different parts of the country, also if the employee has a specialty occupation or exceptional training using a specialty tool or program, if he is a junior or senior, and or if he acts as a consultant or is an “in house” employee. Thus, a BO developer in Bucharest, familiar with a leading business sector and after 7 to 8 years of experience will have a gross salary which would astonish a recruiter in Paris. I think I can say, in this case, the senior employee, working in direct interaction with customers, will reach a high pay scale equivalent to those of a provincial French city and often, could even reach the equivalent salary of Paris. In contrast, an unexperienced tester in a provincial town in Romania will make 10 to 15 times less. In Romania, in terms of what is happening in most other offshore countries there is this amazing difference between junior and senior employees, who are not in France, land of the minimum wages which have been contractually established. Thus, a German novice will often be paid less than his French counterpart, but his earnings will grow faster.

Furthermore, depending on the maturity of the IT market of each country, inflation operates differently. The offshore business may be defined as the science of differences, the companies most confident of their production model and project management are going to target these countries where new companies are coming into this sector and who will try to make rapid productivity gains. After an investment period of one or two years, they will seek to achieve the highest profitability. The consequence is obviously that the growth earning rate, will reach higher levels of profitability much faster than in countries with a high degree of maturity and where productivity gains are lower. For example, Pentalog knew very well, when it established itself in Vietnam that the wages would grow a little quicker than in Romania and even in Moldova. In contrast, as Vietnam “grew” very quickly, the interest in this country became more important in the minds of IT decision makers. The risk appears when, for marketing reasons (Romania during 2005-2007), or demographic (Ukraine-Moldova at the present time – emigration of the workforce), wages increase without being compensated with an increase in productivity.

This article is meant to reflect on the complex strategy phases of our company and in determining its fiscal policy. The crisis has shown us in 2009, with our 50% organic growth and our profitability in double digits, that Pentalog has made the right decisions. A profitable business is able to invest in its growth, in productivity gains and market share, when most others are in recession… which, in a service industry, often results in large economic losses and therefore, in productivity.

Pentalog can not build a unique wage budget model. However, we should seek to get closer to it, to facilitate the movement and adjustments in a group of soon to be 500 people. The concept of remuneration based on productivity and employee satisfaction should be the same everywhere. It remains to better integrate the issue of the Tet (New Year) in Vietnam, not to disqualify it but to integrate it into the Pentalog production card. Indeed, if we apply the same rules in other countries, by adding this supplementary payment this may force us out of a hyper competitive market.

So when my production management in preparing the Business Model for this year, asks me how much the salaries can evolve, I am particularly embarrassed. The future remains very uncertain. Recovery or no recovery? I have always believed in a quick recovery. But where are we in this first step to recovery? I feel the need to improve wages in countries where we are already established. But we must also continue to make good profits in order to invest in our business model, continuing to conduct more training, to seek better productivity gains above the average. Thus we can be more aggressive and continue to win more projects than the competition. The group’s growth has been the engine for everyone, in generating job opportunities. How many Pentalog employees have become executives within the group? How many, in offshore countries, are earning more than 1000 € (over $ 1450)? How many, in these same countries, earn over 2000 €? What does it matter to see wages rise by 20% when it comes to achieving a strong financial personal growth? To increase the salary of an employee when he confirms by his work and his intentions are to become an important element in our company?

I am going to answer the question that was asked of me. With several figures depending on the country. But more than ever, I believe in the remuneration by the effort of everyone who works for the survival and stability of the group and international social community that we comprise. This is the fairest way and most beneficial to everyone and this is ultimately the only common rule that we should adopt.

This is perhaps not the final version, but it is fairly complete. You can compare from last year’s version. This little exercise allows you to have a public record. Let’s say that for 2009, it is good. Pentalog gained more business than it lost. Only the pace of the new business has been slower, affecting the profit margin in 2010 rather than 2009. But we are now certain it will be again in double digits in the first quarter. At first we were a little alarmed by the weight of our first client, even when the eventual growth was reduced. For a moment, we thought it would reach 18-20% of our sales but it was finally reduced to about 13.

This version may still evolve a little before the final release. But for the reader of the blogs and social networking tools, it is normal to give them a sneak preview.

2009 annual report

- 50% growth in sales when the overall performance in IT services is -6%
- N° 1 of the French-speaking IT offshore / nearshore business in France
- N° 1 in Nearshore business in France
- N° 2 on the Romanian IT outsourcing market
- Among the top 10 of European nearshore companies
- EUR 13.5 M in sales
- 458th company in Europe and Middle East for positive growth in 2008, according to Deloitte Technology Fast 500
- double digit profitability ratio, up 50%
- Doubling of the overall profit margin
- Opening the Pentalog Vietnam offices in February, with over 40 employees in December
- First operations in digital television
- Rate of time & material operations reduced to 10% of the productive workforce in December
- 60% of actual sales came from competency divisions (in multi-year contracts), 20% in time & material, 10% in consulting, 10% fixed price.
- 80% of production staff is evaluated on a daily basis, using 25 to 40 criteria points
- Progressive deployment of production metrics on projects
- EUR 0,6 million spent on training
- 32 people trained on project management this year
- 169 people trained on quality awareness
- 152 people trained in French and English
- 541 people were trained (that is to say 100% of the permanent staff, + 100% of those in the Pentalog incubator)
- 77% for overall customer satisfaction (75% corresponding to “very good” and 85% “excellent”)
- Too low an index of internal satisfaction: 61% (66% = good and 50% = fair)
- The overall number rose from 290 to 430 employees
- 100 people were recruited in Romania and Moldova
- Specializing in Telecom: 40 engineer for ST-Ericsson mobile platforms (lower layers), 15 people for LHS-Ericsson billing system, 8 people in internet services for CityVox (Orange group), 3 BI consultants for Orange Romania, 6 people for the management of web services for Nordnet (Orange Group, web access control, management services and equipment).
- 26% of our Sales were signed outside of France (30% of foreign sales in Romania, 40% in Germany and 30% in Switzerland, Austria and Moldova).
- 128% German revenue growth to EUR 1.6 million
- 65 000 hits per month on Pentalog sites up till year end or 2200 hits / day! This figure does not include videos on web sharing sites
- 50 000 downloaded catalogs – Offshore prices for Pentalog services in Europe
- 12 new customers monthly
- Dependency ratio: the first customer represents 13.6% of sales. This figure is rising.

We have just finished moving our Hanoi branch office into their new premises. Having reached our initial objectives, it was necessary to acquire a larger production site in order to allow for future growth. This new office is located 200m from our previous location.

Moving branch offices is always critical. We must lose the minimum in production downtime and maintain the same level of efficiency as at the previous office. The established process has already proven successful over the past 15 months: 3 branch offices have more than doubled the production area each time, with an increased workforce of more than 200 people in total. The Iasi branch will once again move in January. It’s always a competition for the branch manager and IT department to keep the delay between the decision making process and the move as short as possible. Presently the delay is on an average 3 months (including finding new premises). The professionalism of this process is essential to ensure a good result: a new operational office, Monday morning after having “stopped” on Friday afternoon.

On Friday, all activity stops so that everyone can start gathering their things and putting them into boxes. The infrastructure team dismantles the network elements to be re-established immediately in the new offices. The internet access for our business is the most critical element after electrical power (which is validated when choosing the new premises). This validation always precedes moving. This was done Friday night with the remote intervention of the IT team in Europe. The move would then continue the following day.

With the short distance between the two offices, we decided to make this move in the “Vietnamese” manner. We therefore called on 20 people (50% less than a truck) to move all our furniture, chairs and other things. It was the IT team who took care of loading the car and moving our equipment. The move proceeded smoothly, without any hitches, and without any surprises. Saturday evening, all the furniture was in place, the machines were checked.

Sunday was spent completing all the finishing touches: telephones, cleaning, storage of personal belongings, mounting the dedicated hardware for customer service in our server room (expanded to support the VOD project test materials). The new branch offices was now ready for Monday morning to start production as if the premises has not changed. This new office still has an area of approximately 200m ˛ to be fitted out.

Of course, the success of this new move would not have been possible without the preparations of Tuan (branch office Director) and Tanguy (IT) with the help of Thinh (recently recruited). Also, I cannot forget to thank the girls (Tinh Hai, Kim-Anh, Nhung) who helped put the finishing touches on the offices.

In the coming days, Tuan will make a video presentation of his new branch office. Let me give you just a quick overview of the new premises.

January 08, it will be the turn for the Iasi branch to move, and Greg is almost ready to start the move into the new facilities. The success of this move is unavoidable!

It is clear where Pentalog has made the difference in comparison to the competition, it is by proposing, in addition to its software maintenance services (which everyone proposes), specialized offshore R & D. Our clients have entrusted us with at least 50% of their software development, in addition to their maintenance.

This has led frequently to several other business models and lots of creativity… Today, after having helped in the start-up of PeopleCentric, and including participating in the development of many other new products / concepts / solutions, we have noted that we have been missing something essential, a true innovation unit, which would help to improve and professionalize our services like what we have brought to PeopleCentric. Raluca has indeed benefited from the operational support of Eric and Monica, who also participated in the definition of the initial strategy. Similarly, I was able to help her find her a very talented person to become her French associate director.

In contrast, Pentalog has not yet been able to play the role of technological innovator that it could have expected to become. It has only been associated in the “realization”.

For this reason we are preparing to launch an incubator program that would create an innovation team that could actually be called Pentalog Labs (but we’re still open for a choice of names).

Concerning our incubator strategy: Yes, we are preparing to unveil a program included in the 30-2013 plan, which will include the acquisition of equity for Pentalog in start-up enterprises. Along with the first dossier of People Centric, we will address the needs of the software world and information technology. They will be in the world of social networking, recruitment, skill assessment and management, but also production management and software productivity.

I would like to appeal to all my Pentalog counterparts for ideas. We will qualify their ideas, evaluate them, and we will provide the means for development, management and marketing. In the future, we will help them find the appropriate financing for the development of their ideas and their businesses.

Similarly, we will call on people outside of the group, interested by an investment in their business through providing engineering capital. We envision three possible poles to host the Pentalog incubator: France (Orleans), Romania (Brasov and or Iasi) and Vietnam (Hanoi).

About Pentalog Labs: it will have at the starting point a group consisting of a financial advisor, a professional marketing, the Pentalog Chief Data Base Officer and Chief Software Architect Officer, the Network Guru Officer and one or two talented analysts. The headquarters will probably be in Romania, in Brasov or Iasi. I like the idea of Brasov, except for what continues to bother me is the damn problem of accessibility. But I love the environment and I hope this team can regularly enjoy the lovely countryside. Being chased by a bear regularly keeps you close to the realities of life Brasov is the logical place to create a Romanian Silicon Valley. It’s a shame there is still no airport to easily get to this magnificent city! This team will be there to offer the support to any truly innovative idea, whether from customers or from the group. It is under the direct responsibility of Aymeric, but it is possible that I will take an active role also in it.

I would like to publish this article from Guy:

… survived the frenzied, dantesque, terrifying traffic of Hanoi. The first confrontation is frightening; one is paralyzed when seeing this steady stream of motorcycles in front of you. Impenetrable, insurmountable, and certainly not linear and spread out: everyone changes lanes or direction about 200 times per kilometer and keeps preferably to the right, just before turning left and crossing the complete flow of traffic. Or vice versa.
Sometimes at night on a one way street 30 m wide, fully occupied, you will find a bike with no lights going down the street the wrong way, nothing out of the ordinary; he just saved himself 500 m doing so. Signal lights are unknown.

The favorite vehicle is the super bike of local production, perfectly suited to its environment. Two or three brands share the market, but THE MUST is actually the Honda Wave (97 cm3, 4 stroke, a great gearbox without a clutch).

Wave or not, all these bikes are perfectly quiet (too bad we don’t have the
same in France!), they do not give off any exhaust fumes and are built to last forever. It must be said that motorbike pooling is widely practiced here, up to two adults and three children on the same bike. One can just as easily carry a 123 cm television not attached to the carrier or 50 live ducks. Scooters are also making inroads, especially amongst the girls.

If there were only 2 wheels vehicles, everything could be understood. But there are also the cars, more and more of them. And not just small ones, particularly in the better neighborhoods! In principle, the Hanoi driver does not tolerate anyone in front of him, motorcycle or car. So he honks almost continuously to clear the passage. Totally spent after 10,000 kilometers, the horn must be changed every oil change, along with the oil filter.

But you will mostly likely say to me, that such a way to drive is incompatible with what we know of the Vietnamese State, we would assume that they would make everyone go in the right direction and quietly! That is without knowing this proud people who advance whatever happens, all in the same direction, but each in his own way!

Days pass. You take a taxi four times a day, and then you walk; you begin to dare to cross the stream of traffic, putting at risk your life. Perhaps you make a trip on the back seat of a motorcycle, putting in danger again… And then things become more and more understandable, the monster becomes less threatening, all these motorcyclists are applying the same rule, a totally opportunistic way of driving, each person takes immediate possession of whatever space is being liberated in front of him, left or right. This asynchronous behavior that optimizes time and road space is possible. And no sign of aggression in all of this, just an obsession to win some time, so important to these people who never stop…

And I’m starting to dream. A dream of a less civilized western world, with fewer rules,
fewer prohibitions and obligations. Fewer radars. A world where we could drive more spontaneously, take more advantage of the moment, more in tune with the traffic and the weather. But I know that those looking after us are watching, and will give nothing.

Well my boy, maybe I’ll immigrate to Vietnam after all? But as long as they do not make me eat dog or cobra on the floor! Definitely not that!

Guy LASNIER

During my trip to Hanoi, to set up with Iulia a development team for the ISD, I took the opportunity to visit a new “open”ť Datacenter. As I explained in a previous post, our network strategy is to deploy a regional strategic point in an open Datacenter to have greater flexibility.

Indeed, we have to consider that a growing branch will expand every 12 to 16 months. This expansion implies moving. If we were obliged to move systematically the international links, it would increase significantly the budget of the expansion. The strategy is to “freeze” the international linkages that allow us to control our quality service throughout. Then, the links between the data center and regional branches are more accessible and less expensive to move.

In preparation for a potential opening of a second branch in Vietnam (Da Nang, Hue or Ho Chi Minh City) I went to visit this Datacenter on the outskirts of Hanoi and close to our branch office. I have already had the opportunity to visit several data centers in France and Romania. But I confess that I was impressed by the level of this one:

- External and internal access control 24H/day
- Video surveillance circuit of 70 cameras
- Double power supply but only one national provider
- Double generator set with 72 hours of autonomy
- Double UPS circuit with 20 min of autonomy
- Operator hosting room (currently 6)
- Bay hosting space of 500 m˛
- Additional services: data recovery room, rollout room…

I was very impressed by the services made redundant, as well as the environmental quality and technical skills of the interlocutors. There are not many hosting possibilities available at this level in Hanoi, certainly a bit more in Ho Chi Minh City.

The strength of this type of this hosting service is the presence of many operators who will be able to ensure the necessary interconnections. For that provider it is still low. Most rely mostly on the capacity of NTT (the historical Japanese operator) who have invested also in the Datacenter sector.

Our project is progressing. It will be achieved when we have completed our search for international operators and we have sufficient bandwidth for our services. We also need to negotiate the best rates possible and therefore we are playing the game of competition between the different operators.

Prices are changing rapidly. We are presently negotiating with our two current operators to double our bandwidth for the same rate.

The new version of our catalog has been out since last October.

- Euro version
- Dollar version

Pentalog is the only company to offer a catalog of its ongoing services in euros and dollars, updated 2 times per year.

Find nearly 130 services, available locally or offshore: developing information systems, business intelligence services, embedded systems, infrastructure, networking, telecom, outsourcing, hosting, BPO – business process outsourcing, …

Download it, save it and distribute it around you!

As Tuan mentioned in his last post, we had a very busy week in Hanoi. We participated in several events which were divided between Frederic, Tuan, Guy and I.

I will dwell mainly on the Vietnam Comm Exhibition and the Vietnam Electronics 2009, the largest Vietnamese ICT exhibition and our first participation in an Asian trade show. I assure you it was an interesting experience, first of all from a point of view of the animation and atmosphere.

The day before the opening, I participated with Tuan in a group meeting with the VNPT (Vietnam Posts and Telecommunications Group), organized by Ubifrance. It was an opportunity to present Pentalog, our dynamic growth, and especially our presence in Vietnam. Our Vietnamese counterparts showed a strong interest and possibly this will be an opening towards future partnerships. At the end, the traditional exchange of gifts, a local custom can not be overlooked.

The opening of the exhibition took place in a festive atmosphere. Simply awesome! Here is a video related to this event: http://www.youtube.com/watch?v=b4SRxjQO8HM.

Not to deny our French roots, the Pentalog stand found its place in the French Pavilion, hosted for the first time by Ubifrance.
The presence at the Pentalog stand was assured by Tuan, our Branch Director in Hanoi, Frederic, Kim-Anh, Mai and I. The visit of French officials and Mr. Ambassador Herve Bolot (former Ambassador of France in Romania), gave me opportunity to exchange a few phrases in Romanian.

Even if we had a very good location, we had to deal with a few organizational problems, mainly due to the incredible noise made by the Telecom operators. Being accustomed to a more sober and reserved style, the games, contests and entertainment, with its background noise certainly not taking into account the other exhibitors, surprised us in a negative manner.

In terms of meetings, we meet very few qualified visitors. The most interesting discussions we had were with the contacts we already knew before the show. Most appointments made at the stand did not come through. But I will not forget the interesting meetings organized by Ubifrance with Canal Overseas and Calyon.

On the other hand, meetings with other exhibitors opened a few doors for business opportunities. I am reminded here of Orange (a very interesting presentation on their tele-conference solution), Sagem Com HTTV, Infoterra Hit Value, SAP, and the last but not the least interesting, Noema.

I must not forget to say a few words about the evening Gala. It was a moment that reminded me of memories “deja vue” of a past regime.

In conclusion, we were able to make our presence felt and our involvement in French events (I speak here of Ubifrance) and prove that French investments and French interests in this area are very strong and supported by all the officials.

Next year the exhibition will be held in the city of HCM. And who knows, maybe our presence will mark the opening of another Branch office.

After the visit of the French Prime Minister in which Fred was a part of the official delegation, we had yet another busy week participating in the Vietnam Comm 2009 exhibition; meeting of businesses and graduates organized by the French Embassy, the inauguration of the IMAGINE-IT Center at the Polytechnic school of Hanoi and recruitment simulation interviews held at the PFIEV. Pentalog participates with enthusiasm at every opportunity in these French speaking programs which are increasing in Vietnam.

Thursday night we hosted a dinner to celebrate, “unofficially” the first year of Pentalog in Vietnam (I think it will be about December 31 that we will really celebrate, when moving into our new offices). Pentalog Vietnam today has: 40 employees, 4 active project platforms, the delivered quality level is now approaching the level of our Romanian / Moldovan colleagues, especially from a development perspective this is very promising for 2010 and not only for offshore (Fred will explain this in more detail).

What is extraordinary is to see how Pentalog is being recognized in Vietnam, and after only such a short period of time. Using tools such as the website, blog, social networks, and mailing list, in which we are extremely active and transparent in our communication vis-a-vis our customers, our partners, our employees, our future partners and our friends. People “external” to our company are informed almost at the same time as we are about the company’s activities. We maintain very few “secrets” for ourselves, everyone through our communications can already know 60% -70% of what is happening. I think, personally, it is difficult to find any other company that shares the same level of published information. I had confidence in our business model even before I met with Fred, and applied for a position in this Pentalog adventure which I learned about through this blog.

At the Vietnam Comm exhibition, without being put in touch with anyone, a man came up to me asking “You are Tuấn of Pentalog? I know who you are because I read your blog. There is no need to say more about how much pleasure this gave all of us at this time. This man is finally a Viet Kieu from France who has worked in Romania and trained some of our employees before they joined Pentalog to participate in our most important embedded development platform in the Telecom field. He is in Vietnam working on projects which can eventually lead us to work together one day.

Yes I am Tuấn of Pentalog.

As expected the fourth quarter of 2009 stalled in terms of pace but accelerated in October, with a number of new signatures which had an immediate impact in terms of sales. The previous estimated growth for the fourth quarter was moving in the range of 10 to 15 points.

In the last two weeks of October, Pentalog has registered € 4M in orders, composed of approximately one quarter of new biz and 75% extensions or renewals. In France, the new signatures were with Anevia in the sector of video on demand and Look Voyages in the tourism industry. A test is also underway with a very prestigious Swiss company.

In Romania, the orders of People Centric (a close partner with the Pentalog Group, based in Bucharest) has increased, while the company Arcforce, in the interim, chose Pentalog to host its infrastructure.

With regard to renewals and extensions, they concern Altadis Imperial Tobacco in France, which should become our second largest group customer this year, LHS Ericsson in Germany has renewed its confidence and extended its collaboration, requiring the participation of nearly 20 new Pentalog employees. Our client NordNet (Orange group), signed in the early 3Q 2009 confirming and also extending its orders. No new defections or reduced budgets have been recorded during this quarter. The final figure, and with the accumulated growth of 2009, is expected to be around 50%, the final figures will be available in late January 2010.

The foundation is now set for the beginning of 2010 and it is in net progression. After long consideration that the growth of Q1 and Q2 of 2010 would be spread out, it is now more likely that it will end with a positive change, well into the double figures. The Vietnam site, with over 40 employees, now represents 4% of the group’s production, or 16.6% of Pentalog’s growth in the Q4.

- Orange, Twitter sign European partnership – tweets by SMS just the start, Twitter on TV could follow (17 November 2009, Techcrunch)
- Bharti Airtel launches far-east connect network (17 November 2009, CIOL)
- Burda buys 25% stake in XING (18 November 2009, Techcrunch)
- Social network sites criticized on bullying (18 November 2009, CNN)
- The Next War Over IT (16 November 2009, Forbes)
- CIOs fear mass IT exodus following economic recovery (18 November 2009, Computerworld)
- Cost-Saving Secrets of the Outsourcing Insiders (18 November2009, Computerworld)
- Billiganbieter in der Kritik: Unzufriedene Kunden setzen Offshorern zu (19 November 2009, Computerwoche)
- Zukunft der IT: Alles Service – oder was? (19 November 2009, Computerwoche)

I just returned from a 2 weeks trip to our Hanoi office with Iulia, the head of the software team of our IS department, where we established a new development team for the Pentalog information system. Frederic has already discussed this project in past blogs, I would like to give you a few extra details.

We have reached the third stage in the cycle of our information system. For each of these steps we PRIORITIZE the means & resources as follows:

1. Implementation: Infrastructure, Applications, and Service
2. Development: Applications, Infrastructure, and Service
3. Maturity: Services, Applications, and Infrastructure

This translates in fact into the following:
• The establishment of a more detailed data collection service that the ISD will put at the disposial of its users.
• Better communication services through newsletters.
• Paying more attention to our users by adding new communication channels including satisfaction surveys (4 per year).
• The establishment of skilled professional committees dedicated to monitoring internal projects and a strategic steering committee.
• The deployment of a permanent team for software department.

We arrived at this information system, first with temporary resources (bench time, incubator…). Only maintenance and the software helpdesk were given permanent resources. With our continued growth and the opportunities it has brought, it was time to improve and professionalize the software department. Since this summer and with the confirmation of Iulia to this position we launched this project to establish a development team in our Hanoi branch.

In 2010 the team with will have gone through 3 stages of development. We finished the first stage with the deployment of a team composed of:
- Cuang, the team leader
- Hieu, the .Net developer
- Nhu, the tester
- Quang, the PHP developer
- Yoann, the BPM developer

Eventually the team will need to increase to 10 or more people in order to meet our growing needs for our internal / external communication tools, tools related to management (production, finance) and our production (improvement of the eco-system of the development environment). The help-desk software, business intelligence cell and management will remain in Europe.

The direct consequence of this change is the working language will pass from French to English. So gradually the content of our documents, in the wikis and other tools will gradually switch to English. However, Yoann will represent the French speaking people in this team.

As with all outsourcing projects, we dedicated these past 2 weeks in Hanoi training the team in our practices, needs and their evaluation. After a few days back home, I must confess that I am not disappointed with the way it was conducted nor the level of the people we recruited. Through Cuong, Hieu Nhu Quang and Yoann, we have a solid foundation which will enable us maintain the right balance between the ISD and the company’s objectives.
It is with all the experience that we have gained in past projects for our clients that we can now deploy this project. The pitfalls are well known:

• Communication: it exists through technical discussions, weekly follow-up meetings and a monthly steering committee.
• Proximity Management: Cuong, the team leader is responsible for meeting the demands and the quality deliveries and improving team performance.
• Human relations: we repeat this constantly to our customers, that these relationships are essential in order to maintain the team cohesion in the project despite the distance. Three or four times a year, Iulia and / or I will make on-site visits for an update of ongoing projects and new projects. It will also be necessary to maintain better visibility in the future.
• Mastering start-ups: everything that can be deployed at the beginning of the project will help development further down the road. So we deployed from the beginning, our development processes and maintenance (those applicable to the customers and certified ISO 9001-2008).
• Precise Methodology: our recent successes in the deployment of the agile method encouraged us to implement this methodology for this team. This will allow us to have a faster understanding of their needs.
• Monitoring individual performance: we are building a basic work unit for our technological environment. Producers and managers thus will have a benchmark to measure performance and the progress of everyone.

The recruitment for the second phase has already begun and it will be completed at the end of December. After the integration of these newcomers, we will begin the third phase after the Tet festival (feast & traditional family event, which is much awaited). Obviously, these recruitments have been orchestrated by People-Centric from their Hanoi branch. The process also worked there, and the results are there to prove it.

We could not complete this project without sharing a friendly dinner together. So we went to the “Highway 4 (exotic specialty restaurant) instead of the snake restaurant (Iulia promised to go there next time). We really had a good time around dishes of grasshoppers, shrimp and other delicious exotic dishes.

This team, under the responsibility of Iulia already knows that its production will help support the company in regards to meeting its objectives. The challenge is enormous but accessible!

The Hanoi team has been on the Ubifrance booth (nb. 1A41) of the Vietnam Comm trade show for a couple of days, lasting until 21 November. It is the biggest ICT fair in Vietnam, with 180 exhibitors from 17 countries.

Tuan, Monica, we are looking forward to reading more details and seeing pictures!

Hanoi, Thursday afternoon of last week, I joined the official delegation of Francois Fillon. To start of with, we naturally went by the embassy where the “delegate” badge had its effect. Later that day we went to the office of the Deputy Prime Minister and Minister of Planning. This gave me the opportunity to point out the incredible leverage that the software industry in Vietnam represents, through appropriate investments (quite modest), when we think that very soon this country will have more than 100 000 engineers in the information technology sector and probably around 500 000 in 20 years. Taking into consideration the true depth of the Franco-Vietnamese relations, this could result in a fabulous working relationship, given the shortage of sustainable engineers in France.

Thursday evening, with a small delegation of only a dozen business owners, I accompanied Mr. Fillon, Mesdames Pecresse and Idrac, Mr. Bussereau to a dinner given by the Prime Minister of Vietnam. I was invited, along with Marwann Lahoud, Director of strategy and marketing and number 2 of EADS, Philippe Favre, Vice President and Director of the International Network of Alstom, Michel Cornil, Chairman of Systra, Bernard Di Tullio, CEO of Technip, and many others of the same category… Impressive!

Friday, we took part in a Franco-Vietnamese forum of entrepreneurs. I would like to make one small observation. The interactivity during this forum was actually quite low and this is regrettable!

I will say little about Friday afternoon and evening, which was spent in relative confusion, and ended in Hue, the ancient and magnificent imperial capital of Vietnam. All that I retain from this evening was that I spent it in the Airbus of the ministerial delegation, along with… a lot of champagne. I talked with Mangeard Philip, Vice President of Ubifrance, a patented serial entrepreneur (Modalohr, Unik Media Sesit, Expert au Carre…)! We did not leave the company of each other until Saturday evening. I would absolutely like to do this again! But let’s forget about this Saturday afternoon, that posterity will probably remember less than we do…

Saturday, a fantastic visit to Hue in the company of a small delegation with François Fillon, Anne Marie Idrac and other entrepreneurs. I had the opportunity to meet an incredible, dynamic entrepreneur, Alain Glon, 68 years old, and 80 factories, 4000 employees in the agro-food industry in France. An exceptional meeting and one that I would like to renew.

Finally, I had a short conversation on the bridge of a boat, with the Prime Minister, over looking the River of Perfumes and we talked about the role that France could play in training and schooling in Vietnam. Thank you, to all those who gave me this opportunity… but I have my small idea!!

- 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)

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

- China verbietet Twittern zum Mauerfall (29 October 2009, netzeitung.de)
- Firms turn to IT outsourcing to lower costs (28 October 2009, Business and Leadership)
- Who do you trust when you’re spending your IT budget? (28 October 2009, Silicon.com)
- Die großen Widersprüche Chinas (27 October 2009, Financial Times Deutschland)
- Deutsche vertrauen der IT-Branche (27 October 2009, Silicon.de)
- British Software Industry Is Still Alive (26 October 2009, BusinessWeek)
- Zweistellige Wachstumsraten trotz Krise (26 October 2009, Computerwoche)
- Unternehmen wollen 2010 sparen (26 October 2009, Silicon.de)
- China ready for cyberwar, espionage, report says (23 October 2009, Computerworld)
- Africa to compete on outsourcing (23 October 2009, Offshoring Times)

Friday October 30, 2009, I attended the 10th anniversary ceremony of PFIEV (Engineering Training Program of Excellence in Vietnam) in a large hotel in Hanoi with Tuan (branch office manager) and Kim-Anh (the local representative of People Centric).

For those who are unfamiliar with PFIEV, it is an engineering program with a 5 year cycle which has a very high level of recruitment. The program had been funded for the first 5 years by the French Ministry of Foreign Affairs. Today, the Vietnamese government has taken over the funding of this program. The goal is clear: we must train our leaders of tomorrow! Graduates are recognized worldwide, as the program is recognized by the CTI (a French independent body involved in he evaluation and accreditation of higher education institutions in the fields of engineering, computer science, applied mathematics, project management, etc. The CTI is a member of the European Association for Quality Assurance in Higher Education). A few figures concerning PFIEV:

• 14 main areas of study: Aeronautics, Electronics, Energy, Industrial Computer Technology, Telecommunications, Advanced Materials, Mechatronics, Automated production, Transport Infrastructure, Urban Engineering, Hydraulic Engineering.
• 4 large French schools also contribute to the program
• 3 locations: Hanoi, Danang and HCM
• 3000 students
• 1200 Graduates
• Classes in French and English

A few of the speakers at this ceremony were: The Program Director, Vice-Minister of Education, Cultural Attaché of the French Embassy, teachers, student representatives, Business representatives… all offered congratulations on the successful results (100 % student recruitment, and the establishment of scholarships), but also to assert that the program should continue but also continue to improve. Although direct funding is actually finished, the support for the program continues with the cooperation of 4 French schools involved in the project and a student exchange program.

The country wants to continue opening up to the international community. To meet this commitment, it is essential that foreign firms coming into Vietnam find the qualified manpower and qualified managers. This is exactly our position.

I would like to thank the organizers for having allowed me to speak for a few minutes during the ceremony to give Pentalog’s view on this program. We learnt about this program during the first visit of Frederic to Vietnam in 2008. It wasn’t PFIEV that made us choose Vietnam over North Africa or India, but it was a solid contributor. Indeed, we must be able to provide our clients with a high level of services in a variety of areas, including R & D.

Students of PFIEV, we will contact you via the email addresses taken from the student directory. I hope we can work together. You can also contact us via the website http://jobs.pentalog.vn or via the information contained in the insert of the student directory (page 10).

I spent all of last weekend-end and the beginning of this week with the client-actors of our biggest platform project in Iasi and Chisinau. This project is a challenge that our two companies have chosen to face together. Its volume classifies it in the heavy weight category; but the schedule requires the speed and footwork of a bantamweight. To maintain this type of agility and a high level of performance, we divided the project amongst the 3 cities of Hanoi, Iasi and Chisinau. What is extraordinary is that it was the European sites that gave the reassurance to our clients, but it was the Vietnamese price that weighed into the balance and allowed us to out perform our competitors. In other words, we indeed needed a Euro / Asian proposition. Today the 3 cities and 6 teams are moving at very similar and at a high satisfactory rate… with a bit more for Hanoi.

Jacques, the technical director, visited the 3 production sites, and confirmed his choice and has increased his solicitation even more so. We will soon therefore be 50 in a few days.

I am speaking to you today, but also to all the Pentalog employees who have the honor to be involved in this relationship of trust, and finally to all those who, at one time or another have been involved in similar project like this. I want to tell you that this type of challenge is not possible without the commitment of each one, customers and suppliers in a true merger of fertile talent, courage and rigor. These are the projects which forge a sense of responsibility and professionalism… and which also form many new friendships. The Pentalog employees have come through 100% and also those of Strator.

We are doing something big and we will succeed! Thank you all!

Our client, designs, develops and produces products in France for the distribution of digital television programming and Video on Demand (VoD) which is then exported around the world, including areas of high $ correlation. The downward trend of the greenback in recent months has strongly encouraged the company to consider, in choosing its partners, which take part in the production and or, even the engineering and quality control. So it was quite natural for our client to turn towards our Vietnam site in Hanoi.

However, a 100% turn towards the $ is not without risk either, because after all, even if it seems that reducing the U.S. budget deficit (a downward influence on a currency) is not for tomorrow, the situation is not brilliant either in Europe. A rebound of the greenback in the event of a geopolitical crisis should never be excluded. Our client is still delivering the bulk of its production in Europe and Pentalog coming on, in the case of a Vietnamese production, with about 50% of its cost determined in Euros and 50% in $, we agreed upon on a 50/50 exhange risk… making the risk virtually disappear. From a formal point of view, nothing easier, 50% of the bill is invoiced directly in $ and 50% in €.

But our client who liked this idea, did not want to just stay there and wished to see the price adjustment procedure to be equally as creative. Indeed, he hoped that the revision of our prices would not exceed the inflation rate in Vietnam. This obliged us to calculate our prices in Vietnamese Dong at the beginning of the contract. The new value is then calculated in € and $ and is limited to 10% maximum per year.
I think we must think about integrating this type of billing practice in our market offers and our .com.

- Key Capabilities of Next-Generation Project Managers (22 October 2009, CIO)
- Microsoft, Google seal Twitter search deals (22 October 2009, CIOL)
- Outsourcing Industry Mergers Spell Bad News for IT (22 October 2009, CIO)
- Top 10 strategic technologies for 2010 (21 October 2009, CIOL)
- Erschütterungen im BPO-Markt: IT-Dienstleister vor Übernahmewelle (21 October 2009, CIO)
- Five open source IP telephony projects to watch (21 October 2009, CIO)
- India to top Asia salary growth in 2010 (21 October 2009, CIOL)
- Update: Sun to cut 3,000 jobs as Oracle awaits merger approval (20 October 2009, InfoWorld)
- How Wall Street Will Kill the Recovery (20 October 2009, BusinessWeek)
- Chile’s Outsourcing Challenge (20 October 2009, BusinessWeek)
- Wo es in Deutschland IT-Jobs gibt (19 October 2009, CIO)

- Deutschland: Konjunktur springt langsam wieder an (15 October 2009, DiePresse.com)
- Outsourcing: Krise nährt die Krise (15 October 2009, Computer Reseller News)
- IT-Service-Unternehmen rechnen mit einstelligem Marktwachstum (15 October 2009, Silicon.de)
- YouTube Monetizing Over A Billion Video Views A Week (15 October 2009, TechCrunch)
- SocGen to Increase IT Offshoring in India (14 October 2009, BusinessWeek)
- America’s 200 Best Small Companies Of 2009 (14 October 2009, Forbes)
- China and India Business Grows as Border Dispute Flares (14 October 2009, BusinessWeek)
- Studie: Weniger Outsourcing in Deutschland (12 October 2009, Computer Reseller News)
- Indian Outsourcing Companies Look for New Markets (12 October 2009, BusinessWeek)
- Agile Softwareentwicklung- Mehr Erfolg durch Flexibilität (12 October 2009, Computerwoche)
- Third party maintenance contracts on the rise (12 October 2009, Offshoring Times)

3 moving announcements and an extension this week. Who can ask for better?

- In Iasi, in eastern Romania, we have no less than doubled the size of our unit there, which will soon reach 800M2 in the most beautiful building in the downtown area. Iasi is now spearheading Pentalog in Eastern Europe and is already home to the developments that we are undertaking for LHS Ericsson (Frankfurt), Juwi MacMillan (Hannover), but also for those of Nordnet (Orange Group, Lille) , Mousset (food logistics, near La Roche sur Yon). The branch, which opened in August 2007, is already at its third address in the Moldovan capital of Romania.

- In Bucharest, due to the growth of the team involved with our client, ST-Ericsson, Pentalog has taken another 130 m2, bringing its total area in the Romanian capital to 350 m2. We now occupy an entire floor in the Diplomat complex on Sevastopol street. We therefore will retain the 1ha park that the whole world envies. This could follow with a beautiful commercial announcement in the coming weeks.

- In Hanoi. We just signed for an additional 350 m2 adding to our one hundred meters in our current location. The 200 m2 where we first began, no longer could accommodate the 3 projects we are launching in the coming weeks. Do you remember, a few weeks ago, I was talking about two or three new projects … but last night I received a call from a new client who told me he had chosen our Hanoi site for the industrial testing of his product line (I will soon talk about this). In other words, the site of Hanoi will keep its promises in the first year … frankly it’s nice, especially with a new opportunity, albeit a small one, has just appeared and my little finger tells me…

In all, that makes how many m2 in management anyway? More than 4600m2, in 8 cities, 600 on the average, ˝ hectare! It was worth a few negotiations, n’est-ce pas? In Hanoi, we passed from $ 18 to 10 per m2. In Iasi, we gained 20% while improving on the quality. In Bucharest, we earned a small euro, or 5.5%. Remember that a Euro saved is about € 7 gained per employee invoiced and per month. We, therefore are talking about € 30 000 per year for the group, 2% of the operating margin… for a small Euro of negotiation. In Hanoi, we won 5 and Iasi 2! We also renegotiated our lease in Chisinau and economized 11% in the Moldovan capital.

Congratulations to the Branch Office Managers for the quality of these operations that have provide us with better working conditions while enhancing our profitability.

- Gartner: flat IT budgets, but get ready for growth (08 October 2009, ComputerWeekly.com)
- Indian IT mid-cap firms to post mixed Q2 results (08 October 2009, CIOL)
- Deutsche Unis in weltweitem Ranking abgeschlagen (08 October 2009, Financial Times Deutschland)
- 60% of outsourcing firms hiring more this year: Survey (07 October 2009, Sourcingmag.com)
- How To Deal With Corruption In China (07 October 2009, Forbes)
- Mehr Intelligenz fürs Software-Outsourcing (07 October 2009, Silicon.de)
- Study: 54% of companies ban Facebook, Twitter at work (06 October 2009, Computerworld)
- Bulgaria Gets Real about Its Economy (06 October 2009, Business Week)
- Indien verliert an Boden im Offshoring-Markt (05 October 2009, CIO)
- China’s Statistical Setback (01 October 2009, Forbes)

We had fallen behind in the release of this indicator. It is now available again with some modifications.

Here are the following Average Daily Rates for each of the countries in which we work. We have made a distinction between Bucharest – offshore, and the division of technical assistance to local clients.

France: EUR 460
Prices are progressing. This is logical since we have reinforced our team of project managers whose services are invoiced at a higher rate than that of technical assistance services. However this indicator hides many un-invoiced days. We have not yet completed the total invoiced cost for these profiles. Nor has their work schedule been lightened yet; they are regularly solicited, almost daily, for project evaluations for clients or prospective clients.

Romania: EUR 175
This figure is just a little below the price of our catalogue for dedicated teams (EUR 180) and so it still remains a competitive price.

Moldova: EUR 137
Our lowest ADR in Europe which also takes into account a few BPO services. These services are invoiced at around EUR 110 / day, lower than the Average Daily Rate.

Vietnam: EUR 91
This ADR is well within the range that was anticipated; this rate is for the moment entirely composed of the development of information systems. With new projects expected to arrive shortly (especially in the BPO industry), we should see these rates lower slightly in the coming months.

Romania – Local Clients: EUR 256
This is the average fee charged for technical assistance to local Romanians clients. It integrates an average rate for technical and functional experts, as well as for junior developers in the more conventional technologies.

The next indicator will be proposed towards the end of October and thus it will focus more on the rates of the 3rd quarter.

It was curious to see how fast they had disappeared, during the month of September and while the Euro had reconnected with $ 1.40 + +. Nobody heard Mr. Gallois speak about this a year ago on the same subject… No, everyone was waiting for Pittsburgh and even Mr. Gallois had no right to speak in the meantime. Yesterday, he said in Le Monde that things could go really bad for Airbus.

And he is right, because I think that this time the threats are much more serious. After Pittsburgh, nobody believes Geitner and Obama and their discourse about the strong $… that has moved towards the interior of the U.S… In reality, the $ is now a borrowing currency with its 0% rate policy, which will certainly continue for sometime. There is no question in my mind that Obama is thinking first of his 10% unemployed. The weak dollar is a blessing for him and the hypothesis of a 1.65 average is a reason for a real cry of joy.

The 13% budget deficit is going to translate more and more by the slow but progressive conversion of the central bank reserves.

From Pentalog’s point of view, we have never been better equipped to deal with this situation as our three production currencies are dropping against the euro and even the dollar for 2 of them.

Let’s go back to the 3 countries in question:

- Romania: our wages are determined in euros and payment is made in Leu. Our employees will have more and more Leu, since the latter has a strong chance of dropping further below the euro. In other words, for quite awhile we could be close to the status quo on our production costs. Salaries, for companies that pay in Leu are also blocked, which minimize the wage demands of new employees.

- Moldova: The currency (Moldovan Leu), has also been dropping in front of the two major world currencies which interest us. Our salaries are determined in Euros. Again, another period of status quo is likely in perspective. The wage levels asked for in Euros could possibly fall in the coming months.

In Romania, as in Moldova, we could possibly see timid reductions in costs, given the fact of the rising number of job applicants and reduced demand on other budgetary items (buildings, vehicles, air transport …).

- Vietnam: Our salaries are established in $, but paid in Vietnamese Dong. Now the Dong is under performing against the $ which is under performing against the Euro. Our production, invoiced in €, is particularly interesting today. Many developers are looking for employment and the wages requested have dropped slightly. We have renegotiated our premises rental rates down sharply and we have even found space at 10 $ / m2 monthly, which is less than € 7, where we were offered space at $ 17 in early 2009! We’ve moved in the space of 6 months, from rates higher than what we had seen in provincial Romania, to prices lower than 30%.

In short, at present, we are “relatively” protected from the risks of this currency crisis and are instead on the right side of the mathematics. However, the possibility of a violent push of inflation could relativise these protections, without destroying them. I am thinking in particular about the threats to energy and raw materials which would inevitably create serious problems, particularly in emerging countries such as Moldova or Vietnam.

Currency problems are more likely than the financial crisis to have serious negative consequences. But the commentary of this type could easily slide into cynicism. Here I have tried to stick to simple facts.

- IT professionals fear ‘brain drain’ as UK opportunities dry up (5 October 2009, Computer Weekly)
- India to add more rules in IT Act soon (2 October 2009, CIOL)
- Europe finds flavour with Indian outsourcing (October 2009, Offshoring Times)
- China’s Online Censors Work Overtime (30 September 2009, Business Week)
- Germany Benefits from Global Recovery (30 September 2009, Business Week)
- India’s new outsourcing rival–Romania? (11 September 2009, cnet); missed that-one a few weeks before, but it’s very interesting…

Ramona gave me a Vietnamese article to read devoted to the Japanese offshore. The people questioned mentioned the lack of Japanese speaking people and simply just the lack of human resources. The article estimated that 30 000 people work for Japan, which according to my figures, represent slightly less than 20% of all those in the Vietnamese software industry. In contrast, the volume of available human resources continues to increase by over 10% per year. We should even consider that soon there will be over 20 000 graduates per year and the demographics of the country will soon reach a cruising speed in the next fifteen years of approximately 40 000 grads /year. But these 30 000 would represent only 10% of all Japan offshore, which initially has used mainly Indian companies. The Japanese offshore would be, by extrapolation, about 7 times larger than the French offshore for a country 1.3 times larger in population. I am not absolutely sure about these figures.

I also did a calibration of IT resources on the largest online recruitment site of VN… Pentalog’s base already represents 20% of those who put their online Resumes on this site. We will have to implement another strategy soon, using Facebook. The thousands of contacts we already have will help us to develop faster now. No doubt that the Vietnamese still do not have reflex of “Online Resumes”.

However, our performance will improve, Tuan has just hired two people in the last two weeks (e.g. between the decision of Pentalog and entry of these two new collaborators into the company, there was just 2 weeks). But we still need to reduce the decision time in Vietnam to be equal to that of Romania. In absolute terms, to achieve our objectives in Vietnam, combined with our existing bases in Romania, we will need to have close to 50 000 Offshore / Nearshore resumes by next spring.

Some news…

- Internet: The forty glorious years (25 September 2009, CIOL)
- China zückt politisches Scheckbuch (22 September 2009, Handelsblatt)
- Offshoring geht nur mit Methode (22 September 2009, Computer Zeitung)
- Indian IT firms step up security with paramilitary (21 September 2009, CIOL)
- CFOs unzufrieden mit CIOs: Keiner weiß, was Outsourcing bringt (18 September 2009, CIO)

This exceptional performance in the context of the global economic crisis is without precedent; it is mainly the result of our “niche strategy” implemented by the company and the development of new markets. Thus Pentalog Deutschland grew by 180% this semester, Pentalog Technology (Embedded Systems subsidiary, co-owned with AUSY), for its part, generated a growth rate of 310%.

Pentalogs’ historical markets have not been left behind, because outside of Germany and Pentalog Technology, the company registered an increase of 21% organic growth rate during this semester.

The third quarter should show an increase of 30%, while the fourth is already showing an increase of 15% based on our present back log. These figures could further improve in case of a future recovery this year.

This information demonstrates the performance of a unique business model amongst consulting and outsourcing companies; in addition to our ability to generate new business, which has allowed us to have an Ebit between 2 and 3 times higher than the industry’s average. This is also due to our significant increase in productivity, an excellent commercial, technical structure, and good administration (15%), Pentalog is not only weathering this crisis but is retaining an operating margin of two figures, and which will continue throughout 2009.

This morning, I looked at what was going on in the Pentalog joblogs. I am actually very happy with the recruitment rate through this instrument which is very visible and accessible to all. I have not measured the results, but it is very high. I saw a post yesterday on Peoplecentric.ro concerning the recruitment of staff for Sibiu (Romania) which has been extremely difficult to fill, and this helps me illustrate my point here, although I know that everyone does not read Romanian.

We have, through Peoplecentric recruited approximately 70 people since the beginning of the year… roughly the planned figure. But the progression has slowed in part because of the economic slowdown. However, we are still betting that it will exceed 100 by the end of the year. Let’s be clear, the IT people who visit us are the key to the effectiveness of the Pentalog business process. One of these days I will go into this in more detail.

I propose to take a quick look at joblog.biz, which contains all the job offers for the Pentalog group, in English, regardless of the location of the job in the world…

Alex, Mircea and I currently are in Frankfurt, Germany, until June 19th and we will be in München between 22nd and 23rd of June and we will be available to meet local IT companies in order to talk about offshore opportunities, about Romania, Moldova and Vietnam.

If you are a businessman, an entrepreneur, an innovator, an IT diretor, a software editor and you want to develop your own offshore capacities in Vietnam or a nearshore office in Romania or Moldova, come and meet us!

Give us a call at +49 6196 7762 662 or e-mail us at flasnier@pentalog.fr

The month of May was particularly rewarding for Pentalog Vietnam because the team made its first delivery to its first customer. We must say that the office in Hanoi had a very strong production start with 15 people initially, on a large development project using the latest Java technologies. A real treat for the developers who were more accustomed to maintenance projects or coding phases.

Whether in Europe or Asia, Pentalog is loyal to its quality mark. The working methodologies as well as the quality assurance system are implemented identically, thanks to the presence of Monica during the first 3 months and to spending 2 weeks at the office of Cornel, our technical manager. The client has expressed his satisfaction but we will not stop there, we will continually deliver better quality to our customers.

So many stories and you may be wondering how we are at Pentalog Vietnam? Oh well for you, for your pleasure, we have filmed the videos below with the help of the Marketing Team in Hanoi and Chisinau. Pay attention to the special effects provided by the team of Michael Bay in their free time during the execution of Transformer 2.

This is not a promise yet, but an idea that is being considered within the marketing department of Pentalog. It seeks to take into account a certain situation you have inevitably heard about.

In fact, we want to create impulses & reflexes for initiatives, either to survive or to adapt, or even to dominate, and to prepare effectively for the future rebound.

I can see the incredible amount of stress within companies, which does not produce anything good, on the contrary.

I propose you to convert it into an efficient anti-crisis action: the assessment of the offshore destinations of your choice, Romania, Vietnam and Moldova.

But much better, WE FINANCE THEM! This is what matters now, I believe! We envision a formula like this one “4 stars accommodation available for any purchased plane ticket “, or “offered plane ticket” … This could take this form “open offer to the first 10 offshoring projects reaching us before …”. It’s our job to formulate this and define the eligibility criteria.
In any case, the idea is to assess an anti-crisis strategy that is not expensive.

In a journey that resembles the one already taken by many of our customers, we propose you to evaluate the universities, the Pentalog infrastructure, the Incubator, the project managers, the quality plan, whatever!

We will think abot this trick and will test it by mail and see if software engineering companies are interested.

In 1 hour and 30 minutes I leave to Hanoi for a whistle-stop (I will set off again on Saturday evening). I hate these on-the-spot trips. You don’t have time for anyone. But we must preserve our reactivity and availability. A customer makes us the honor to visit our office … therefore we are present!

Saturday evening, I will leave to Bucharest via Frankfurt. I will stay there for 5 days. Maybe I’ll make a quick visit to Sibiu. On Friday, I will meet most of the EU ambassadors stationed in Moldova, as well as the ambassador of the US. We will discuss the situation in the country.
Finally, I should arrive in Frankfurt on the 8th. I’d like to “Germanize” myself for 15 days. Pentalog DE represents between 15 and 20% of our sales figure and I would like to understand better this market, which seems to be suffering, especially today.

Then I will spend about 2 weeks in France before setting off again, towards … Hanoi.

Pentalog accelerates the pace of its internal growth and reports a 60% increase in sales in Q2 2009 compared to Q2 2008. The sales figure over 6 months represents approximately 120% of the 2007 annual sales figure. This increase is due to the ramp up of operations with ST-Ericsson Wireless, Strator group Altadis, but also of our German customer LHS-Ericsson and Société Générale in Romania (BRD).

Recruitment has been particularly active since the group’s number of employees increased by 60 from Jan 1 to May 1 and its staff now totals 350 persons. The office in Hanoi, on schedule as planned, began to produce in April. So far, it represents 2.5% of the group production but will continue to grow in the upcoming months. The group plans a small deceleration in the growth pace and foresees an increase in the range of 25-40% in Q3.

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!

Since a few months now, I have been feeling a great commercial pressure from Indian offshore companies… We knew they were commercially aggressive but now they become harassing. There is no day without me receiving some canvassing emails or phone calls. This reveals some difficulties without a doubt, as highlighted in a recent article published in the IT press, announcing that Gartner expects a slowdown in the growth of offshore business in India… For the first time in its history, Infosys is also expecting to record a drop in sales of about 3 to 6%in 2009.

As an explanation, there are of course the consequences of the global economic crisis: customers tend to decrease the volume of their operations, they seek to renegotiate prices. But before that, and in a general manner, there are also high turnover rates, salary inflation, infrastructure problems, the Satyam scandal, the attack in Mumbai… in short, India’s reputation was hurt lately… This benefits other destinations such as Eastern Europe, Brazil, Vietnam, which appear to increasingly overshadow this giant. It is true that India is “a must” for these very large contracts that require the mobilization of huge resources in record time, but these customers represent only a small percentage of companies looking to outsource development projects today. And for the establishment of teams of 10, 20, 50 or 100 people, there are many alternatives in other countries, quite capable of responding to such a need. Perhaps it will rather be those countries which will benefit from the trend tending to promote outsourcing to low cost countries…

Well, it is clear that India should still keep its offshore leading position for a while. Indeed, in terms of resources, tens of thousands of young engineers in computer science graduate every year from Indian universities. At this level, no other country can compete, not even China, who faces linguistic problems that hinder the development of the country on offshore markets. One needs to pay 10 to 15% more for English-speaking resources there and the key destinations where one can find these rare gems are already saturated. So the prices go up even much faster than in India…

And with their experience, Indians know how to benefit from the rise of other offshore nearshore destinations. Most of the giant Indian companies have subsidiaries in Eastern Europe and they are in the process of settling in Mexico, Brazil.

They will not let the biggest share of the cake be taken away like that!

While enjoying a public holiday (anniversary of the death of Hung kings, ancestors of the Vietnamese) I could step back and think of the recruitment process within Pentalog Vietnam during the last two months. (Thanks to Fred who has given a very nice speech to our colleagues in Hanoi before his departure, on intercultural communication and management, which encouraged me to continue this discussion).

At Pentalog Vietnam we will be almost 20 collaborators next week and we’ll be able to start the big project for our client – a European leader in the Tobacco industry. To achieve this, we interviewed nearly a hundred applicants.

Certainly, we pre-sorted the CVs first and our candidates passed online technical test, but still, I must confess that it was a bit difficult. Given the number of human resources available on the market, given the crisis that makes our task easier, as several companies have no more projects, one may wonder why the difficulty in recruiting? The reason is simple: Pentalog has very high expectations with an emphasis not only on technical competence of the candidate but also on his/her ability to communicate. We demand that our collaborators are capable of communicating verbally in English and, if possible, in French. We systematically conduct interviews in both Vietnamese and English. Those who refuse to speak in English during an interview or who cannot express themselves correctly in English will never join us, even if they are experts in Java, .NET…

Now Pentalog has about thirty French collaborators, two hundred Romanians, almost one hundred Moldovans and about twenty Vietnamese. Such an environment, with a functionally centralized organization and travels between offices, forces people to get out of their shell and communicate with the others.

Vietnamese outsourcing is in most cases based on a model of communication or a project; there are only one or 2 people who interface with the customer at the other end of the world. The rest of the team has never spoken directly with the customer; we call them “silent developers” or “code pissers”. Of course, they seek to defend themselves by saying “well, I write and chat every day with clients.” It’s good, but not enough! What do we do when there is a problem to be solved immediately in 5 minutes, or a point that cannot be explained in writing? Also imagine if the person who created the interface is incompetent?

A piece of information that I reveal to you Monica, because you often ask me why we do not see candidates from a limited number of companies. Because many candidates with good CVs, with good results on tests, reply to me when I tell them that part of the interview is to be conducted in English: “Is it possible to speak in Vietnamese only? I assure you that I can perfectly read documents in English.” The truth is that many companies do not encourage their employees to speak English. In time, this becomes a real handicap, which limits their evolution.
Here’s an anecdote: recently, when I talked about this problem with a dear friend of mine, who probably is a god in computer science, with over 15 years of experience, but not too good in English, he replied with irritation: “Go find your candidates in language schools!” This was a desperate attempt to defend!

All this upsets me very much! One who talks about globalization must talk about communication. One should no longer be satisfied with his technical skills but also with his language skills. An IT engineer who speaks English has probably twice as many opportunities for development and is two times more likely to remain intact in this difficult period.

At Pentalog Vietnam we continuously provide free English/French courses to our employees. I am happy to see how our men are rushing to follow this course and not because the teachers are very good-looking. They are well aware how much the command of one or more foreign languages contributes in their careers. Out of the current 20 collaborators, all speak English and seven speak French. Maxime is Franco-American and speaks Vietnamese perfectly with a Southern accent. Binh and Bach speak Japanese fluently. That is an international company! Of course, there is still a gap with our Romanian / Moldovan friends in the matter, but I hope we will catch up very quickly.

I am convinced that in order to transform Vietnam, which is “potentially” the first outsourcing destination, in the REAL destination, we must continuously improve our language level. Consider the case of a less typical person, that we dearly call our Uncle: everything he did had nothing to do with chance. Already confident in his communication skills, he spoke perfectly French, English, Chinese, Italian, German, Russian but also Thai, Spanish, Arabic…

So, don’t you speak English? Then, no thanks!

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?

Monica and I had introduced our project to a new German organization in Hanoi and yesterday Tuan and I did the same thing at the Australian Embassy.

We believe that the role played by the French authorities in us discovering Vietnam, could be played by the German and the Australian embassies for their companies. The economical departments or the chambers of commerce could consider projects more or less similar to ours.

We have therefore shown joint investment plans meant to reduce the worries of newcomers on the Vietnamese IT market, regarding employment, managers, infrastructures…Together with a rebilling system, it will allow enormous economies of scale, as I already mentioned.

We are already discussing a French project.

They are definitely interested in us. The experience of a Western company, with offices in Vietnam, came as an extra potential asset. For the European countries, setting up a joint-venture, within a shareholders’ agreement, signed by our French holding company and therefore submitted to the European laws, allows setting up a guarantee system based on our equity capital (several millions of Euros) and our personal liability (to be adapted to Vietnam).

In a couple of days, we will set up a benchmark document and a PowerPoint presentation for all those who are interested in these Joint-Venture projects with the Pentalog Group in Vietnam.

I’ve been in Hanoi, since yesterday morning. I’ve linked together my meetings and presentations a bit. Yesterday I met a dozen young boys, aspiring technical leaders, team leaders and project managers. People have already started to talk about Pentalog Vietnam and yet we have just launched the website (www.pentalog.vn). We will send the first newsletter in a couple of days. We already have nearly 1000 developers among our contacts. The foundations of the previous successful of Pentalog establish in this part of the world as well. We are also going faster than we did before: this is called experience.

For now, we are 12 (14 with Monica and me) and in two weeks we will be more than 15.
Today, we’ve met with the Romanian and German Embassies. We have presented our plan to create a center for IT offshore joint ventures. The Germans were really interested because they are now involved in the investment for a German university in Saigon. We will go and see them as soon as possible because it should be of interest for Pentalog Deutschland. However, the idea of establishing a hosting center for European investments has clearly attracted them. Especially because we could ensure that the protocols and other shareholders agreements are refereed in France or Germany, which would be a decisive advantage in comparison to what our Vietnamese colleagues may offer in terms of JV creation.

To be continued. Tomorrow our first client who has signed with Pentalog Vietnam will come to visit us. This is absolutely brilliant.