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IT outsourcing

The Return of the Crisis: Uncertainty leaves Nearshore & Offshore clients in limbo

Frédéric LASNIER
CEO & Chairman (Founding Partner)

It started with minor bleeding here and there – especially at European start-ups; and we’re starting to see it happen with our Swiss, German, English and French clients. But, not in the US as of yet, where digital investment was still riding high at the end of 2018 and into 2019.

Investment in intellectual property rose by 13% in Q4 compared to the previous year.
This is unprecedented. It also goes to show why I spend so much time on the other side of the Atlantic.

As was the case at the end of 2008, in Europe we are seeing the beginnings of a minor trend.

  • Some companies are using fewer outsourced and consulting services (local, nearshore and offshore) and pruning their partner teams.

  • Those who, on the contrary, see the storm cloud gathering are looking to increase their use of offshore services. If they are our clients, they are using us to replace their outgoing collabs. Others are now knocking on our door as they see their profit margins shrinking and their clients expressing uncertainty. We welcome them and help them get back on their feet.

offshoring - digital crisis

In a crisis, some companies cut back on the number of partners to focus on their in-house teams, while others increase their offshore presence. Contact us to strengthen your business and reduce your time-to-market!

During hard times, agility is still your best bet for growth

This will come as no surprise to you I’m sure, but I firmly believe in outsourcing methodologies. They are tried and tested by us, as we worked our way to the top in Western Europe and the US. We plan to show in 2019 and 2020 that we have become the most agile mass-market digital company in the world.

We owe our success to our:

  • thousands of freelancers

  • 1,000+ employees (dev, DevOps, security consultants, UX/UI designers, scrum masters, and POs) who deliver 250 agile products each year to the world’s top digital businesses

  • community of 500,000 devs with a SkillValue account

  • agile contracts and legal experts

  • agile financing offers for start-ups

  • agile recruiting processes

We leave nothing to chance. Pentalog will be the world headquarters for digital agility – an automated platform that delivers on price but never forces you to compromise on quality.

As a reminder, we only have seven salespeople, four legal experts and 25 marketers to handle all the offers we have on the market and we fully expect to reach 15 to 20 countries this year with our two marketing teams (in Orléans and Eastern Europe) and four sales teams (Orléans, New York, Paris and Frankfurt).

Key accounts transition to offshore & nearshore the fastest

What I find most interesting is that it’s the behemoth companies who transition the fastest to offshoring and nearshoring – perhaps because they can be relentless and unshakeable. They also have access to studies of economic conditions.

We welcomed two of these at the end of 2018 and start of 2019. We had never met with them before, we didn’t do any prospecting and yet in a few weeks we had $15 million in contracts with them:

  • The first asked us to replace a mixed German-Polish solution with a 100% Romanian solution integrated into their ordering and agile processes (us).

  • The second is no longer hiring on the east coast of the United States, but at the same time they have huge projects that they don’t want to delay at the risk of losing revenue. They prefer to think ahead.

If things turn out the way they did around 2008, offshoring as a whole will be up and running after an initial slowdown. It will likely be stronger than ever given the maturity of the global supply. The lure of cost-cutting and the need to complete projects will ultimately work in favor of offshore and nearshore outsourcing – as they have in every crisis since the ‘90s.

On a platform like Pentalog.com, it is easy to see the economic scope of the global supply. The world is split into three main price zones:

  • US – No outsourcing on the East and West coast for less than $800/day

  • Western Europe, the rest of the US and Canada – Nothing less than €500 in general

  • Eastern Europe – Nothing less than €270

  • India & Southeast Asia – Nothing less than €170

There is also Africa, but it does not yet have a sufficiently scalable or stable supply. That being said, we are keeping a close eye on Kenya, Senegal and South Africa.
The prices I’ve quoted here take into account a balance of seniority in a dev team. Prices for security consulting and DevOps are higher across the board.

Note that the same trends apply to freelancing, starting at €450 in Western Europe and €230 in Eastern Europe.

 

Do you have the right strategies in place to respond to the crisis? Are agility and outsourcing part of your plans? Set up a meeting to discuss your needs!

 

 

Read more:

Low Cost IT Outsourcing in Moldova, Mexico, and Vietnam

Digital Transformation is Agility. 8 Insights to Get Started

Ultimate Guide to IT Outsourcing


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