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Innovation and strategy

Digitization: a global war (Pentalog strategy)

Frédéric LASNIER

CEO & Chairman (Founding Partner)

After 8 months of personal involvement in downtown Cambridge, at a stone’s throw away from MIT, in one of the biggest startup incubators in the world, and after having passionate conversations with entrepreneurs from ten countries, 7 days a week, I would like to draw my conclusions on the unprecedented movement of digitalization that is shaking up the world and might as well make investors lose their minds, deeply disturb governments and ruin industrial empires that seemed untouchable some years ago. How reassuring it would be to think that there is a financial bubble behind all this! As there’s no such thing, let’s better guess what Pentalog strategy could take advantage of all this in a context that I find quite violent.

Small context reminders: as Nicolas Colin and the other associates of The Family startup accelerator like to say, the barbarians are attacking!

Today’s barbarians are the entrepreneurs, mainly Americans, who have shaken up all economic sectors and are currently building a new order: the e-society. They focus on the e-health sector (the sensors that will be attached to our bodies will reduce the need for treatment, the volume and the number of emergency services thanks to a better anticipation of patients’ needs), whereas e-education could very well make average quality regional universities disappear.

Why should I bother to obtain a diploma from a European University when I could simply get an online degree from Harvard, which is way more prestigious at global level? Why pay our English teachers in France, whose professional failure is quite laughable, when we can resort to teachers from Malaysia, 3 times cheaper, available online, far more motivated and native? I’ve done this for a long time in Pentalog France (but not in Pentalog Romania, where the foreign language teachers offer better and cheaper services). What will become of the energy companies in the e-energy and e-car context? Will our Mastercard or Visa cards stand against Google and all mobile payment initiatives? What will become of our old euros, old dollars, and old banks … against Bitcoins?

I don’t want to take this even further as these quasi-apocalyptic scenarios are already known and feared by the most conservative of us. Rather than enumerate them, I prefer telling you that I believe to 200% in those scenarios and that Pentalog already counts hundreds of engineers in the e-health, e-energy, e-education and even in the e-love sectors. I’m not even talking about e-Commerce, where we already have a very high profile. What draws my attention here is the e-mutation process and its deployment speed to make the best of it in terms of Pentalog strategy.

The social format, rules, norms and codes of most giant companies will not allow them to take advantage of the new opportunities, while a high number of companies from developed countries will either disappear, be dismantled or survive in a degraded form and humiliating agony. For Pentalog, it’s quite simple: let us focus on startups and growups!

To ensure this huge transformation, investors will favour the most agile format, that of startups. The culture of trial and error will become the reference, revealing enormous needs in prototyping technologies and small production volumes (Python, Django, Ruby, Node JS…). The situation will become rather uncomfortable for the software structures that will not be prepared. The ramp-ups will become more and more ensured by the physical power of the Cloud, the optimisation becoming impossible in an ultra-short innovation – obsolescence cycle. I still remember an American startuper who asked me why I was trying to sell him a nice optimized code which takes weeks to write when in only 5 minutes I could buy power in the Cloud, whose price continues to drop. The back end developers might not like this.  Let’s sell some Cloud!

20 million coders soon!

But in order to digitize entire sectors that aren’t at all digitized, we will have to at least double the number of coders at global level. And for this to happen very quickly, children will have to know how to read, write and code. It’s the return of the 80s, except this time it will go all the way! Bring out your TO7! Of course, they will no longer need to go to school. They will find everything in the Cloud! We will witness the rise of many entrepreneurs, sometimes very young and, more often than not, self-taught.

In the meantime, the current IS Managers and the 1.0 IT companies will neither be able to provide for the volume of needs, nor grasp their nature. Anyway, these companies don’t believe in these needs, as they are trapped in their pathological and incestuous relationship with their application maintenance contracts with global Fortune 500 companies. A considerable number of developers will no longer be compatible with these new work methods even though their number will at least double to face the stock of digitization needs! According to our estimations, the number of coders at global level has reached 10 or even 15M in the last 50 years. We need to fasten the pace to bring the future 10 M! And while waiting for the next generations to arrive, emerging countries will be the ones to provide the largest volume of digitizing forces! I think that more than 70% of this generation developers will come from these countries. Let’s travel even more and contribute to the development of the world!

Industrial revolution or merciless war?

I think that this is rather a global war, not between countries, but between (mostly American) business alliances. Digitization also enables us to gain all the clients from companies around the world, regardless of their activity sector. In a very short time, this war has begun to integrate a considerable part of the payment means. It encompasses the logistic flow thanks to the geolocation functions, the same for people transportation, advertising, outdoor sports. Most of the old economy companies understood this too late. The financial markets, which are always suspected of creating a digital bubble are, on the contrary, underestimating the potential of the digitization stock to be fulfilled.

The already eligible capitals directly proportional to the value of these companies can offer them access to European brands such as Peugeot, Vodafone, Orange, Mercedes Benz, Unilever, the equivalent of thousands of years of patents, and industrial intelligence for certain fractions of their stock capitalisation. All this thanks to the Cloud, Big Data and mobile applications. Under these conditions, the European countries can rely only on tax, regulatory and anti-trust weapons in order to defend their ageing investment stocks. This explains the numerous reactions of government panic, as we could see in France (Dailymotion), as well as an aversion to the sector (the listening by the NSA to the American people’s conversations, the increase of the number of fiscal inspections in digital companies everywhere in the world); so many deplorable and desperate attempts. The Turkish Government’s actions, for example, are without doubt on the verge of ruining 30 years of constant economic and freedom progress in Turkey.

Whether we’re talking about a war or a revolution, it doesn’t make much of a difference to Pentalog. A group of this size will have to engage in alliances with both the barbarians from the West (the Americans) and the rare barbarians from the East (some Europeans isolated on a continent too big, and, most importantly, too slow for them). We also keep in mind extending our business to Asia. Starting from 2014, Pentalog will reach between 10 to 20% of its sales figure on the other side of the Atlantic Ocean as our first steps turned out to be a real success.

A short conclusion?

War or revolution, the barbarians who animate it will always need embedded systems for the new connected objects, genuine (open) Clouds, mobile development as a universal interface. Thanks to a clear positioning and 70% of our sales figure achieved together with high tech companies on the cutting edge of digital energy management, e-education, smartphone and tablet embedded systems, we are more than ready to fight this battle. Pentalog is one of the 5 structures of more than 500 people from Central and Eastern Europe, and one of the web and software R&D talent pools able to provide a full stack of services, from hardware to Big Data, from Embedded systems to Cloud, and from Cloud to mobile. Even more, Pentalog is probably the only one of the 5 already providing triple play service offers to its clients, in a very strong framework of trust. Don’t ask how we do it because a cook never reveals his secrets!


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