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IT Outsourcing

In times of crisis, modern IT outsourcing is the only possible strategy.

Frédéric Lasnier
Frédéric Lasnier
Chief Executive Officer, Pentalog

Understanding and overcoming the current economic situation is a real challenge. The technology market remains very strong, but it is still plagued by the same spasms that are affecting all economic sectors, including newcomers like retail, payment instruments, decentralized finance, and even startups who see that fundraising has become more difficult.

In digital, the obligation to act is still as strong as ever, but at the same time, the winds of caution (panic?) are blowing across boards of directors and general management – winds that are fed by inflation and shortages.

Result: CIOs and CTOs are faced with the need to make brutal decisions as they are asked to cut back on projects that only a week earlier, were priorities.

Considering that the race for markets and productivity in organizations is, and will remain, mainly digital, CIOs and CTOs know that these suspensions will be as temporary as they are costly, and that it will be as difficult and time-consuming to restart them as it was simple and quick to stop them.

If we look closely, the wave of machete blows spreading through Product Management and information systems follows a long period of euphoria, of assertion of digital power where we internalized to excess. As if all companies had forgotten the mantra of previous decades: variable costs are better than fixed costs, and Opex (operating expenditure) better than Capex (capital expenditure).

We have entered a crisis that will last at least 3 years. The time to act, to make digital organization more flexible, is now.

In an anticipation paper that predicted a crisis around 2023, I described the period that is opening as Accountant’s Creed. Over the next few years, it is the accountants who will have to be convinced. Whether you are in a startup or a big company, no one will escape the requirement for predictability and the cash-oriented vision of financial departments.

And since 3 years is a long time, it is clear that it will be necessary to restart projects by better mitigating the risks and advocating an approach that mixes fixed and variable costs. That might even be the only language that financial and administrative departments can hear.

Modern Outsourcing makes it possible to adjust the ‘ups and downs’ with a contract!

Today’s outsourcing makes it possible to integrate external services (see what I did there?), providing for both ramp-up and ramp-down! The principles of collaboration are completely described, following established models and a framework of cooperation anticipated by contract. We get to aim high in quality with increased responsiveness, both in terms of growth and reduction of budgets.

The graph below is not imaginary – it’s perfectly real, although it is anonymized. It illustrates the IT outsourcing experience of one of the first clients in Pentalog’s history, a client that we worked with every single day from 2002 to 2021. It was a SaaS product for property management, used by the largest European companies.

Pentalog has been present throughout its long life, starting with two dedicated employees, and about thirty in 2021. Over this lifespan, the product had many more Pentalog employees than integrated ones (probably 70% Pentalog). This strategic choice allowed the client to take acceleration risks easily, and to be able to decelerate during the 2008 crisis with no internal traumas. We accompanied this client from the peak until the takeover, when it massively penetrated the (German) DAX and (French) CAC 40 stock exchanges.

This strategy has most certainly contributed to the rapid acquisitions of the company on two occasions. The SaaS publisher had already made its structure more flexible, and could respond very easily to any request, ramping up or down as required. As a result, in twenty years, the product has experienced growing success and three owners – with no ownership crisis. A textbook case of multiple valuations in a framework that is both STABLE and FLEXIBLE.

The real meaning of modern outsourcing is this: being able to integrate an adjustment variable into your strategy allows you to protect your internal teams while guaranteeing controlled and sustainable growth, whatever the context.

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