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IT Outsourcing

How Trump will blow up the demand for offshore services against all odds…

Frédéric Lasnier
Frédéric Lasnier
Chief Executive Officer, Pentalog

… as the Brexit is already in the process of doing.


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Talking from our own experience, we have to admit that never before has our company received so many requests for offshore services coming from the UK… than following the Brexit! A paradox? I think not. Trump’s victory should have a similar impact in the US.As I have already said it in a previous article, which brought us a £600K customer just a few days following its posting, the fear for labor market closure is pushing many British IT players towards outsourcing their IT production. And this is only the beginning.Far from being a paradox or an act of political resistance, this decision made by IT entrepreneurs is logical from at least two points of view: firstly because a closed labor market to foreign workers is bound to have inflationist consequences much higher than a possible import tax; secondly because in this context their development calendar risks becoming more and more uncertain. They are thus taking the only valid action and new comers to the UK outsourcing/consulting market, such as us, for whom this is too good an opportunity to miss, cannot but benefit from this economic and political paradigm. Better yet, there is a new market perspective, with long-term consequences, which is very tempting for most clever CEOs.The movement should be even stronger in the USI realize that even if Trump’s US are more nationalist and protectionist, there’s no reason for them to react any differently. The perspective of the software economy’s extreme overheating is even stronger in a country with less engineers per 1 000 inhabitants than in the United Kingdom.In the US, where IT salaries reach global peaks since the country hosts most GAFA R&D centers, the less silvery startup legions and especially the ancient economy sectors already used to be partly blocked in their recruitments before the election. So now…The cost of IT services in the US big cities being around 4 times higher than in Eastern Europe and around two times higher than in Paris or Munich, no protectionist barrier will prevent American decision-makers from being attracted by offshore opportunities. Especially since the collapse of venture capital continued in Q4 and is not expected to recover in a while. In the country of stars and stripes, the idea of a nearshore/offshore smart move is in everybody’s heads since Trump’s administration has taken over.If some are making this decision with great regret, some others will have, for sure, an emotional satisfaction, a sort of a 2nd presidential election round. Simply put, a revenge. A great part of the highly educated population is appalled by the new president’s rude attitude towards the rest of the world. The Uber CEO has had, for example, to withdraw from the president’s team of economic consultants, under the pressure coming from both his customers and employees! And given his attraction to consensus, one can imagine how great the pressure must have been! We’re talking about 1% of apps uninstalled, but no one knows for sure how many users got back to using taxis or switched, the same as drivers, to another app, without necessarily uninstalling Uber. But message received. As far as recruitment is concerned, no one wanted to join them anymore.Trumpophobia is now taking California by storm!Some of the tech (San Francisco and Silicon Valley) and movie (Los Angeles) stars are even mentioning a Calexit (California exit), saying that nothing is irreversible in a federation. This will obviously not happen any time soon (or at least not too soon) but the very existence of such a surprising existential debate clearly shows how great resentment against the result of this election is. I cannot help thinking that as rational as this might be, the choice of an offshore software production will be enjoyed by some American decision-makers… To be continued.

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