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With Euro falling vs Dollar, is it the right time to invest in Latin America for Pentalog?

Frédéric Lasnier
Frédéric Lasnier
Chief Executive Officer

While Euro was reaching tops some years ago I wrote a lot on the impacts of those variations on every layer of the software outsourcing and consulting economy: the coder, the customer and the ITO company. With the Euro now experiencing some of its lowest levels (1.12 for 1 Euro last Friday) the same topic is up raising again with proportionally but inverse consequences on the ITO geopolitics. But currencies are not the only one to move. Pentalog has changed a lot too since we opened our first facility in Vietnam to strengthen our Romanian and Moldovan Units and under the influence of our fast growing sales operations in the US.Pentalog US sales have progressed so fast that they weight already 2 times more in our turnover than Germany and could even catch up with France soon. Of course we are aware that this $ drop is a fantastic opportunity for us, fitting perfectly the timing of our US agenda. As a matter of fact, this is now becoming crystal clear that our strategy to start a coding facility in Latin America has to be re-envisionned considering those new parameters, especially after the ECB’s decision to start a QE policy and the recent Greek elections. As a vast majority of economic observers we bet on a durable Euro decline with slow growth recovery on the old continent, giving a noticeable advantage to its production. Consequently and simultaneously Latin America’s software producers will keep their relative dollar indexation on cost lowering their customer attraction power on the outsourcing market and their resistance to Eastern European competition.Is that so much the moment for us to blow our own trumpet that we’re arriving in Latin America? I’m quite sure that a Euro/Eastern Europe marketing speech will be very welcome those days on a still very demanding and mature US market. However stepping in Latam is the only way for Pentalog to achieve its plan to become full member of the global nearshore players club (4hrs maximum time shift guarantee from anywhere on earth – being in Vietnam Western and Eastern EU, we only miss Latin America today). Well, isn’t everything about timing and finding the right balance when it comes to investments?And Mother Russia strongly helps…The dramatic situation in Ukraine where dozens of civilians are killed every week also recently contributed to a global redistribution of the forces at work in Eastern Europe. Everybody now knows that XXsoft (sorry for encryption),one of the largest Russian ITO company, is working very tough on reducing its exposure to Ukraine… and Russia. And where do they expand? In Poland, in Romania, looking at Central and Oriental EU to reduce both geopolitics issues and the “russianity” of the image of a company which is already quoted in NY but widely held by Russian citizens. Some other companies, having origins on the US territory are shifting their production centers out of Ukraine and Russia, trying to escape also from potential war and embargo risks.I remember my surprise arriving in the CIC of Boston as a co-worker after I spotted so many Russians and Ukrainians surrounding me :). They were mostly working as project managers and consultants for mother companies headquartered in Russia. Many customers now are effectively trying to skip from Russia/Ukraine to other eastern Europe providers… in Nato countries.Without putting the blame on anybody in this conflict let me phrase a conclusion on it. Attacking countries’ bank account has always been an efficient way to find a pacific solution in geopolitics. As a result Eastern EU ITO companies have an opportunity on the US market that they should not screw up.Indians are $ correlated as well as Latin America and Russo-Ukrainians are logically affected by the crisis in Eastern Ukraine. Believe there is nowhere else in the world to welcome US ITO demand in 2015 and 2016 than Eastern Europe. Pentalog has understood this and will extremely soon issue a new version of its American price list as well as our marketing and sales teams are constantly seeking acceleration in US!

 

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