France is considered as a very difficult market for offshore outsourcing. However, lately more and more companies moved projects abroad. On the other hand the French government is planning to introduce measures to keep IT jobs in France. (read more)

Externaliser is a specialised outsourcing trade fair. The exhibitors represented various sectors and industries. The fair was held between 5 – 7 October in Paris.

The French IT sector in Europe

European IT market value (2003): euro 287 billion.

French market share: 17.1% (the third largest market in Europe)

Expected IT market growth in France (2004/2005): 4.3%

E-commerce (including B2C and B2B) – EITO 2004

French market dynamics

Demand for IT services and software in France is expected to grow by 6 percent in 2004 (source: Pierre Audoin Consultants), led by computer facilities management (sales topped 4.3 billion, up 7.6 percent in 2003). In software applications, sales are led by decision-making tools (growth of 4 percent per year) and by CRM solutions for SMEs, with sales expected to rise by 5.5 percent per year until 2007 (source: Gartner).

Key players in the French IT market

Cap Gemini Ernst & Young and Atos Origin, two world-class IT service companies founded in France, are in the top five in Europe and the top 15 worldwide. France is also home to other strong performers including Steria, Unilog, Sopra, GFI, Thales IS and Altran.

The most important IT market segments are CAD/CAM (Catia from Dassault Systèmes, Lectra), software engineering (Softeam, Aonix, TNI-Valiosys), natural language processing (Telisma, A2IA, Itesoft), geomatics, imagery and video games (Infogrames), decision-making (Business Objects), management (CCMX, Cegid, Adonix), e-trading (GL Trade), and software components (Ilog).

Telematics and embedded systems are important areas for the French automobile industry and public transport. The largest companies in this field are Renault, Peugeot, Thales and EADS, for telecommunications Alcatel, France Telecom and for consumer electronics Thomson.

Other leading players on the French market for IT services and software are numerous, the list includes Accenture, EDS, IBM Global Services, SAP, PeopleSoft, Oracle, Intentia, JD Edwards, CSC Peat Marwick.

Externaliser 2004

Outsourcing is growing also in France. The main drive for outsourcing is cost reduction. The outsourcing market space in France largely consists of onshore outsourcing.

There are, however, two opposing force shaping the market:

Price pressure, and pressure from clients in general, forces companies to look for cost reduction alternatives and at the same time preserve their integrity, identity and also meet market sentiments as well as government policies. Naturally the strategies considered also include offshore (or more nearshore) alternatives.

The French Government is planning to take measure to keep jobs in France;

“France announced plans to spend more than E1 billion on tax breaks and other incentives for companies that agree to keep jobs in the country amid growing public concern about jobs being moved abroad.

Prime Minister Jean-Pierre Raffarin said companies in about 20 newly designated "competitiveness zones" would be offered reduced corporate tax rates and social charges under the $1.2 billion proposal in exchange for commitments not to take jobs overseas.”

The Associated Press September, 2004

The IT industry press in France covers offshore outsourcing issues quite frequently. After the UK and Germany, France is the third country in Europe where a chapter of the European Outsourcing Association (EOA) has been established.

Key offshore geographies for French companies

North Africa

Central-, Eastern Europe, especially Romania

Market intelligence

When outsourcing is considered a nearshore alternative is more acceptable than offshore. Clients often rejects companies with offshore operations.

Outsourcing at large is lagging 3-5 years behind the USA or the UK.

Due to difficult market entry, offshore service providers often exclude France from their primary European target markets.

Local market presence (physically) is a must. An office in Paris is also highly recommended. Even French IT companies from Toulouse or Lyon found it very important to have, at least, a smaller marketing and support unit in Paris.

Partnering with a French company is the way to enter the market.

French language knowledge is a must. It is important to note that most people in the IT sector speak English (and they do not mind to speak English).

Outsourcing decisions are made at CEO and CIO level.

The overall cost and salary levels highly differ in various parts of France. A few French companies use the “Nearshore outsourcing” term to refer to outsourcing to low cost regions within France.

An indication of pricing levels and costing example can be found at: BELER

Defined processes, quality certification, strong references, French language capabilities and skills are considered the most important factors when selecting offshore providers.

When considering France it is quite important to look at companies and opportunities in the Lyon and Toulouse area.

The most problematic areas experienced by companies with offshore operation

Performance

Process integration

Level of awareness of offshore outsourcing

IT companies are quite aware of the latest global trends in IT outsourcing.

Often the (perceived) risks associated with offshore outsourcing (added to government initiatives and market sentiments) out weight the potential advantages of moving processes offshore.

Companies often do not have the experience, skills and knowledge of managing global teams and the (offshore) outsourcing process.

However, companies are quite open to discuss (offshore) outsourcing issues and looking for information sources.

References and Links

Invest in France

http://www.investinfrance.org/France/?l=en

IT sector in the Lyon area

http://www.lyon-aderly.com

IT sector in the Toulouse area

http://www.invest-in-midipyrenees.com

Kepler-Rominfo (French - Romanian IT company)

http://www.kepler-rominfo.com

BELER Ingenierie (French company with operations in Romania)

http://www.beler.fr/index.asp?sect=1&lang=en