It should come as no surprise that in our ever-modernizing and increasingly connected world, spending in the information technology (IT) industry is on the rise. The worldwide IT market will exceed $1.2 trillion in 2007 with an associated five year CAGR of over 6%¹. Sales quotas for companies which serve this market are on the rise as well, increasing 10-15% over last year, while sales budgets are only projected to rise 9%². As a result, technology sales personnel need to work smarter to hit their quotas, which in turn means maximizing their leads from both a quantity and quality perspective. Virgo Capital believes that Enterprise Profiling Services (EPS) provide a clear solution to these issues and that the sector as a whole represents a promising area for investment.

While sales cycles vary considerably from company to company and industry to industry, they all have several key points in common. For example, all new sales cycles begin with lead generation to identify potential targets. Sales personnel are increasingly turning to online information sources such as EPS for help with this step, as evidenced by the 71% growth in the online lead generation industry from the first half of 2005 to the first half of 2006³. After leads are generated, it is important to rank and prioritize them, and then augment the most promising leads with auxiliary value-added information. According to industry research, finding high-quality, detailed information to augment leads is the most difficult part of the sales cycle, but also one of the biggest factors in the outcome of the sales process⁴. Examples of high-impact auxiliary information include organizational charts to provide context on how a particular contact fits into a company’s overall structure and information on upcoming IT initiatives to allow a salesperson to cater a pitch to a client’s specific needs.

Although Enterprise Profiling Services are gaining acceptance as an important part of the sales process, they can vary significantly in the type, quality, and sources of the information they provide. For example, services like Jigsaw and LinkedIn primarily provide access to contact information generated and qualified by their users, but typically offer little information on the companies where the contacts work. On the other end of the EPS spectrum are providers such as Hoover’s and OneSource, which aggregate information from a variety of sources to produce detailed reports on a large number of companies, but tend to lack contact information for decision-makers below the executive level.

Between these two extremes lie niche providers such as iProfile, a Virgo Capital portfolio company, who provide the best of both worlds by virtue of their strong vertical-market focus. iProfile employs proprietary methodologies to create extensive, thoroughly verified databases of contact information, organizational charts, and other information covering the IT departments of large US and European corporations. We believe services such as iProfile are particularly valuable because the leads and the augmentation information they provide tend to be both higher quality and accessible to fewer people, giving sales personnel who use these particular services a distinct advantage over their competition.

Aside from filling a need within a sales organization, our optimism on the Enterprise Profiling Services space is fueled by the overall dynamics of the sector. The companies in the EPS sector have a significant opportunity to grow: the sector has low current addressable market penetration of 1-5%⁵, and our internal analysis indicates that the market opportunity in the technology industry alone is in excess of $1 billion. Additionally, we believe there are significant expansion opportunities for EPS beyond the technology industry. Further, due to the initial investment of time and resources required to create and verify large databases of information, EPS providers enjoy defensible market positions. Recent investment activity, including infoUSA’s $100mm acquisition of OneSource in June of 2004 and the sale of AberdeenGroup, a company backed by Commonwealth Capital, First Light Capital and TL Ventures, to Harte-Hanks in late 2006, lends additional support to Virgo Capital’s belief that the EPS space offers a promising opportunity for the motivated investor.

¹ IDC. Worldwide IT Spending, 2006-2010 Forecast Update by Vertical Market. 2006.
² IDC. 2007 Technology Sales Barometer: Growing Budgets, More Sales People. 2007.
³ Bullhound. Sector Update – Online Lead Generation Market. 2007.
⁴ Gartner. Augmenting Leads Improves Sales Conversion Rates. 2007.
⁵ Gartner. Hype Cycle for CRM Sales. 2007.