Across almost every industry in the U.S., businesses both large and small are highly dependent on software technology to support their operations. Whether they are manufacturing a product, managing a sales force, invoicing a customer, or paying employees, more often than not software plays a major role in getting the job done. With the increasing amount of software technology, including third-party applications, databases, operating systems, websites, and propriety applications, one of the key challenges that companies face is how to manage and maintain all of this software, in many cases mission-critical software, in a cost-effective manner. For software and technology providers themselves, the increasingly competitive marketplace is making it important to not only provide a lower total cost of ownership but also be fast and efficient in improving products and expanding feature sets.
The Emergence of Nearshoring
Few business trends in recent memory have garnered the type of attention that outsourcing has. Driven by increasingly strong pressure to cut costs and focus on core competencies, companies are continuing to look to outside firms to handle non-core business functions such as collections, customer care, and human resources. In the 1990s, many companies in the U.S. began looking into offshoring, sending work over to places such as India and the Philippines. Recently, however, numerous issues have emerged with the offshore model, and executives are starting to look to nearshore providers for their business process outsourcing needs. At Virgo Capital, we believe the nearshoring model offers a unique value proposition when compared to domestic and offshore outsourcing providers, and that it represents an attractive opportunity for the right investors.
Professional Employer Organizations
Human resources management is one of the most substantial and promising areas in outsourcing today. One of our favorite models is the professional employer organization, or PEO. The value proposition PEOs provide enables clients to cost-effectively outsource the management of human resources, employee benefits, payroll, and workers’ compensation, allowing them to focus on core business functions. PEOs deliver these services by establishing and maintaining an employer relationship with the client employees and by contractually assuming certain employer rights, responsibilities, and risk. We believe that significant investment opportunities exist in this consolidating market given the fast growth and low overall market penetration.
