Our Outsourced IT Services Investment Thesis
Learn more about our Global Private Equity team’s thesis in outsourced IT, as well as our sectors of interest, investment criteria and relevant experience.
The outsourced IT services market stands at $573 billion globally and, with a roughly 8% annual growth rate that shows no sign of slowing, is on track to nearly double by 2031. Driving that trajectory is the need to digitally transform businesses, optimize repetitive functions, lower costs, and increase productivity, all of which can be achieved at a reduced cost through the use of technology, offshore talent, or a combination of both.
Businesses serving this market are often encircled by multiple moats—including high barriers to entry, significant technological know-how, and intricate integration with their customers’ business operations—that protect and provide long-term visibility on their revenue streams.
Mapping the Opportunities
The outsourced IT services market is broad, growing rapidly, and characterized by technological change. All of that is paired with attractive revenue models, some of them more project-based but re-occurring in nature while others are more recurring.
We see attractive opportunities in both.
On the project-based but re-occurring side are Digital Transformation Consultancies that help companies become more efficient through technology or use it to extract and better understand data and Outsourced Technology / Software Development providers that help companies drive efficiency or revenue growth with custom software developed in low-cost geographies.
Other outsourced IT services providers tend to deliver more recurring revenue streams. These include Technology-Enabled Business Process Outsourcers (BPOs) that combine talent in low-cost geographies with process automation (think robotic automation and AI/machine learning) to lower costs for highly repetitive tasks, as well as IT Managed Service Providers (MSPs) that manage an entire IT function in a particular hosting environment (private or public cloud, for example) that often start out as value added resellers of specialty software or products.
Investing in Outsourced IT Services
Baird Capital is a seasoned investor in the outsourced IT market. Over the past two years, we have evaluated many investment opportunities in the Outsourced IT space and believe we “know what good looks like.” We are actively seeking new investments in this space, particularly platforms in the U.S. and U.K. that have offshore delivery and international growth opportunities where our global fund can make a difference. We focus on opportunities that align with our investment thesis, which prioritizes opportunities across the four verticals discussed above.
Over the past year-plus, Baird Capital has made several investments in the broader outsourced IT services market, including JMAN Group. Based in London, JMAN is a data consultancy that helps the C-suite access real-time data across their organization to make quicker and better strategic decisions. Highlights of the investment include:
- The commercial chops of management consultants, combined with the agility of a tech company and a solid reputation for accelerating PE portfolio company growth
- Tailwinds from the imperative for businesses to become more digitally enabled and leverage data to enhance value
- Gaining traction in US market with valuable input from Baird Capital
- Demonstrable ROI that drives high levels of repeat and recurring revenues
Mastering the Complexity
One thing all these opportunities share is complexity. After all, their business models are about taking complexity off the plate of their customers.
A critical resource for quickly evaluating complicated businesses that appear to fit our outsourced IT services investment thesis—and in many cases providing strategic and operational insights post-investment--is our network of seasoned executives with deep experience in all four of the outsourced IT services categories in which we are active.
Achieving New Milestones
Baird Capital seeks to invest in high-quality businesses that are benefitting from the growth in innovative technological solutions and services that drive efficiencies, cost-savings, and revenue generating activity for clients. With our global capabilities and deep sector experience, we believe we are well-positioned to help these dynamic, differentiated, and growing companies reach new milestones.
