Driving Success Through Strategic Support
Private equity (PE) firms play a pivotal role in driving the success of their portfolio companies. Leveraging their expertise in private equity portfolio management along with extensive resources, these entities support their portfolio companies through a structured and strategic process. This includes identifying issues, analyzing high-spend areas such as labor costs, providing strategic guidance, private equity portfolio monitoring progress, facilitating collaboration, and promoting knowledge sharing among portfolio companies. Such proactive engagement can lead to substantial improvements in profitability and overall efficiency for private equity portfolio operations.
Empowering Portfolio Companies with Expert Partnerships
One of the key ways PE firms can assist their portfolio companies is by connecting them with specialized Business Process & Technology solutions providers like Aeries Technology. This partnership facilitates a holistic approach to optimization, encompassing organizational and private equity portfolio operations assessments. Aeries, known for its established and efficient methodologies, can swiftly identify opportunities to enhance operational performance and cost-effectiveness for private equity portfolio companies.
Boosting Efficiency Through Strategic Outsourcing
Outsourcing is particularly advantageous for functions outside a company’s core competencies. By partnering with specialized providers like Aeries, private equity portfolio companies can tap into expert knowledge and benefit from economies of scale, resulting in significant cost reductions. This strategy is especially beneficial for roles that require highly specialized and expensive talent, such as complex software development, data analytics, artificial intelligence, finance and accounting, and specialized engineering.
By outsourcing these functions to experienced providers familiar with PE-sponsored companies, portfolio companies can avoid the substantial costs associated with hiring and training in-house professionals, especially when considering U.S. labor rates being 40%-70% more expensive for similar talent. Aeries’ expertise ensures that private equity portfolio companies receive top-tier services without the overhead expenses, thereby optimizing their operational budgets.
Leveraging Cost Advantages in Lower-Cost Regions
Outsourcing to lower-cost regions with abundant high-quality talent can yield substantial cost benefits. Countries like Mexico and India, known for their favorable wage structures and advantageous exchange rates, offer significant labor and operational savings. Clients of Aeries Technology typically achieve savings between 40% and 70% by capitalizing on these regional cost advantages. For U.S. companies servicing the domestic market, Mexico’s nearshore location and similar time zones provide the added benefit of real-time collaboration and seamless customer service. This strategic approach enables private equity portfolio companies to drastically reduce expenses while maintaining or even enhancing service quality.
Effective Global Capability Center (GCC) Model:
The Aeries Technology Advantage
Traditional outsourcing, typically conducted through a Managed Service Provider (MSP) arrangement, often involves a client relinquishing control of operational functions to the provider. These engagements are governed by service levels and financial penalties for service failures. They often lack transparency in provider fees and typically feature long-term contracts that are difficult to exit. Moreover, clients usually do not have hiring authority during the ramp-up phase, making the process inflexible and often more expensive due to high provider margins, sometimes exceeding 50%.
Aeries Technology presents a distinct GCC model that overcomes traditional outsourcing challenges by emphasizing transparency, control, and flexibility:
- Operational Control: Clients benefit from a framework that aligns with their strategic goals, ensuring operational and functional control in collaboration with Aeries.
- Best Fit Hiring Approach: Clients are involved in selecting key leadership positions within the GCC, ensuring that these critical roles align perfectly with their strategic needs and standards.
- Cost Plus Model: The pricing model is transparent, covering labor and benefits only, with all other costs considered
pass-through, eliminating hidden fees and inflated margins. - Custom Branded Office Space: Aeries provides dedicated office space that is custom-branded, creating an organic extension of the client’s home office.
- Transparent Pricing: Aeries offers fully transparent pricing, allowing clients to understand and control costs effectively.
- Build Operate Transfer (BOT) Model: This model ensures Aeries’ capability to establish and manage the client’s offshore operations, with flexibility to adapt to future strategic needs.
- Speed and Operational Readiness: Most operations with up to 80 full-time employees (FTEs) can be operational within 12 to 16 weeks. Aeries manages the recruitment, sourcing, and interviewing processes, while clients participate in finalizing selections for pivotal positions, ensuring consistency with their strategic goals.
- Comprehensive Ancillary Management: Integral to the GCC model, Aeries manages all in-country ancillary functions including HR, payroll, employee benefits administration, legal and compliance, IT support, marketing, candidate sourcing, recruiting, onboarding, and local tax and accounting. This comprehensive management frees clients to focus on core business activities.
- The End Result – Fully Functioning Subsidiary: The end result is a fully functioning client subsidiary powered by Aeries Technology, seamlessly integrated and operationally efficient.
By implementing Aeries Technology’s GCC model, clients experience enhanced operational control, benefit from transparent and cost-effective pricing, and gain a flexible, supportive partnership that fosters success and growth. Through these strategic initiatives and partnerships, PE firms can ensure their portfolio companies are well-positioned for sustainable growth and success.
