In 2021, private equity investors inked $284 billion in tech deals, making up 25% of the total buyout value and 31% of the total deal count globally. This largest share for any single sector underscores the pivotal role of technology in modern organizations. For Private Equity (PE) firms, technology isn’t just an accessory—it’s the lifeblood that powers their operations. In the rapidly evolving PE landscape, fluency in technology is not optional—it’s a necessity. To stay competitive, optimize operations, and drive value creation, PE firms need to not only understand the role of technology but also master its strategic application.
Whether it’s portfolio companies heavily reliant on technology, or the use of cloud-based platforms for workflow management, a strategic approach to technology can be a game-changer. However, recognizing the significance of technology is just the first step. PE firms also need to make calculated decisions that align with the bottom-line about building or enhancing their IT teams to ensure they are equipped to navigate the digital transformation wave.
Cost and Compliance: The Twin Challenges
This increased reliance on IT brings its own set of challenges. The high demand for tech specialists has driven salaries upward, making these types of roles a significant cost factor for PE firms and their portfolio companies. The quest to balance cost and quality, a common dilemma for portfolio-owned companies, has now become an acute issue in the tech labor market.
Simultaneously, there’s an enhanced emphasis on compliance. IT roles often involve handling sensitive data and systems, making them a critical aspect of a firm’s risk management and compliance strategy. Ensuring technology operations adhere to global standards, legal requirements, and industry best practices can be an intricate and resource-intensive task.
Cost:
In the United States, the average software engineer’s base salary is $115,256. So how can you stay cost competitive?
Well, the short answer is Latin America. Many may not know the vast amount of IT talent available in LATAM countries, but even fewer people know the amount of money that can be saved when hiring LATAM-based professionals. On average, one can save 40%-60% on a developer compared to a US-based option.
These savings are largely due to the difference in cost of living between the two locations. With inflation and competition for tech talent continuously rising in the United States, it is time to look elsewhere to prevent erosion of margins.
Compliance:
When hiring a remote team on your own, there is a lot of risk, especially in compliance. Some of the main pain points include:
Payroll
Severance
Social Security
Local Labor Laws
Benefits
Tax
These are just some of the headaches that come with remote hiring, and these are even more complicated when hiring from another country. With the growing need for IT professionals, it takes even more resources from other parts of a company to keep up with all of these compliance necessities. So why do it all yourself?
Flexibility and Adaptability
While cost and compliance are hot topics in Private Equity, having a flexible team that can easily adapt to your needs is also important. As PE firms navigate an uncertain investment landscape and as the needs of their portfolio companies evolve, the ability to scale IT capabilities up or down becomes invaluable. Access to a diverse range of IT skills and expertise, from data analytics and cloud computing to software development, is crucial in today’s digital age.
How Can you Take Advantage of IT Roles to Maximize Value Creation?
Zipdev offers a cost-effective way to access top-notch IT professionals from Latin America, a region known for its high-quality tech talent. With this strategy, PE firms and their portfolio companies can significantly reduce staffing costs of tech professional by 40%-60% without compromising on the quality of talent.
Zipdev also takes care of all employee risk and compliance aspects, providing employers with the peace of mind they need to focus on their core business. We handle everything within the hiring funnel; from identifying, screening and presenting top candidates, to background checks, to ensuring compliance with local labor laws, payroll, and much more.
With a flexible nearshore staffing solution, PE firms can scale their technology capabilities to support growth, providing some needed agility in today’s uncertain investment climate.
As growth-oriented companies face the challenge of filling critical IT roles, looking for remote talent in Latin America can be a brilliant solution for value creation.