Offshore Small Business: Same Problems, Higher Standards?

Based in the US, VSI Nearshore Outsourcing offers outsourcing services for software development and business processes from its facilities in Colombia. VSI stemmed from its parent company, a US-based financial technology …

Esteban Reyes

Based in the US, VSI Nearshore Outsourcing offers outsourcing services for software development and business processes from its facilities in Colombia. VSI stemmed from its parent company, a US-based financial technology and services provider, and became an independent entity in 2010,  having survived a period of risk and uncertainty for the company and the industry it serves. In an interview, VSI CEO Esteban Reyes highlighted the following lessons:

Regulatory compliance driven by policy legislation such as Dodd-Frank — described by Reyes as a “tectonic change” for the financial services industry — coupled with sustained concerns around data security, pose the greatest threats but also present the greatest opportunities for companies such as VSI. Financial institutions must be compliant and must reduce risk. Offshore-based companies such as VSI, however, face a higher level of scrutiny than some of their onshore competitors that are flying under the radar based on local assumptions that being in-country inherently means being more secure. VSI and other offshore-based companies have to maintain higher levels of internal controls to overcome greater levels of external objections and concerns around risk. The irony — and the opportunity — is that offshore-based companies may, in fact, deliver more tightly controlled, better secured data and services.

Go-to-Market Strategy

Mid-tier firms such as VSI can reap benefits from a tightly focused go-to-market approach. VSI targets non-depository lenders such as auto loan and mortgage clients that are not inclined to purchase higher-cost services from global systems integrators or take the risks associated with working with smaller entities. These buyers have complicated, customized demands, expect top-tier service, and are too large to risk working with single-shingle operators, making them ideal clients for vendors such as VSI. By staying on top of the emerging technologies and legislative issues defining their topical swim lanes, firms such as VSI can lap their competition.

As if regulatory blindsides are not enough to deal with, VSI, like other firms, needs to address the growing demand for cloud-based consumption operating models. VSI is in the final stages of negotiating a partnership with a leading-edge cloud services supplier that will pivot it into new market areas. This comes on the heels of VSI investing in building out a center of excellence around cloud transformation. These services are more horizontal in nature and will shift VSI into new customer segments that serve global rather than just U.S.-based enterprises, likely adjusting its core business streams of IT outsourcing and process outsourcing.

Asked by TBR if his customers’ locations mattered to him, Reyes said, “It doesn’t matter [if] they are in the U.S. or elsewhere.” People need to borrow money for homes and cars throughout the world and the basic process flows and checks remain similar — further illustrating how business typically remains one step ahead of the governments seeking to monitor, regulate and adjudicate business practices. The larger lesson: Technology-enabled instantaneous communications and workforce collaboration erode the impact of sovereign nations on business commerce.*

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Entrepreneurship Doesn’t Change

Small business owners — the risk-takers putting capital in play to provide livelihoods and deliver products and services — have universal objectives. “As an owner/entrepreneur, building a great company is always a concern, with ‘great’ defined as a great place to work. Providing leadership and driving it across the business is important as is delegating that responsibility,” Reyes said. “Beyond that it is Business 101: Driving growth, building up sustainable business models, innovating to be ahead of the curve, and, ultimately, when you pull it all together, delivering services to clients and making them happy, which results in clients looking to grow with us.”

In the U.S., at least, 80% of small businesses fail within the first two years of operation. Of the remaining 20%, 80% of them fail within the first seven years of operation. VSI represents a success story achieved by only 4% of entrepreneurs like Reyes who risk savings to start a business, and VSI did it in an industry wreaked by havoc and distress. VSI was formed during an economic implosion in its core market, prompting the parent company to spin it out. Principals took the risks to save jobs in their local economy. Today, they keep their eyes on legislative impacts to their business and lie awake at night balancing what their core markets will expect from them and how to train, develop and push their employees to continue operating successfully.

*In a previous column published in May 2013,”Pricing Pressures and Protectionist Policies Bring New Pain to Mid-Tier Players,” we noted how public policy can have a profound impact on businesses. VSI’s example reaffirms the understanding that the business community and commerce will always be larger and more rapidly changing than the public policy sphere.

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