Dimitri Korvyakov is the CFO of Sandton Capital Partners, a mid-market firm with $900 million in assets under management. It raised its fourth fund in 2016 with committed capital of $600 million. We spoke to him about the outsourcing lessons he’s learned, his tips for fellow CFOs and his predictions about the future of outsourcing.
What is your biggest outsourcing regret?
We were looking into investing in agriculture in France and we hired a research company based in India to research the market to see whether the investment would be appropriate for us. They did produce a high-level review of the French agricultural market, but not to the level for us to make any conclusions with regards to whether we could invest or not. Projects where you’re not giving the outsourcer clearly defined tasks don’t usually work out that well. Because they don’t know your internal culture, your internal dynamics and your constraints, the results of that are fine, but not necessarily useful.
What was your most important lesson learned?
The most successful projects are those when you do not leave much freedom of interpretation to the outsourcing firm, but rather give them very narrowly defined tasks, clear instructions and very clear expectations as to what you want them to deliver. It gives clarity to the outsourcing firm in terms of what needs to be done, it enables them to staff the project better and we know exactly what we will get as a result.
What outsourcer has been great for you?
Projects within the operations side of the firm are ones where you can clearly define the expectations and the deliverables. For fund administration, we are using a company called Sanne, who are quite well known, especially in Europe. For HR services, TriNet is the usual suspect – many investment firms use them. They’ve carved out this niche very well, and they offer services that firms of our size can benefit from.
What three tips would you give to other CFOs about outsourcing?
- Provide outsourcers with very specific, well-defined tasks and deliverables.
- Be specific about the process you want them to carry out to achieve the results.
- Spend time getting to know the outsourcing team and explain to them what you do and the role the outsourcing team will play in your internal process.
What would you love to outsource but can’t?
The perception in the industry is that valuation has to be outsourced because it requires a level of experience that you may not have in-house, but we haven’t found that experience to be helpful. With small to mid-sized private companies, the use of standard valuation techniques is necessary but not sufficient to provide a good valuation analysis. It probably would work for a larger private equity firm, but for our size – and we are looking at investments between $10 million and $20 million on average – we haven’t found that the value of the work justifies the cost.
What do you wish outsourcing firms would do better?
You could call it a customer service issue, but to go a step deeper, companies tend to spend less time on the client with the desire to make a profit on the project. It takes time for an outsourcing firm to get to know their clients and two or three years to generate profit from a project. Many outsourcing firms are trying to speed up this period in order to get into the green by spending less time trying to get to know who we are and what we do. It seems to me, to ensure the quality of future projects, outsourcers must start by spending a considerable amount of time getting to know their clients on a personal level, and as a business – what the investment strategy is, what the thesis is and what previous investments they have made.
What do you predict for the future of outsourcing?
I’ve been in this industry for 15 years, and I do clearly see that the degree of outsourcing has been increasing, and I believe that the future is in more outsourcing. Eventually a lot (maybe all) back-end activities, particularly on the operations side, will be outsourced. Outsourcing as an industry has great potential and the most successful outsourcing firms will be those that invest into getting to know their clients better.