The outsourcing of functions that were once managed internally has been a popular business strategy for many years. Companies impacted by pricing constraints resulting from factors such as international competition and low inflation have sought to become more efficient by eliminating non-core functions that specialists or firms that aggregate demand can provide to them at a lower cost. This, of course, creates opportunity for businesses that can provide the required functions reliably and on a cost-efficient basis.
Within this outsourcing trend are other changes that can create opportunities. After a period of outsourcing functions to multiple providers, companies often reduce the number of providers they deal with and concentrate their needs on those who can offer a broad range of services or a broad geographic coverage. Opportunity also comes from the ever-increasing use of technology and the Internet to achieve business efficiencies.
We seek to invest in businesses that have been able to develop a recurring revenue stream by providing services under long-term contracts or that are so unique or market-leading that substitution is unusually difficult, or which operate in sectors where change costs make existing customer relationships particularly reliable.