SIFEM - Swiss Investment Fund for Emerging Markets

September 2021

Cloudstaff: «Working from home is here to stay»

Established in 2005 by Australian internet pioneer Lloyd Ernst, Cloudstaff initially focused on software development for Western markets. In 2010, it identified the Philippines as an emerging market for outsourcing services and expanded its operations to the region. After starting with a team of only seven employees, Cloudstaff was able to extend its service offerings, expand its international client base and increase its workforce. Cloudstaff currently offers a wide range of outsourcing services, including accounting and finance, back office, creative and marketing, customer service, engineering and drafting, software development, software quality assurance and technical support. It works with companies in a variety of sectors, including collections and debt recovery, dental services, e-commerce, enterprise, mortgage brokering and real estate.

Cloudstaff contributes to SDG 8: Decent Work and Economic Growth through employing more than 3,500 semi-skilled and skilled workers on permanent contracts. The company is committed to building the “Number One Workplace” in the Philippines by creating a productive, fun and family-friendly place to work, with modern, well designed and fully equipped workspaces. At the same time, Cloudstaff’s work from home initiative has been invaluable since the COVID-19 pandemic.

Employee salaries and benefits are designed to meet or exceed local legislation and norms. New employees receive extensive training which not only leads to professional development, but also ensures they can meet client needs. Regular training is provided thereafter. In 2020, Cloudstaff provided over 33,000 hours of training to its employees. The company’s low turnover rate (around 3% in 2020) is a testament to employee job satisfaction, which has supported Cloudstaff’s strong growth.       

In 2019, SIFEM invested USD 15 million in Navegar Fund II, which invests in mid-sized companies in the Philippines in need of growth capital, including Cloudstaff. Since Navegar’s investment in Q1 of 2020, the fund has worked with Cloudstaff to chart its expansion plans, improve its back-end process and advise on its corporate restructuring.

In the following discussion with SIFEM, Cloudstaff CEO Lloyd Ernst tells the story of the company’s beginnings, its clear focus on what it offers to customers, and how it handled the challenges of COVID-19, including retraining employees. Lloyd also talks about the “new normal” of working from home and stresses the importance of taking care of employees.

The beginnings – with a detour via China

The Cloudstaff story is as much about success in the field of Business Process Outsourcing (BPO) as it is about the evolution of internet-based services. Lloyd started his career at Microsoft before creating an Internet Service Provider (ISP), which grew to become the largest ISP in Queensland, Australia. After selling that company, Lloyd created a web-hosting business which grew to become the third largest globally. He then moved to China to explore the emerging field of offshore software development. 

At the time, software developers were hard to find and expensive. He started a pilot project in Beijing, which help grow the business to a team of 200. However, when they needed to conduct a large software testing project, the language barrier in China became an obstacle. Lloyd recalls: “I had a friend working for the World Bank who said I should try the Philippines”. His team started a project in Manila, which quickly proved successful and gave the business opportunities for further expansion. 

Lloyd and his team also spotted the move to cloud services as businesses sought less onsite infrastructure, such as servers and ADSL connections, at their offices. “The next step was that staff did not need to be in the same country. In fact, they could be anywhere on the globe,” said Lloyd. Cloudstaff’s growth path is linked to the expansion of cloud-based solutions for SMEs. 

«Thanks to our partners, we have been able to make much better decisions. They can change the scope of our thinking and that has been very valuable.»

Cloudstaff: a company with a clear focus

As Lloyd explains: “There is a global problem that businesses face: the cost of managing staff”. He is convinced that: “In the future businesses will get smaller, not larger”, and that firms should focus on the key value creators inside their organisation. In particular, SMEs should increasingly direct their energy and resources on growing their business, leaving companies like Cloudstaff to support the rest of the organisational structure. Lloyd continues: “Our customers are not big brand names. There is a good chance you will never have heard of any of our customers, whether they are from the US, UK, Norway, or Australia. We deal with real estate agents, construction companies, accounting firms, you name it. They will invest a lot of time, money and energy in training our own staff, so we can carry out multiple roles for them. But unlike the big players, we don’t offer a team of 30 people doing one thing, we give our customers one person at Cloudstaff doing 30 things”.

Providing jobs and transferring skills

As a result of technological changes and global shifts, outsourcing has increased as companies in developed countries benefit from lower costs in developing countries. In this way, globalisation also offers expanded job opportunities as well as the possibility to support better living standards in many developing countries.

Cloudstaff provides office-based jobs with good work conditions for its 3,500 plus staff, with internal training programmes and benefits that meet or exceed local requirements. For example, employees who work beyond 10pm local time are paid a premium.

Cloudstaff also provides a useful skills transfer model in the SME sector, as Lloyd explains: “I am certain that in five years’ time, someone is going to leave Cloudstaff and go out in the Philippines’ market and start their own real estate company, using the expertise and the skills learned from working with customers in Australia right now”.

Crucial support from the Fund Manager and its partners

In order to continue its expansion, Cloudstaff has receiving financing from private equity fund manager Navegar, which in turn has partners such as SIFEM. Lloyd has words of praise for this successful collaboration: “Thanks to our partners, we have been able to make much better decisions. They can change the scope of our thinking and that has been very valuable”.

The best of teamwork: dealing with COVID-19

Of course, there are also bumps in the road. Last year, Cloudstaff was put to the test with the onset of the COVID-19 pandemic. Remarkably, with a combination of planning and leadership, it had around 90% of its employees working from home within 48 hours. Lloyd recalls: “We had amazing teamwork, with people working through the night – and technicians sleeping in the office – just to make sure that they could get everyone online. We were running around computer shops buying every laptop we could possibly get our hands on”.

Overall, Cloudstaff has weathered the crisis well and has been able to retain and retrain its employees. “We had some exposure to the travel industry, so some of our clients had to let their staff go. We were fortunate that we were able to transition our employees to new clients that were experiencing continued growth,” says Lloyd.

It’s a new world – but some things remain unchanged

Lloyd expects that “maybe 20% of our employees will work from home and never have to come back into the office again”. He recognises various positive elements about the new normal: “Working from home means our people have more flexibility to organise their schedules and spend time with their families. People also save significant time by not having to commute, which can be substantial considering the local congestion issues, and avoiding traffic is clearly much safer. 

However, Lloyd also believes some things will not change: “We will always want to attract the best talent by making sure that our employees are well looked after. If we can achieve a positive working environment, then attracting clients and getting good returns for our investors will be natural consequences.”

Navegar Fund II

  • Fund size USD 196.85 million
  • SIFEM investment of USD 15 million in 2019
  • Around 19 employees at Navegar
  • Two portfolio companies in Navegar Fund II at present

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  • More than 3,500 employees 
  • Seven locations in the Philippines