GPs don’t invest time in IT

Private equity firms fall into the trap of merely buying software or hardware, and then not investing the time to ensure it works efficiently, especially after the product has been purchased, IT consultants have told PE Manager.

“Private equity houses have an attitude of once they have bought it [technology solutions] they forget about it,” said one US-based IT consultant.

This can lead to disappointment in the final product. The US-based IT consultant said he’s observed private equity front office teams disappointed with new technology, which looked great during the demo, but acted differently when it was actually rolled out. This, he says, is because firms often neglect the time and effort it takes to get exactly what you want from a technology vendor.

The Blackstone Group’s chief technology officer, Bill Murphy, agrees. He adds that it is critical to continue to invest time in the product post-implementation too. 

“Often, a great system is deployed and then five years later it needs to be replaced because there wasn’t consistent investment in it.”

The IT consultants point to GPs viewing their technology vendor relationships as customer/client relationships, and not partnerships, as the root cause for poor implementation. This can come back to haunt GPs that are just trying to knock the price down.

“What will the deal look like when it comes to upgrades, ongoing support, where you sit in their overall client rankings? Probably not near the top,” said a UK-based IT consultant.

One way GPs can alleviate this problem is to have someone at the firm dedicated to managing vendor relationships. The Riverside Company, for instance, created a specific technical project management role, who reports to Eric Feldman, the group’s director of information technology.

“His primary responsibility is to work with our various business units to evaluate systems, to map out challenges, and the business case for why we are doing it [implementing a technology system] and how it justifies the cost,” says Feldman.

For more tips on how to avoid common IT mistakes be sure to check out PE Manager’s February issue.