Hybrid cloud: The future of private equity infrastructure

Albert Bauer of Citco Technology Management describes how hybrid cloud infrastructures can help PE firms modernize their businesses, streamline cumbersome processes and increase operational flexibility.

Cloud computing is all around us. The cloud allows us to access applications and data from any point – whether on our personal devices, company desktops or through a corporate data center. We have all heard of it, more industries embrace it, and as with any newer technology adoption, it is sometimes difficult to understand how the applications work and what their benefits might be. One such industry in this adoption revolution is alternative asset servicing.

The cloud is being used to bolster solutions and streamline services, but what does that mean for managers and why should they care? While the private equity industry may have been slower to adopt the cloud, over the last several years we have seen more and more managers beginning to embrace it. Those managers are adopting the cloud directly or through trusted third parties to whom they outsource specific business functions; they are joining in the digital revolution in a way that works for them.

Albert Bauer

Asset servicers to the private equity industry are leading the charge with respect to cloud adoption. Traditionally focused on the back office, asset servicers today offer holistic solutions across the front, middle and back office and are using their scale and access to data to drive technological innovation within the private equity industry. These firms are at the forefront of migrating legacy, on-premises systems onto hybrid cloud infrastructures – a mix of on-premises IT resources, private cloud and public cloud – in order to better do the following:

Create, manage and scale new technology

Many private equity managers are now starting to adopt the latest technology, including cloud migration. By utilizing hybrid and multi-cloud approaches, they are able to not only create customized solutions, but also take advantage of newer technology in a more time-efficient and secure way. Hybrid solutions allow users to take advantage of the benefits of public cloud services like those provided by Amazon, Google and Microsoft, and combine them with the benefits of in-house computing solutions. Multi-cloud solutions utilize more than one public cloud service.

The cloud provides the elasticity firms need to scale quickly and the ability to test and deploy new solutions faster than they ever have previously. This allows them to create new data and incorporate tech uses such as software development and IT operations. It also future-proofs data by storing it in a way that can be used in line with other emerging technologies such as artificial intelligence.

Enhance the speed of old and cumbersome processes on legacy platforms

Every firm has a different integration process in accordance with their “secret sauce.” The fear of change has been a barrier for firms looking to adopt new technology. By allowing for the integration of legacy products with the cloud, this fear will not only be overcome, but also will act as an enabler for firms to increase the speed and efficiency of their processes. Workflows can be automated to improve the distribution approvals process and lessen the number of emails, telephone calls and spreadsheets, with sensitive data encrypted for enhanced privacy and security. For example, we allow clients to side-step outsourcing instead giving them the ability to license tech that can optimize operations in house.

Provide a more accessible service to increase flexibility

A leading factor in the adoption of the cloud in the current environment is the flexibility it offers in terms of access, especially for those firms still working with on-premises infrastructures. Flexibility creates the ability for a free-flowing organization that eliminates manual processes on both sides. It enables users to log in remotely and securely from different end points, giving the front, middle and back office access to data and applications so they make more informed decisions.

Firms can also use the cloud to gather data from their portfolio companies. Some larger firms with majority stakes may even require that the underlying portfolio company employ specific tools on the cloud for a seamless solution. Additionally, it is possible for firms to collaborate with vendors through programs such as Microsoft’s Cloud Solution Provider or Amazon Web Services (AWS) Partner Network.

As vendors such as Microsoft, Amazon and Google continue to develop the future of cloud infrastructure, remaining barriers to adoption will quickly disappear. The ultimate goal of the cloud for asset servicers is to ensure that managers have robust and efficient operational processes. It is a platform on which firms can build confidence in the power of emerging technologies, modernize their businesses and take part in the private equity industry’s digital transformation.

Albert Bauer is managing director of Citco Technology Management