Find your match

Much has been written about the IT systems that support private equity and what they supposedly can and cannot do, but does the answer really lie solely in the underlying system functionality itself or should private equity clients be considering other factors which may be a little ‘closer to home’. This author certainly thinks so!

This chapter examines some of the factors that private equity firms should consider when looking to adopt a system-based approach to their operations as well as the questions they need to be asking prospective providers.

After figuring out exactly what the firm’s IT infrastructure should be able to do, the next step for a private fund manager is to consider the process and mechanisms by which it might identify the most appropriate vendor and software. This process should be planned carefully to avoid wasting time and effort and to present a favorable first impression with the vendors.

There are various methods available throughout the process and the main ones are explained in chronological order here.


This stage in the selection process aims to identify a manageable number of vendors to take forward to the demonstration stage (typically between three and five).

Identifying the initial long list of vendors may be aided by a number of web-based information sources. One such source is, which provides summary profiles of most of the major private equity software providers and a real-time news summary of the latest developments announced by those vendors. Clients should also research the vendors’ websites and talk to their own peer group, some of whom will have been through the process recently.

There are also several dedicated consultancies that support this niche market and any of these should be able to guide clients through this initial filtering very quickly.

Ultimately, at this stage, the private equity firm should be looking for vendors with a proven track record with other clients of a similar size and nature and with similar objectives and functional scope.


This is a formal documented process for obtaining written information from a long list of possible vendors. It is an established process for large-scale IT procurement and may be a mandatory step for certain private equity firms if dictated by their own purchasing rules.

The RFI can be a useful tool for forcing a GP to formalize its project approach by documenting a long list of requirements. However, this can be very time consuming and assumes that the firm already has a solid understanding of what it wants and what is available.

As a selection tool it is also of limited value in assessing underlying functionality. A series of questions asking, “Does your software do this …..?”, will almost always result in a positive answer. Most private equity software can do most things in several different ways, so the whole process may fail to differentiate between the potential functionality on offer.

A simpler alternative may be a ‘lite’ version of the RFI which instead sets out summary details of the private equity firm, its business model and core requirements and asks vendors to pre-qualify themselves. Supplementary questions focusing on due diligence-type factors may also be included. This can be surprisingly effective, since most vendors will have a good feel for their likely success and will not wish to waste time and effort on a process that they expect to lose.


Product demonstrations are usually undertaken with at least three vendors and no more than six. The private equity firm’s core project team assembles to view each demonstration, which typically lasts between two to three hours. The firms should provide written invitations to these demonstrations, setting out salient information about its business, project objectives, functional requirements, timescales, project team members and an agenda for the session.

Product demonstrations are best held at the private equity firm’s premises and should be scheduled over a short time period to aid comparison. Web-based (remote) demos are a poor substitute for face-to-face meetings and provide limited opportunity to form an assessment of the vendor’s staff.

The demonstrations should be energetic and positive and should allow the vendor to show a firm grasp of the private equity firm’s business and the challenges to be faced during implementation.

The private equity firm should get a good feel for the user interface, data structures and core functionality, plus the various reporting options, but should also note that it is viewing a demonstration database and not one that has been configured specifically for it.

Finally, the private equity firm should debrief and take notes after each session and again when all demonstrations have been completed. There may be supplementary questions to follow up on, but this stage should ultimately identify the two or three vendors that will progress to the next stage.


Vendor workshops should be viewed as an essential stage in any selection process. They are a significant step forward from the generic demonstration stage and provide invaluable insight into the software and its application to the private equity firm’s specific needs.

The content of the workshop is driven by the firm that prepares an information pack setting out representative business structures (investors, funds, assets etc) and business events (for example, first close, first drawdown, management fees, asset purchase, second close, valuation, asset sale, distribution). Issues such as multi-currency should also be incorporated where relevant. Private equity firms should identify between 10 and 15 such business events and provide all information required to fully reflect these in the system.

Workshops are generally one full day for each remaining vendor. This represents a significant investment of time and effort, but if designed effectively should be a powerful tool for assessing the software and vendor. They are also extremely useful for the vendors who will also learn a good deal more about the private equity firm client and its requirements.

The workshop day should certainly be held at the private equity firm’s offices, as it is essential to work closely with the vendor’s team as you walk through the various test-case scenarios. The process should be very interactive and will create a platform for an exchange of ideas and deeper assessment of the software’s capabilities.

Other topics may be covered during the workshop day, including the vendor’s implementation approach, support facilities and price estimates for software and professional services.

A further debrief session should identify the client’s first and second choices, pending subsequent follow up of any unresolved and/or supplementary questions.


Client references are generally taken up as a last step, prior to confirming the preferred supplier. The remaining vendors should furnish the private equity firm with contact details of two or three existing clients for whom they have implemented systems within the last two years and that have similar profiles to the firm.

Reference calls are particularly useful in assessing some of the softer issues surrounding client/vendor relationships throughout and beyond implementation. Key questions to ask include:

· What is the vendor like to work with?
· Did the vendor adhere to the proposed timetable?
· How does the vendor deal with inevitable issues that arise?
· What would the private equity firm have done differently?

The above steps should provide the fund advisor with sufficient information to make an informed and confident decision regarding its preferred supplier and should also help to define the scope and approach of the subsequent project, so that the contracting phase can be completed without any major surprises.


Selecting and implementing private equity software should be a challenging but ultimately rewarding process and it is one that more and more private equity houses will go through as the demands of investors and regulators place ever more pressure on their operations.

As with any software project, in any industry, there are a range of potential outcomes with varying degrees of client satisfaction. Indeed, there are many stories and battle scars that are discussed among those that have already been through such processes.

The core message is that private equity firms have much greater control over the project outcome than they might believe and that choosing the right software/vendor is only one of many things they need to ‘get right’.

Tony Piper is the founder and director of 4vco, a provider of consultancy services to private equity operations.