Six ways to avoid an IT mishap

Lack of due diligence and inadequate training are among some of the most common mistakes a fund advisor can make when updating and maintaining its IT infrastructure.

Chief financial officers will tell you managing a firm’s IT system is a job fraught with complications, and hasn’t always been at the top of the priority list.

Moreover GPs’ don’t always have the resources or inclination to track the latest technology news and maintain best technology practices.

However, industry tech experts speaking with PE Manager say that’s beginning to change; in part because of LP demands and the need for greater operational efficiencies. But in a world of ever-changing technology, it’s not always easy to upgrade the firms IT infrastructure without running into some common obstacles. Below are six, and some expert guidance on how best to avoid them:


It’s easy to spend money on technology, but less so to get the most bang for your buck, sources say. Often GPs fall into the trap of buying software or hardware, and then not investing the time to ensure it works efficiently, especially after the product has been purchased.

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

For many, the problem stems from working without a concrete IT infrastructure plan. Consequently, many private equity firms never see the benefits their IT systems can offer, according to the IT consultant. He says that 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.

“You see inconsistencies in technology implementation all over the place,” agrees The Blackstone Group chief technology officer Bill Murphy. “Often, a great system is deployed and then five years later it needs to be replaced because there wasn’t consistent investment in it.”

One IT consultant says private equity firms often fail to spend time on technology because they do not see their relationship with the vendor as a partnership, but rather a customer/client connection. Moreover consultants say fund managers want to beat the provider down to the lowest cost possible, which can impact the quality of service.

In fact, knocking a couple of basis points off the original estimate may seem great at the time, but sources say this can come back to haunt GPs. “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,” says the anonymous IT consultant.

One way for firms to improve their relationship with technology providers is to hire an employee dedicated to IT solutions at the firm, who can also be responsible for ongoing dialogue with service providers. The Riverside Company is an example of a firm that does this. The mid-market investor 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.

What’s more is this kind of employee, as a salaried member of the firm, is more reliable and directly accessible. That’s especially valuable at a time when technology providers may have slow response times, perhaps because of a new product launch or wide-spread tech disaster.


Having only one internal technology champion, or relying on third parties, creates a key man risk too. If the detailed knowledge of core systems is only in the hands of a few people, illness or the individual leaving the firm, can leave the firm in a precarious position.

Feldman uses the hypothetical example of having only one person responsible for controlling and monitoring Riverside’s email environment. In the event that employee leaves even an experienced replacement will take weeks to get up to speed with the organization’s peculiarities and restore order.

To help mitigate this risk, sources say the firm should keep detailed documents explaining the ins and outs of the firm’s IT infrastructure, and ensure that multiple staff members and outside service providers understand its content.


Vendor reliability issues can also be mitigated with the right amount of due diligence, something not every private equity firm spends enough time on, sources say.

One technology provider puts this down to many private equity professionals “thinking they have all the answers, when in fact this isn’t the case at all.” And with new participants and products entering the market every week, it’s becoming more difficult for that due diligence on technology providers to be completed, say multiple industry sources.

Riverside’s Feldman says GPs don’t always ask the right questions during an evaluation of a product. He’s witnessed some GPs blindly deciding on a product because it is well-known, friends of theirs use it, and other GPs use it. But this can lead to problems during implementation. “They don’t realize that it may cost tens of thousands of dollars, maybe even hundreds of thousands, to customize it for their specific business.”

The IT consultant agrees that due diligence needs to be conducted more thoroughly. He says GPs don’t often consider the geographical limitations of some third parties. “If you have operations and significant investments in Asia, but the company you are partnering with is strong European player without any Asia support, how is that going to work?”


Another problem GPs face with due diligence is having no centralized IT decision making, says Blackstone’s Murphy.

This especially becomes a problem as firms grow in size, headcount and geographical scope, meaning IT decisions need to be made with more factors in mind.

Feldman says he has seen firms where investor relations have their own customer relationship management (CRM) systems; the deal teams have their own CRM and all the C-level professionals tracking contacts have yet a completely different system.

This is something that Blackstone works hard to prevent, says Murphy, but adds it is one of the more difficult challenges for firms as it takes a lot of leadership and organizational wherewithal to ensure technology purchases fit within the firm’s overall architecture.

Both Murphy and Feldman insist the best way to tackle this problem is simply by spending more time embracing technology as a firm. They argue that if IT is central to the top level conversations it becomes easier to hatch a long-term plan of what needs to be achieved.


Merely using technology to solve individual problems also creates usability issues for GPs, say sources. Murphy says buying individual IT pieces or solutions, all of which operate differently, creates problems for the end users. “We try and not fall into that trap by building common usability format standards across all our businesses. The more we can centralize the more efficiency we can create.”

Technology providers agree, noting that too many GPs investing in their IT systems fail to embed them across all their processes.


Multiple systems making up the firm’s IT function can also create training problems for end users. If one system significantly differs in usability from another, then more training will be needed to educate busy dealmakers and others.

Indeed, many professionals within the firm may feel too time-strapped to even attend these training seminars. Mention software training in almost any conference room and you’re likely to hear groans. Boredom, bad classroom experiences, lack of interest, or complexity all contribute to employees’ resistance to learning new applications, says one US-based IT consultant.

And this leads to the technology being wasted as the end users are not able to use all of a system’s functionalities and efficiencies. “The technology is able to do a multiple of what it is actually used for,” says the technology provider.

It’s estimated that office staff understand less than 20 percent of the available features in the software applications they use. “That means 80 percent of the features, time-saving capabilities, and cost-reducing functions remain unused,” says the US-based IT consultant.

One notable tip to get the most out of IT training is to ensure the training is properly targeted to the right audience.

For instance, Feldman says private equity firms often have generational differences within their organization and this is needs to be addressed in technology training. In recent conversations with Riverside’s professionals, Feldman said the younger employees have a better understanding of the three major technology systems Riverside has rolled out over the past 18 months.

To cure this ailment Feldman has been tasked to put together a service catalogue. It lists all the service offerings from a technology perspective, what they do, how to access them and features a contact list of people to call if an employee has any questions about a particular service.

As more firms begin embracing the full potential of sophisticated software systems, it is that kind of preparation that can allow GPs to avoid some common mistakes during adoption.