Dungeons & Dragons, the role playing game that seems to have been a foundational pursuit of technology geeks everywhere, did crop up in our conversations with technology heads at private equity firms. Surprisingly, it was only mentioned once, when Harry Moseley, chief information offi-cer at The Blackstone Group compared D&D to building a CRM system across the firm's nine businesses and nearly $80 billion in assets under management.
Mosley likens his firm's vast CRM system to a D&D adventure, with a player able to enter at one point and emerge somewhere else, magically empowered by knowledge. ?It's creating a complete, holistic view of our investors, clients and investments,? he says of this system.
That Moseley likens his project?one of Blackstone's most important currently?to a game reflects the prevailing attitude among IT heads, that what they do combines both business and pleasure. Making an investment professional's life (operationally) easier is the mandate. Tending to crushed Blackberries, unstable wireless connections, stubborn videoconferencing systems, lost laptops and system crashes is one part of the equation. Keeping the information flow secure and constant come hell or high water is the other part. But of his job, a major function of which is finding opportunities to increase the operational efficiency of the overall organization, Moseley says, ?It's not work, it's a hobby.?
Moseley is not the only private equity IT professional to find his job fun. Mark Weinstein, vice president of IT at Waltham, Massachusetts-based Charles River Ventures says: ?I get a lot of satisfaction seeing my firm operate in a really efficient way. When done right, IT lubricates the communications and transactions processes and just makes everything happen a little faster and easier. We are doing a great job when no one notices IT.? He adds, ?I also get time to be a boy with toys, evaluating new products and services.?
But the pressure to keep all the balls in the air is intense. IT heads say that the demands of today's private equity environment, with its multibillion dollar deals sizes and investment professionals working around the clock and across the globe are ?phenomenally high.? According to John Tracey, head of group business and IT services at London-based private equity firm 3i Group, the service expectations in private equity are ?much higher than anywhere else I've worked for before. We've got a constant demand for a really high level of service.?
Often, however, these IT heads have to do their juggling acts from rooms full of machines and wires, relegated to locations far from the fancier floors that house investment professionals. Sometimes, they may even surface to link up partners' pieds-à-terre, vacation homes and yachts to the firm's network.
Their purview, though unanimously involving data and technology, differs from firm to firm. Most are also happy with their jobs, but a firm's culture has a big impact on how decisions are made and even how IT is viewed at the firm. But the biggest gripe is: where do we find the time? Ladies and gentlemen, meet your CIOs, the unsung heroes of private equity firms and a growing presence in a growing industry.
Not all private equity firms have IT heads, and if they do, the IT heads may assume different titles?chief information officer at bigger private equity firms, vice president or director of IT at smaller firms. But the task is the same: aligning technology to meet the firm's business objectives. What that entails, as well as their scope, can differ from firm to firm.
?IT heads say that the demands of today's private equity environment, with its multibillion dollar deals sizes and investment professionals working around the clock and across the globe are ?phenomenally high.??
The classic definition of what an IT head does may be Weinstein's: ?The technologies available today are pretty reliable. Still, some of the routine support is stuff that breaks, a lot are things that people don't use the way they're supposed to, some of it is just helping users adapt to change?new technologies, new handhelds, other new gadgets, managing anti-spam filters, new VOIP systems. A lot of what we do is very simple troubleshooting and training that our users don't want to take the time for. A lot of guys we work for are technophiles themselves, so they're into new technologies and they can learn really fast, but they often can't afford the time they need to look up a problem in a manual or in Google.?
But they also take on other responsibilities. At Blackstone and 3i, which each have 750 employees and extensive global operations, IT heads do more. Moseley's role at Blackstone extends to publishing, printing and market data and research, although he spends ?upwards of 80 percent? of his time on technology. At 3i, Tracey also counts premises and facilities management, meeting rooms and procurement under his umbrella of responsibilities. Both Moseley and Tracey have teams of 45 to 50 people each, not including consultants, to share the burden at their firms.
Most IT heads say that their responsibilities do not extend to portfolio companies, apart from occasionally helping in the due diligence or investment process. But Peter Green, IT director at London-based private equity firm Terra Firma Capital Partners, says that in the past twelve months, ?I've spent probably 75 percent of my time on the portfolio businesses themselves.?
Currently Green is flying between Dublin, Miami, Seattle, San Francisco and Australia to work on restructuring AWAS, an aircraft leasing company that Terra Firma bought from Morgan Stanley in 2006. On that project, he is opening new offices, closing down offices and advising on technology. For Terra Firma, Green spends only about a quarter to a third of his time on the internal workings of the firm, including property, offices, security and administrative functions. He is also involved in the due diligence process and consults on portfolio companies' needs.
There appears, however, to be a movement for IT heads to begin having more responsibilities for portfolio companies where possible, particularly in group master agreements to improve service and reduce costs. Terra Firma, Green reports, negotiated a discount of close to 40 to 50 percent with Ikon, a copier scanning company, for new capital equipment. ?There are a lot of potential savings in group spending for utilities, power, insurance and other similar foundations that each business needs,? he adds.
In the US, at least two firms are bringing together CIOs of portfolio companies. At Madison Dearborn, where Kouris spends about 10 percent of his time on portfolio companies, the objective of the meeting to be held this year is ?to share best practices, vendors that we're currently using, talk about projects that have been successful for us, those that haven't been successful, and about deploying technology,? says Kouris. At Blackstone, which recently organized a ?small? CIO roundtable for its portfolio companies, Moseley says, ?There's a strong drive towards standardization.?
?A large part of their job satisfaction seems to stem from the appreciation and recognition that IT has in the firm, as well as the autonomy and trust given to them to do their jobs..?
?As far as technology is concerned, everybody has the same issues,? says Hoby Cook, vice president, IT at Boston based private equity firm Thomas H. Lee Partners. But the observations he garnered through discussions with his peers says a great deal about how the role of IT is viewed and how decisions are thus made at different firms: ?Even though we're all in the private equity business, it was stunning to me how different the cultures are from firm to firm.?
Most IT heads can count the chief financial officer or chief operating officer as their closest confidant, or mortal enemy?these are the individuals they report to and make joint decisions with. At THLee, Cook says that decisions on high-ticket items also involve the office of the president. Kouris reports to a senior partner at Madison Dearborn, David Moser, and Green reports to Terra Firma CEO Guy Hands.
At bigger firms, the IT decision-making and strategy process may involve committees, such as Blackstone's, which includes Stephen Schwarzman. But IT heads say they enjoy a high degree of flexibility in determining how they want to run the show.
But at smaller firms, the differences in strategy planning can be vast. For Weinstein, it's an organic process. ?I don't think many of us spend a lot of time sitting around and strategizing about IT. In the process of working on day-to-day problems and projects, strategic solutions come to mind or we stumble across new technologies. At CRV we try to support IT fundamentals the best way possible, rather than looking for a strategic IT evolution,? he says.
At Madison Dearborn, with 14 partners to Charles River's 10, Kouris says the best part of his job is defining the firm's technology needs. He stays ahead of the partners, presenting new devices or ways of doing business using technology every quarter. Strategy at THLee, which also has 14 partners, is more collaborative, although Cook says that he is the focal point where IT decisions get made. ?Sometimes it will come from the partners??You have to do this. You have to find a way to do this.? More often than not, it'll come in the form of a question?'Can we do this?',? says Cook, who as administrator must know how all the pieces fit together.
Getting it all done, however, can be contentious, especially when it comes to paying for technology and services. Although all IT heads try to downplay the cost factor, Tracey admits that ?cost is always on the agenda.? However, in a recent benchmarking exercise at 3i, he says, ?the overriding theme in private equity is quality of service sits above cost. Within that, there's always varying levels of pressure and cost and that tends to be linked with the performance of the company and economy as whole.?
Most IT heads declined to disclose their IT budgets, but Green comes clean: ?In most companies you would see an IT budget for commercial banking or finance in the region of about 10 percent of overall annual cost. Ours is about two percent. We have to set an example for the businesses we're looking after.?
They do emphasize, however, that all important projects get funded. Kouris leaves little to chance?he comes to meetings fully armed and prepared for battle. ?When I make a presentation to the partners, I put a business case study together along with the ROI, matrices, I talk about the projects I intend to do. I come very prepared when I sit at the table,? he says.
The cost pressure, however, is evident in the wish of Sergey Bushlyar, executive director IT at New York fund-of-funds and secondaries firm Paul Capital Partners. For the firm whose IT mission is to use technology to distinguish it from its competitors, Bushlyar says, ?I wish that I can operate more freely and have partners say, 'Here's your chunk of money. Go ahead and do the things that you think is right.' That would be much easier for me, quicker to execute and implement.? But the firm has a special operation committee that controls expenditure on high-ticket-items.
Another problem IT heads often butt heads with is the eternal issue of finding time to do it all, particularly in the 24×7, round-the-clock, global environment of private equity and venture capital dealmaking. Terra Firma's Green, for example, wishes for a nine day week to get everything done.
Details can get lost in the midst of frenzied dealmaking and big plans. ?Trying to get good disciplines around the day-to-day bits can be really quite difficult because few people are really focused on that,? says 3i's Tracey. ?Everyone's interested in where's the next big deal, where that comes from, not really if the key information around the last deal is fully up to date or whether their secretary needs a laptop. Some of those low-hanging items can be disproportionately frustrating.?
But they largely seem happy with their jobs and firms. A few, whether a factor of personality or firm, even rave about their jobs. A large part of their job satisfaction seems to stem from the appreciation and recognition that IT has in the firm, as well as the autonomy and trust given to them to do their jobs.
Some even enjoy working with their tormentors, the partners whose demands often make the lives of these IT heads difficult. ?These are very smart people,? says Bushlyar. Having a great team also helps. ?One of the biggest challenges is to pick people to work for me who really do have an excellent grasp of not only how each application or operating system works, but to understand how that works within our organization. I happen to have an excellent team working for me,? says Cook. So well liked is the IT team at THLee, they manage the technology at employees? and partners? homes, too.
The work gets done?systems are patched, Blackberries are replaced, downtime is disappearing, but ultimately, it's personal satisfaction that makes a difference. For Moseley, ?In two years I think I have made a difference in the way this firm operates. And I think I'm appreciated, which is nice.?
If, indeed, building and managing a state-of-the-art private equity IT system is a bit like a Dungeons and Dragons journey, then the in-house IT specialists must be thought of as wizards, conjuring solutions to the many tech challenges that face sojourning GPs.
What happens in Florida
Miami was the location of choice for the second annual venture capital and private equity IT conference. Held over the course of two and a half days in February, the 20 participants from the East Coast (there is also a West Coast group) discussed server and storage consolidation, co-location, wireless communications, outsourcing, Apple, Microsoft vista, office and Exchange 2007, and contact management.
The participants, comprising of IT heads, chief operating officers, office managers and principals with the IT responsibility at their firms, also had fun ?the kind, which for the rest of us non-IT people, doesn't involve technology. They had the option of taking an airboat tour over the Everglades or charter a boat. And they didn't get through the last item on the agenda, 'IT Worst Practices: learning from others? major mistakes.? Instead, the grown-ups had lunch and went home.
The IT professionals at the mega buyout shops in the US also have their own club. In their last meeting in January, they discussed ?quite a lot? about people ?retaining, hiring, motivating, recognizing and compensating them. These CIos also talked about Microsoft vista, Microsoft Exchange 2007, Google, and enterprise application software.