Four Big PE Tech Implementation MYTHS

June 25, 2020

In the age of automation, it’s inevitable that private market firms of all sizes will have to implement new technology in order to keep up with the market. Many firms have a reputation of being hesitant to adopt new technology internally: most of us are reliant on Excel, so the idea of moving out of it can create panic. In reality, though, new technology doesn’t need to replace your current process; rather, the right solution should enhance it, and lighten your workload.

Whatever your technology strategy, it’s the implementations that feel tough, even though the payoff at the end is huge. But what’s real and what’s just fear-inducing industry rumor?

Read on as we break down four common misconceptions about private equity tech implementations, and then four key factors to getting it right.

Myth #1: A new PE tech solution is going to drain my IT department.

Reality check: You do not necessarily need to commit a lot of IT resources to implementing a new solution; many good ones provide support to complement your own capabilities.

The trick is to be thoughtful about your selection and involve a small team at the start of the implementation process, and make sure they are held accountable for a successful implementation and adoption process.

Myth #2: New PE tech means I need to warehouse our data.

Reality check: Most firms don’t need a data warehouse to store all the data from their CRM, portfolio companies, and accounting. With that said, once you get to a certain size, dealing with multiple asset classes (i.e. Real Estate + Credit + Hedge + Private Equity), you may hit a tipping point where it might make sense to invest in data warehousing.

Myth #3: The cost of new PE tech is astronomical.

Reality check: Cost is relative, and an incremental change can often feel larger than it actually is. If you’re looking at investing in a new technology suite, and that investment represents 2x the current spend, you need to look at what you are currently spending. Is it just Quickbooks and Excel? Or something more? Remember that when you consider headcount savings, economies of scale often begin to prove out as you achieve higher AUM-per-full-time-employee.

Myth #4: I’ll buy a shiny new tool, and it’ll fall apart immediately.

Reality check: You invest in the tool, but you still need to invest time in considering how data flows through your organization, and how data processes should evolve.

Hint: The answer should not be: “let’s copy paste from Excel into the new system.” Be thoughtful on how things should change as you implement a new system and think about how to empower your organization to fuel efficiency.

While deploying new technology will always require a level of effort and work, there are some key steps you can take to make an implementation as quick and painless as possible.

Read: How to get a Tech Implementation Right