As private equity managers become more comfortable adopting technology, a measure of which has been accelerated by the Covid-19 crisis, their needs are also developing further. The increased adoption of public cloud services is leading to more data-warehousing which in turn results in more in-depth analysis of that data. However, as these firms progress along the technology adoption timeline, they must ensure their cybersecurity is air-tight.
George Ralph, Managing Director at RFA discusses the changing needs and demands of PE firms: “There is going to be a huge ramp up in the use of public cloud solutions within private equity. In conjunction with that, almost every conversation I’m having with PE clients is about consolidating software platforms and bringing all of their data into a single database – a data warehouse.”
This, according to Ralph will help managers analyse their data more effectively which will ultimately help them make better decisions. He also expects artificial intelligence to have a significant impact on analysis as well as on predictivity of growth and performance both in PE portfolios and funds.
One of the crucial elements of success in these exercises is cybersecurity. Ralph explains: “There is more data available and its flowing more freely. The security of those data warehouses and the ETLs feeding the data in and out of those platforms is going to be a key factor. You’re creating more entry points for those who may want to access the data and therefore security is crucial.”
Another aspect which PE managers need to keep top of mind when looking to build a data warehouse is the vendor risk this can potentially generate. According to Ralph, trust between the manager and the partners they choose is vital to any new process: “Wherever you are on the technology roadmap, you’re pulling and manipulating data so you have to rely on the expertise of the people helping you.
“PE managers need to think about the risk of the vendor hosting the data. If you have a client relationship management system (CRM) and all your client data is in that CRM, your risk lies with the CRM provider.
“If you’re going to go down a data warehousing route, and looking at an off the shelf product rather than developing your own, then you need to trust that the provider has good backups, redundancy, security of access, etc.”
All this points to the importance of running robust due diligence exercises on IT providers, something Ralph says PE managers are doing more of.
His advice to managers buying IT solutions or services is: “Make sure the IT service provider can clearly outline their strategy. Are they looking to grow the business fast? If they are, they may ask you to sign a long contract to tie you in. Are they going to invest in new technology and innovation? It will be clear that they are expecting to build new technology as the contract will contain a lot of information about release management and updates.
Always check out client references and it goes without saying that financials should be reviewed. What you are looking for is a provider with longevity, stability, a solid client base, a good R&D team and a clear commitment to investing in innovation.
George Ralph
Managing Director, RFA
George Ralph CITP, has successfully founded three technology firms along with C-level advisory services include M&A to numerous firms. George is a true leader and has been managing teams internationally, and leading technology transformation projects for over 20 years. A certified GDPR, Cyber assessor, Auditor, Architect and widely experienced cybersecurity and RegTech professional, George has extensive technical experience in network and server architecture, large scale migrations utilising leading technology brands, and IaaS offerings.
