The world of Private Equity and M&A is all about ROI. Anticipating, calculating, performing due diligence, all part of the private equity investment ecosystem. Perhaps common sense that the COVID-19 global pandemic has forced everyone to confront challenges never before considered, even private equity firms. What might not be so obvious, is the impact technology can have on PE firms’ ROI. Welcome to the legacy technology trap.
The Legacy Technology Trap is what happens when a portfolio company is operating on outdated, on-premises technology that will cost more to update than realized, has become unsupported, or is found to produce insufficient reporting to manage the business, all which create an unanticipated immediate short-term risk to the investment. “There has been a massive change in how organizations work today as compared to five or 10 years ago,” says Ben Telling, managing partner at AIT, a consulting firm that partners with private equity firms to support their technology management needs. “It’s no longer just an issue of keeping licenses upgraded, but more about implementing technology that can rapidly migrate to new business model changes…” continues Telling.
From a technology perspective, COVID-19 has underscored the importance for businesses to have a technology environment that can adapt and rapidly migrate to new business model requirements. Modern, cloud-based applications are built on a platform that is more flexible, mitigates risk, accommodates new lines of revenue, and changes in the product management and sales approaches. There are many benefits to upgrading your portfolio businesses to the cloud in the short- and long-term. According to a recent Deloitte Consulting, LLP article, by leveraging the cloud, “Private Equity companies can begin the transformation process early in the merger and gain the agility to seize opportunities and long-term improved performance more quickly.” In the longer term, the cloud can help Private Equity companies unlock savings in their portfolio well past the initial M&A transaction.
Benefits of migration to a cloud-based solution
Despite the argument that retaining existing solutions alleviates the need for lengthy cloud installation and updates, migrating to a modern cloud-based system include benefits that support the business both long and short term:
- Easily support work-from-home or remote worker connectivity
- Reduced operation costs
- Real time data
- Modern technology is more flexible and can address business challenges allowing companies to more easily, and quickly, modify as they grow
A proven technology partner demonstrates how they have successfully shifted companies to cloud-based applications on an accelerated implementation schedule with packaged services that lower risk. Interested in learning more? Click here to access our How-To Guide for Private Equity Firms to better understand how cloud technology, and the right partner, can support both you, and your portfolio companies.