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How can digital transformation in private equity enhance PE portfolio company value? 7 questions private equity CEOs need to ask.

Answer your most important digital transformation questions with Linedata's help.

Private equity CEOs have traditionally been detached from technology strategy, relying on CTOs and outsourced providers to keep IT running. However, the current business landscape requires PE CEOs to show a greater interest in digital transformation to grow and protect the parent company and its portfolio investments.

At Linedata, we speak with PE CEOs all the time, and we’ve collected crucial questions that can help you make a legitimate impact on the success or failure of your firm’s digital transformation initiatives.

7 key questions CEOs need to ask when discussing digital transformation with their teams.

1. How do we make key decisions about transformation within our business?

Every digital transformation project should provide direct business benefits; you don’t want to implement technology for its own sake. The decision to implement a digital transformation initiative could be led by your CTO, a business leader, or a vendor. So, you’ll want to know how these experts are identifying transformation opportunities, how they see each project benefiting your firm, and whether the benefits can flow down to (and up from) portfolio companies.

An important caveat: if a vendor is driving the transformation, you’ll want to have a method of oversight monitoring the process to ensure the project is aligned with your goals and not just those of your vendor. This oversight can be conducted internally or by an external partner.

2. Do we have the right culture to ensure transformation can be successful?

Cultures are built from the top down, so the firm’s culture starts with the CEO. You should instill confidence in digital transformation decision-makers, and ensure they feel supported as they begin new product implementations. This need for deep trust and close engagement extends to your portfolio Managing Directors as they help CEOs at each portfolio company make good technology decisions.

Also, it’s important to instill a “fail fast” culture regarding technology projects. Not every digital transformation project will be a success. If your team has the freedom to suggest shutting down a failing project, you can quickly pivot in a more effective direction.

3. How do we align technology transformation decisions to the direction of the company?

Establishing a culture where digital transformation is encouraged will help you experience less friction when you implement changes within your firm, and when ‘onboarding’ new portfolio companies.

For instance, when you invest in a portfolio company, it can be much simpler to immediately assess the opportunity to add new technologies into their processes and integrate relevant technology and data flows with the parent company stack. Doing so can help you control costs, create valuable oversight of the company’s health, and potentially hit vestiture targets earlier in the investment lifecycle.

4. How do we mitigate against cybersecurity and compliance concerns slowing down our transformation momentum?

In any private equity firm, you likely have a compliance officer, a CISO, an external cybersecurity provider, or some combination of these. These positions can be at odds with leaders looking to drive digital transformation, such as a CIO or CTO.

As a private equity CEO, you must be involved in the often-competing interests of these two key groups and find a balance between progress and security. Having a reliable cybersecurity partner can help you maintain momentum while ensuring your data and assets are protected and in compliance.

Rising Up the Agenda: Hedge Funds Must Tackle Cybersecurity Head-On


5. How do we measure the success of technology decisions and maximize transformation value?

To ensure you’re getting the most value from your transformational activities, you need to be able to easily track progress, both at the parent company and at portfolio companies.

A simple way to accomplish this is to have a detailed reporting dashboard. CEOs are busy, so if you can track the progress of specific metrics with an easy-to-consume dashboard, you’ll be able to adjust activities and actions without wasting time.

6. Are we able to combine and leverage knowledge from disparate portfolio companies?

When portfolio companies span various industries or sectors, you can often leverage the combined brain trust for maximum collective benefit. An excellent example I have seen is the creation of a “Portfolio University” bringing together IT managers from portfolio companies to spend time with the PE firm’s CIO, CTO, and outsourced provider to discuss technology trends, testing, and successes.

Other examples include the use of Artificial Intelligence and Machine Learning (AI/ML) to monitor the status of your portfolio investments. For example, I’ve seen a few large PE firms leverage AI in investment data management to streamline monitoring of key financial KPIs across portfolio companies to understand variations to the thesis and predict changes in risk profile. If the AI and ML algorithms detected changes that indicated risk, the parent company could assist to manage the situation quickly before it became a problem later.

7. How many of our strategic technology functions are provided by vendors, and why?

Private equity CEOs often implement a variety of technology projects across portfolio companies using multiple vendors. Because a vendor’s goals and your firm’s goals may not always align, you need to monitor which technology functions are provided by vendors and ensure oversight over those functions.

Working with a Managed Services Provider can be essential if you lack in-house resources. However, your MSP shouldn’t lead the charge on digital transformation projects. As CEO, you must take the lead.

Linedata can help you answer your most important questions around digital transformation – and much more.

CEOs have diverse skill sets, but most are not technology experts. Linedata works exclusively with private equity firms, hedge funds, and other buy-side firms, so we know the specific challenges your business faces, including regulatory compliance and cybersecurity.

We’ve helped more than 25 clients migrate to public cloud since 2020, and many more firms in their digital transformation journeys over the past two decades, so we understand your questions and are ready to discuss potential solutions and actionable projects.

Want to learn more? Here’s a case study on how we’ve aided digital transformation for private equity firms.

About the author, Jed Gardner

Jed Gardner is the SVP, IT Transformation Technology at Linedata.

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