How Cloud BI is changing Portfolio Management in Private Equity
Against a typical background of high leverage, working capital and earnings pressures, and limited resources, private equity will bring urgency and prioritisation to the roles of CFO and CIO in portfolio companies. Modern SaaS based solutions, especially Cloud BI are helping them meet the needs of the owners and have the potential to transform the landscape of portfolio management in PE companies.
Coping with new data demands
A 2013 survey by Deloitte found that CFOs of private equity backed companies were surprised by “the high level of interaction with, and the volume of data demanded by the private equity house”. Some CFOs spoke of an “insatiable desire for data” on behalf of the private equity owners. They also “highlighted concerns about their own management systems’ ability to deliver the data they need” to produce management information in short order to meet fast changing priorities. Quality of data and accuracy is paramount.
The private equity house will have made a strategic assessment of the business during the due diligence process. They will want to understand the data, to help management identify ways to improve and expand the business, and create value. During the first 100 days they will want to see KPIs put in place to track performance against a value creation plan. Ensuring reporting against these KPIs is put in place is crucial, and Cloud BI can help achieve this without stretching existing resources to breaking point.
In any business there are likely to be a number of workarounds, (e.g. manual entry of data) that arise when normal processes cannot cope with new demand. Such unsophisticated solutions are likely to generate errors that will in time require extra work to correct them.
Evaluating existing systems
Companies may already have the information/data they need to tackle business problems, but may not recognise how they can use that data to make better decisions. By being more specific about the opportunities which they wish to exploit or the problems which they wish to tackle, they may identify the data or the source of the data which is required. If the question was posed “What decisions would we make if we had all the information we need?” potential new sources of relevant data may be identified.
Existing IT infrastructure may have created siloed information and hinder or even prevent its integration. Legacy systems may have been built to deliver batch data preventing real or near real time decisions. Legacy IT structures may not lend themselves to new types of data sourcing (social media, machine data from sensors, etc.) storage and analysis.
Achieving rapid results with Cloud BI
Resolving such issues fully might take years and considerable investment of time and capital. Short term these needs can be addressed by prioritizing with the data users their requirements. Having identified and connected the most important data for use in analysis and reporting over, synchronizing and merging data where there is an overlap and identify or work around missing data.
This is where rapid progress can be made even over short timescales using cloud based technologies, leveraging scalable computing power, and SaaS solutions such as Cloud BI. Having worked with the business data users to define their requirements and priorities a solution can be quickly and painlessly deployed.
Such models are particularly useful where an aggregation or roll-up strategy is being pursued, consolidating smaller players in a horizontal industry sector. Many of these businesses may not have the resources (time, skill, financial) to respond to the data appetite of the private equity backed group.
Having a cloud based solution which can be deployed quickly with relatively little involvement of the company’s own resources, gives the group and the private equity owners access to the data they need, whilst at the same time putting a powerful analysis and reporting tool in the hands of the employees of the new acquisition, hopefully improving their engagement whilst accelerating the key process.
A solution you can trust
From the perspective of the private equity house, having a standard technology that they know they can recommend, safe in the knowledge its deployment will be rapid, professional, and flexible and not overstretch internal resources at the portfolio company is a real benefit. No need for immediate concern about common ERP platforms, no major capital outlay, but easy access to the data the business needs and that they need about the business. They can quickly get to grips with the core data and work with management on measurable progress against the value creation plan.
Such Cloud BI solutions can also be deployed to bring together data from various portfolio companies and assist the private equity house in meeting its own portfolio reporting requirements in an increasingly regulated environment.