As the options for fund management software increase, so do the number of private equity and venture capital firms that are adopting advanced software to manage their fundraising and investing. Also increasing is the number of firms changing their software or moving from one platform to another to leverage the most state-of-the-art functionality available on the market.
We find that after switching systems, most firms end up with fund management software that streamlines operations for the area of the business that was in the most need of an upgrade. However, they maintain an array of other legacy systems with varying degrees of effectiveness in managing other areas. Rarely will a firm, for example, upgrade its back-office software, investor relations software, and investment software all at once.
So the question these firms are forced to ask themselves at this point is, “When does it make sense to keep legacy systems and when is it most effective to scrap legacy systems and move to an updated, fully integrated system?”
Creating the Right Fund Management Software Ecosystem
We advise firms looking to implement the right fund management software to start by asking themselves what’s working. Let’s say a legacy system that handles investor relations aligns well with existing processes and has buy-in from users within the firm. Changing this system out might provoke significant backlash from your team. Having separate systems, after all, is not the worst thing that could happen.
The key is to have a good sense of what you’re trying to accomplish with each system and why. Then, you should also have clear delineations regarding who is doing what and in which system.
For example, one good reason to have your back-office systems separate from front-office systems is that you don’t want everyone in your company to be able to log in to your fund accounting system. So, you can build a nice artificial wall there between what people can see simply by not giving them access.
Another thing to consider is that some systems–especially back-office systems–have very specific functions that they perform well and consequently are fairly expensive. So, moving everyone to one platform might mean that you’re paying for people who, for example, only need CRM functionality to have access to fund accounting functionality that they’ll never use—and shouldn’t use.
Fund Management Software Integrations: Look Before You Leap
Integrating systems can be an effective option in some cases. But here again, it’s important to consider the reasons for integrating. Integration can be, depending on the systems you’re using, an expensive and time-consuming project. Often, it’s not worth the time and money required simply to have things integrated for integration’s sake.
You have to ask yourself, “Why is it important to have that data available in two different systems?” From a process and a workflow standpoint, you might just need to draw some clearer lines between the functions the two systems are performing.
Ultimately, consolidating systems does offer a lot in terms of efficiency and can provide your team with a more holistic view of your fundraising and investing activities. But it’s important to remember that maintaining separate systems—for back- and front-office operations, for instance—often makes more sense.