Which Private Equity Software Implementation is Right for You?

There are many software solutions on the market today that help fund managers track their deal flow and manage fundraising. It seems like each solution employs a different software implementation strategy ranging from an extensive and prolonged engagement with a consultant (on one end of the spectrum) to the software provider that just provides access to the software and says “Good luck!” (on the other end).

You could argue that each of those approaches has its advantages. A long period with a consultant means your team will get all its questions answered and have a good understanding of the software when you go live with it. Being handed the keys means you’ll have to fend for yourself, and that can prompt you to delve deeply into its functionality. But, of course, both methodologies have their drawbacks, too.

So, while selecting the right software is critical, evaluating which software implementation strategy is right for your firm is just as vital. In fact, as we noted in another blog, ensuring widespread adoption of your private equity software solution is crucial to your success. And if your software implementation doesn’t go well, you’ll face an uphill battle in getting people to use it and maximizing its value to the firm.

Off-the-Shelf Solutions

Our extensive experience with firms of all types and sizes has proven that a so-called off-the-shelf (OTS) solution—one that’s used as is, with few if any modifications—can be a good fit for organizations that have fairly standard business processes. OTS software may also be the right choice for your firm if you’re price-conscious and looking to get a good amount of functionality for your dollar.

Software implementations with OTS solutions tend to be fairly straightforward. Because the same system is delivered to all customers, the software implementation process tends to be standardized and well-documented.

And the lack of customized functionality doesn’t have to be negative. Many firms find that there’s value in getting their software implementation and data entry completed quickly. For one thing, this approach minimizes implementation-related costs. Plus, enabling teams to get productive faster can mean increasing your revenue faster. So, in effect, the software pays for itself more quickly.

In addition, rapid software implementations can lead to greater buy-in from users, as they start seeing positive results and want to capitalize on that momentum.

Then, as your organization grows or users recognize the potential value in expanding the system, you can customize the solution or add functionality. Of course, this strategy requires that you buy a solution that’s scalable and expandable in the first place.

Software Implementation for Customized Solutions

If a private equity software solution will be highly customized, the software implementation is, by necessity, more involved. An expert or team of experts must work with users first to understand their needs and then to modify the software to meet them.

This approach can be very beneficial if your organization has unique processes. It means you’re not forced to fit round pegs into square holes, so to speak. That said, when done right, this approach involves looking at your existing processes from a new perspective. Yes, the software will be modified to support whatever workflows you choose, but it’s wise to first ensure that those workflows make good business sense and that they’re clearly documented, well understood, and universally practiced.

Then, when it’s time for the actual software implementation, there’s a tremendous value (and comfort) in being able to rely on the skills and experience of people who do software implementations for a living. They bring with them the latest industry-specific best practices and can ensure that your team is able to capitalize on them.

Expert software implementations are, not surprisingly, more costly. However, in terms of the total cost of ownership, paying for an expert-led software implementation can result in a system that provides greater value for a longer period.

Investing in a New Solution

As the private equity industry gets continually more competitive, firms have a greater sense of urgency when considering technology that can give them an edge. However, rushing to purchase a solution and conduct a software implementation is never a good idea. Firms that take the time to evaluate both the new system and the software implementation process always come out ahead of those that make snap decisions without considering the big picture.

You want to be sure that your firm is in the former category!

A traditional crm was built for general ‘customer’ scenarios

Software platforms have made the world a better place by making work a better place. Indeed the world is better off when people enjoy their jobs even marginally more, and workplace applications on big CRM platforms like Salesforce.com have done that and much more.

But the potential that platforms like these offer presents diminishing returns: once the platform provider has engineered too many industry specific components into its platform, its usefulness for other industries begins to be threatened, and with that so do the usefulness of the component tools built into the platform.

So it is with the CRM category that Salesforce.com has defined: it is generic enough to work for many industries, and yet still offers the potential for others to round off the edges and nail more vertically-oriented and extremely tailored software solutions.

Private capital markets are actually a great demonstration of this dynamic. Where generic CRM platforms simplify — appropriately so — to assume there’s a business, a customer, a sale, and service of that customer, there are a few industry-specific pieces that are missing.

Take for example, that investors become customers by investing through legal entities the GP raises. It’s a subtle but important nuance that just doesn’t make sense at a platform-as-a-service level (because it’s overly complicated for a simple one-time sale that many industries require), but which can easily be added without 10 years or software engineering. Once provided, the rest of the platform’s components become tremendously powerful again and you’re set to take over the world.

As a traditional CRM in our pillars methodology, these nuances must be present to properly account for investors in these legal entities, potential target companies and which are owned by these entities, the context of all interactions with these parties (as well as the appropriate overlap, ie co-investments), and how you’re arriving at finding these opportunities on both sides of the equation, such that you’re able to piece together what’s effective and what’s not. Not just because we say so, but because these are the very relationships and data that are key to the motivation behind a CRM in any industry.

It’s critical, too, that the valuable publicly-available information that helps to enrich CRM systems and save users painful steps of entering it themselves is fully-integrated at the platform level.

Again, look no further than the 3,000+ pre-built integrations that Salesforce.com — the creator of the CRM platform concept — has at a platform level to do so, and which only exists by way of holding just short of overly-specifying certain industry workflows that would present challenges to properly integrate.

Stakeholder reporting and communication (investor relations) draws on a range of datasets

The traditional “customer service” model of CRM systems once again makes overly-simplified assumptions about the customer relationship when applied to private capital markets.

In fifteen years I personally have yet to hear the terms “warranty” or “service call” in this market because it’s just not the same. But make no mistake, as uncomfortable as it may be to say aloud, customer service is more important now than ever and it’s constantly happening; the industry is, after all, considered to be a financial “service”.

As it turns out, that service is primarily information-based — it’s driven by data and takes the form of reports and analysis that drive decisions, and then end up again in investor-facing reports and analysis.

The foundational elements of a private capital markets CRM must be built such that they accommodate this data (like we discussed above), but so too that it can accommodate additional supporting data that investors (customers!) need in the context of service.

Oftentimes this supporting data — financial metrics and time-based values, for example — is believed not to meet the traditional definition of CRM and the natural thought is “well, better do this in Excel!”.

While I happen to believe Excel is still the greatest software application ever built, its introduction to this value chain we’ve discussed herein actually creates the problem many firms suffer from: key data needed to provide customer service (again: effectively the entirety of a firm’s reports and analysis) is now in disparate systems and detached.

Both of those dynamics are important and distinct: not only is this supplemental data disparate, but when brought together there is no logical association that can be made between the two data sets.

Allow me, then, to make the point very simply: not only can this financial and time-based value data (you may be thinking about is as “portfolio monitoring” or “accounting”) be a part of a CRM, it is arguably the most important part of a CRM because it’s at the core of what providing service to the customer entails — information that comes out of data!

Firms need a digital method to engage stakeholders (ie investor portals)

Investor portals are not new; in fact, for many of us — including myself — they conjure up horrifying nightmares in which we’re aimlessly guessing at folders to find the newest document we need.

So in lies the opportunity: not only have the portals we’ve come to hate not simplified the process of acquiring information, they’ve failed to create an entirely new experience that is “customer service” driven.

To be fair, this is not a B2C market where you’d be long out of business for not having focused on customer service and thus the customer’s technology-driven experience. But don’t expect to be around too much longer if you aren’t thinking about this shift.

Today’s institutional investors increasingly expect this same consumer-like experience, and a massive opportunity is being missed by not providing it. It’s not about providing them the experience they desire; it’s more about the ability to measure engagement that is had in return.

Put simply: what’s keeping the market from providing this experience is the availability of the information that’s required to create the service that provides the experience.

If you’ve hung in this long, you know that by focusing on your CRM, you have the data that’s required to manage the customer relationship and the technology-driven experience through which that information is shared to create a differentiated and opportunistic customer experience.

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