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Private Equity Outsourcing Trends and Cloud Preferences

By Kaleigh Alessandro | Thursday, January 19th, 2017

It’s time to take another close look at the results of our 2016 Private Equity CTO Survey, this time with a careful eye on how private equity firms are leveraging outsourcing and cloud services.

Private equity outsourcing is growing in popularity – and we discussed many of the reasons why at length in a September webinar which you can listen to here. Our survey findings tell us that the average private equity firm is outsourcing about 30 percent of IT, with of course, some firms outsourcing less frequently and some outsourcing more.  

On the whole, most firms are leveraging outsourced third party providers for between 20 and 40 percent of their IT functions. Firms managing less than $100M in assets are the most likely to outsource greater portions of their IT services, likely given their lack of internal staff and resources.

Overall, firms’ propensity to manage technology via in-house resources, outsourced providers or contract work is expected to stay consistent in 2017, as evidenced by the graph below.

 
Private Equity Outsourcing Trends

Common functions outsourced by private equity firms

The most likely function to be outsourced by a private equity firm is a vulnerability assessment/IT audit, which – from an investor’s perspective – is significantly more reliable if handled by a third party. Vulnerability assessments, as you recall, are discovery actions used to recognize potential exposures in a firm’s network environment.
 
Backup and disaster recovery are also popular functions to be outsourced to a third party, leaving firms and their investors with comfort that data resides in an offsite – and ideally, geographically diverse – location.

Outsourcing to the cloud continues to grow in popularity among private equity firms small and large. Respondents from firms with less than $1BN in assets under management are slightly more inclined to outsource their infrastructure to the cloud, but not by a significant margin. More on the cloud shortly.

 Functions Outsourced by Private Equity Firms

 
Both assets under management and cybersecurity budget allocations appear to influence trends in terms of which functions are outsourced by private equity firms.
 
Firms with less than 10% of their IT budgets earmarked for cybersecurity are most likely to outsource backup and disaster recovery. On the other end of the spectrum, firms with larger budgets (+15%) are more likely to outsource application hosting, employee security training, help desk support, IT project management, telecommunications and compliance/risk management.
 
Firms with smaller AUMs (< $1B) are more likely to outsource application hosting, employee security training, help desk and IT project management, and firms with more than $1BN in assets are more likely to outsource cybersecurity and also social engineering simulations, such as managed phishing services.

Private Equity & the Cloud: Public, Private and Hybrid

The private cloud is, far and away, the platform preference for most private equity firms to support their IT functions, the most popular applications being email and file sharing/storage (both nearly 60 percent).
 
Some slightly less popular applications on the private cloud are Deal Flow apps and CRM tools, which only 38% of respondents selected the private cloud for. That number still outpaces both the public and hybrid cloud options, however.
 
For file sharing and storage, smaller firms (< $1B) are more amenable to the public cloud (about 30 percent), while larger firms (> $1B) are more open to a hybrid solution (30 percent). This trend also held true for CRM and analytics/reporting platform preferences. 

Download our full Private Equity CTO Survey and read up on more private equity technology and operations articles:

Private Equity CTO Survey Report

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