- Private equity has been slow to adopt data science and the cloud.
- But groundbreaking technologies like generative AI are accelerating the industry’s adoption.
- Here’s how Apollo and EQT use Google Cloud to improve themselves and their portfolio companies.
Private equity is finally opening up to the public cloud as it becomes integral to how investors view and quantify potential deals.
For an industry traditionally dictated by human judgment, technology is becoming a big piece of the private equity firms’ value creation plan, according to Vikram Mahidhar, data and digital transformation operating partner at the $598 billion money manager Apollo Global Management.
The cloud represents big cost savings and efficiency gains among portfolio companies; for example, buyout firm THL migrated one of its portfolio companies to the cloud to save 50% on annual IT infrastructure costs. PE firms are working with cloud providers more to understand the savings — and hold cloud providers to it.
“That’s where partnerships, deep partnerships, matter because we can go to partners and say: I’m going to hold you accountable to this number, and it’s set in stone,” Mahidhar, who leads the data, analytics, and digital team at Apollo, said on a panel at Google Cloud Next last Wednesday.
PE firms benefit from having their data — and their portfolio companies’ data — in one place to gain better business insights and check out opportunities. Establishing a firm’s cloud presence and organizing its data is also one of the key first steps of unlocking new forms of artificial intelligence.
“Technology is becoming even more important across all the business functions,” Carl-Magnus Hallberg, managing director of digital experience at EQT, said on the panel. “The alternative sets us back in time.”
Using cloud to improve portfolio companies and investment firms themselves
Boosting employee productivity with the cloud and AI is top of mind for Apollo’s Mahidhar.
“How do we make our own analysts far more efficient in looking at the trends and analyzing lots and lots of data monitoring the industry,” Mahidhar said.
Apollo is in an intense experimentation phase where the firm puts “as many use cases as possible in the hopper,” he said. And the pilots that go into production are the ones that will deliver productivity with a clear line of sight of how to do it.
“Our focus is very value-creation driven. We just don’t get enamored by euphoria,” Mahidhar said.
KKR is another PE giant that turned to the cloud to improve worker productivity, from using AI to help deal teams sift through data when researching potential investments to automating manual processes for software developers.
Google Cloud’s Office of the CTO, a task force of engineering execs committed to solving customers’ toughest tech challenges, is currently working on a solution to speed up investment firms’ due diligence process by quickly assimilating relevant data to understand the value and issues associated with it, Adaire Fox-Martin, president of Google Cloud Go to Market, said on the panel.
Google Cloud’s tech talent has also helped Swedish PE giant EQT speed up cloud projects among portfolio companies.
“You need to be very close to the tech vendor and you need to be very close to the talent and that’s where we can scale out by working very closely with, for instance, Google directly and to ensure there is that speed of execution is something that will be part of the value creation thesis,” Hallberg said.
But implementing new tech at portfolio companies isn’t always straightforward. Sometimes portfolio companies are reluctant to rip out and replace the technology stack they’ve become accustomed to.
“A large technology firm like Google Cloud has a lot of things to sell,” Apollo’s Mahidhar said. “Is this the right technology? Is it going to deliver outcome? And then what’s the metabolism rate that company has today to absorb the technology,” he said.
Generative AI set to accelerate PE’s move to the cloud
While private equity has largely taken a wait-and-see approach to new tech, execs aren’t wasting time trying to apply generative AI. Generative AI, a form of AI that creates content from simple prompts and context, has taken Wall Street by storm.
At an enterprise level, the success of generative AI comes down to data, from the quality of the data to how it’s organized in the tech stack to how it’s curated. That means the cloud — where the bulk of firms’ data and analytics lives and takes place — has never been more important for future proofing PE.
“All roads lead back to data,” Zac Maufe, head of regulated industries and Google Cloud’s go-to financial services lead, told Insider. “You’re only as good as the ingredients that you’re putting into this.”
If data is the new oil, then the cloud is the oil tanker, refinery, and gas station. The cloud is where the data is gathered, cleaned, vetted, structured, analyzed, and distributed. It’s often one of the first and most important steps in any AI venture, Maufe said.
“We are at a very significant point of disruption in the industry. The pace of change has accelerated, and the good and the bad news is today is the slowest it’s ever going to be because it’ll just go faster from here on in,” said Fox-Martin.
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