Market Hill | a northdoor group company |

Working on big, expensive, complicated technology problems.

Unconsidered Needs

Did you know that only 3% of all technology workloads are in the cloud?

· ·

That sounds like a tiny number, considering how every company, vendor and tech journalist talks about the cloud. Would you expect it to be higher?

I’ve quizzed a few people on this over the years; most guess it is between 25-30%. If you break down the 3%, AWS has the clear lead:

47% AWS, 15% Microsoft, 7% Alibaba, 4% Google, 2% IBM

This is a strong indicator there is considerable unrealised value for your Private Equity firm and for your portcos by getting more workloads into the cloud.

While on the other end of the value spectrum, corporate IT focus’ solely on the overall cost of technology platforms or systems, they typically see the cloud as an extension of this world.

Corporate IT’s focus is leaving unrealised value on the table.

The key to leveraging the cloud for Private Equity in 2022 is understanding the cost per user.

Cost per user is a financial representation of the cost to service each customer.

The sum of logical maps of your system details the relationship between business > service > application > infrastructure metrics.

But, translating business demand to technology demand isn’t common practice and the cloud won’t magically make your application or service more efficient.

If you don’t measure the relationship between what a user does and how much technology you use, you can’t predict it.

If you don’t predict it, how do you know what targets to set or what good looks like?

How do I know if my portfolio companies understand and leverage their cost per user?

The simplest way is to ask them.

  • Can they draw the logical map of their system for you?
  • Can they back that up with data?
  • Can their report how this changes over time?

If they can’t, then they have some homework to do.

Thomas

You can sign up for more ‘unconsidered needs’ below.

If you would like to sign up for more ‘unconsidered needs’ direct to your inbox you can do so below.

Order takers, ambulance chasers, and value creators. Step changes to value creation in 2022

· ·

This week, I had three fascinating conversations on technology value creation; this blog is the curated output of those conversations.

For value creators only.

Here are some examples that will resonate from working with your portco tech leaders on technology value creation:

Order takers say:

“Do we have the budget to do that?”

“Our product is unique, so we can only do it this way.”

“We’ve got a board meeting; let’s wait till after that and see.”

And so on.

Ambulance Chasers say:

“We’ve got so many service incidents right now; we need to fix those before thinking about anything else!”

“We’re moving to this new tech platform; it won’t be a problem in 12 months.”

“I’m not sure right now; we have to invest in this new technology; everyone else is.”

Etc. Etc.

Value Creators do:

“How will we know we’ve been successful? What measures can we use?”

“Who will we need to involve, and how will we get them engaged?”

“What do we need to do to get started, what are we missing, what risks can we address? How can we showcase our value?”

Value creators live in a future world where they have already achieved the results; they want to make sure it stays that way and are ready to challenge the status quo to get there.

Ok, I get it; why is this distinction important for technology value creation?

As a value creator, you can sometimes be dissuaded by the influx of order takers and ambulance chasers in your portcos.

You might think I’m not sure we have the resource in the portfolio to support this? Or, what size of upside would be worth changing the value creation plan for? How certain would I need to be? How can I convince the board it is worth dealing with it?

How would you benchmark your portco tech teams approach to value creation?

Order takers and ambulance chasers can significantly limit the value you can create in your portcos. Identifying and eliminating them early can help keep your value creation plans on track and find opportunities to exceed your PE firm’s expectations.

Until next time.

Thomas

You can sign up for more ‘unconsidered needs’ below.

For more ‘unconsidered needs’ you can sign up below.

Where does DevOps sit on your value creation plans for 2022?

· ·

This week I was turned on to the book ‘Scrum: The Art of Doing Twice the Work in Half the Time’ by Jeff Sutherland and J.J. Sutherland. For context, Jeff Sutherland was one of those who signed the Agile Manifesto in 2001.

Can you believe that 2001 was 21 years ago?!

In 2001, the Agile Manifesto set out a ‘new’ way to help software developers build solutions. Faster and more efficiently, reducing the friction in making a technology change.

In 2022, tech leaders are moving away from Agile into DevOps.

DevOps is simply an evolution of the agile manifesto. They are focusing on development teams being responsible for the lifetime of their development. i.e. maintaining their product when it reaches production.

However, tech teams can quickly lose sight of the why when it comes to changing their development approach.

Are they moving to DevOps because it will make us more cost-effective? Does it reduce the time to react to user change? Will it bring greater accountability and quality? (Or does it look good for their CV?)

There is considerable unrealised value in reducing the friction to technology change

Development methodologies, such as DevOps, are a vital piece of the puzzle. For your PE firm, your portfolio companies and their customers.

The goal of DevOps should be to reduce the fiction in making a technology change. This reduced friction will mean that the value of technology change can be easily translated into terms your portco board and PE firms can relate to—e.g. Reduction in Churn, NPS improvements, cost reduction etc.

Where does DevOps sit on your value creation plans for 2022?

Where do you see the next value step-change created for your portcos? Is it with DevOps, cloud migrations, or it is somewhere else?

Please let me know your thoughts.

Until next time.

Thomas

You can sign up for more ‘unconsidered needs’ below.

You can sign up for more ‘unconsidered needs’ below.

Market Hill in the news, articles, podcasts, interviews and books

· ·

Here is a selection of articles, podcasts, interviews and books we’ve published or contributed to. If you are interested in hearing more, you can sign up for ‘unconsidered needs’ a weekly email about the trials and tribulations of technology value creation.

Articles, podcasts, interviews

  1. PE Wire – Podcast, PE and digital transformation
  2. PE Wire article – The case for digital transformation in PE
  3. IMPACT – When you site fails it can be great for business, what PE needs to do next
  4. Private Equity News – The right tech strategy can deliver better value from your investments
  5. Alpha Week – Digital Transformation, still not that well understood by Private Equity
  6. Real Deals – PE firms are uniquely placed to lead the way in digital transformation
  7. IMPACT – Putting a dollar value on cloud cost optimisation
  8. Technology Advisors – Market Hill assist Private Equity backed businesses in increasing their value through IT

Books

  1. Book – The original guide to Technology Value Creation. For private equity operators and value creators

eBook

  1. eBook – The operating partner’s guide to technology value creation
  2. eBook – The private equity cheat sheet for AWS
  3. eBook – The operating partner’s guide to AWS re: Invent 2020
  4. eBook – The operating partner’s guide to AWS re: Invent 2021 – Limited edition PRINT ONLY version. Please email contact@themarkethill.com to request a copy.
  5. eBook – The operating partner’s guide to AWS and value creation in 2022 – Limited edition PRINT ONLY version. Please email contact@themarkethill.com to request a copy.

Briefs

  1. Brief – The changing landscape of the PE insurance market and how this will impact value creation in 2022 – Limited edition PRINT ONLY version. Please email contact@themarkethill.com to request a copy.
  2. Brief – eCommerce conversion rates and how PE firms can leverage them to increase EBITDA – Limited edition PRINT ONLY version. Please email contact@themarkethill.com to request a copy.
  3. Brief – Healthcare tech, how implementing small tech changes can increase EV multiples – Limited edition PRINT ONLY version. Please email contact@themarkethill.com to request a copy.
  4. Brief – Vetcare, External perspectives to guide technology value creation – Limited edition PRINT ONLY version. Please email contact@themarkethill.com to request a copy.
  5. Brief – The value creation potential in niche SaaS software firms for mid-market buyout PE firms – Limited edition PRINT ONLY version. Please email contact@themarkethill.com to request a copy.

Challenging the Status Quo. A short story from the front lines of technology value creation.

· ·

Here is a short, true story that you might recognise from working with your portco tech leaders.

PortCo A is a PE-owned business creating a Multi-tenant SaaS platform. They also have a monolithic application that they want to unify with their new cool application. They ‘need’ to migrate to AWS.

To date, they have migrated 10% of their applications into AWS.

OK, so what does this have to do with value creation?

They already have 4x more infrastructure than they need.

The 10% they migrated to AWS accounts for 30% of their total tech spend.

Some straight-line math would see their tech infra spend grown from $10m P.A to $30m P.A, overnight.

Why did they ‘need’ to migrate to AWS in the first place?

Was it for cost efficiency? Or performance? Or bringing new applications or services to market quicker? I don’t know because they didn’t.

Most tech teams in 2022 are running significant change programmes in the form of migration, transformation, or refactoring. Why?

Here are three great examples from the best tech teams as to why you might embark on significant tech change

To remove barriers to growth, bringing innovative tech solutions to the board. Removing the friction in making creative business change.

To reduce the cost to service an individual user. The cloud might be the key ingredient to make this happen long-term.’

To improve technology-related churn, NPS changes and customer survey results. New services and features might be missing; getting them to your customers faster is critical.

Where does tech change sit on your portcos agendas for 2022?

How easily can your portco tech teams describe the value of their technology change? How does this information get shared with the board? Who is challenging the why?

The status quo won’t change itself.

Thomas

You can sign up for more ‘unconsidered needs’ below.

For more ‘unconsidered needs’ you can sign up below.