The demo is in the detail

“Having the right functions is key but think about the implementation, data migration and reporting”
Barnaby Piggott Holland Mountain

With swathes of private equity firms in varying stages of their tech upgrade journeys, a major benefit of the current environment is the opportunity for more virtual demos of new software offerings.

Selecting the most appropriate and effective software is an arduous task in and of itself. But given the circumstances, what can CFOs and COOs do to boost efficiencies and ensure robust procurement processes?

Perhaps the greatest challenge when selecting a new software provider is developing an understanding of what’s good and what’s not. “There’s a huge spectrum between the professionalism and competence of sales people in the market. In the main, you’ve got really credible vendors employing good, smart salespeople, there are however a few exceptions where the products being pitched are ‘lightweight’.” says Barnaby Piggott, CEO of Holland Mountain.

Furthermore, this is a fast changing market; one that has undergone a vast amount of M&A activity in recent years. Says Tim Friedman, founder of PE Stack, “This market is dynamic and constantly changing, don’t rely on opinions you might have if they’re not based on a recent understanding. There has been so much M&A and new launches that your idea might be outdated.”

Scope and requirements To find out what’s what, it might be tempting to book in a multitude of demos as an exploratory exercise, given the ease with which they can be set up and carried out. However, according to Piggott, it’s vital to first think carefully about the business’s needs, scope and requirements. “For example, if you’re looking for a CRM system to facilitate investor relations and fundraising, then decide if the investment team’s deal pipeline is in-scope or not. These are two very different business functions, with very different needs; both leveraging CRM functionality. You must have clear scope and requirements when engaging with software vendors.”

Longlist

The next step is create a list of relevant providers. PE Stack provides a comprehensive database of private capital-focused software vendors, while peer groups are an important source of information. “If possible, speak to people you know are using the platforms you’re interested in and get some honest feedback to inform your shortlisting process,” says Friedman.

Communicate

Once you have contacted the list of vendors of interest, the next step is to structure the demos. For this, return to the scope and requirements. Says Piggott, “If you’ve communicated your needs and provided an agenda to the vendor, then it’s up to them to deliver a well structured demo to show you what you’ve asked to see. From the client side it’s important you communicate clearly your functional needs, and from the vendor’s side, they need to make sure they focus on those requirements.”

Indeed, a common pitfall of demos is vendors wanting to show off new features or other capabilities beyond the client’s needs. “You need to make sure that 80% of the demo is focused on your core requirements and only 20% on bells’n’whistles. That’s always the conflict you face,” says Piggott.

For Friedman, a way to avoid this is to ask for specific things and ask the vendor to show how specific tasks are carried out.

Market penetration

Great comfort can be sourced by knowing if your peers use the systems you’re considering. And this information ought to be readily supplied by the vendor. “Slide number two or three on their deck should detail who they work with in the market. A good vendor should be researching the client in advance of the demo and tailoring that slide to their peer group. If that slide is not there, then you should ask why,” advises Piggott.

Trying on for size

While demos are a great way to look inside a product and see, from your very own screen, what the system can do, it can be challenging to understand how your particular data and structure might be supported. This often leads to requests of inputting your own data in order to get a clear understanding.

Ryan Burger of PFA Solutions has seen this many times, “We offer prospective clients a no-cost proof-of-concept build-out using their own data. An added benefit to conducting proof-of-concepts is the speed with which we can then transition to full implementation if the client chooses to move forward.”

This is rare, however. Says Piggott, “Vendors won’t typically provide an environment for a prospective client to play with, that’s not a typical part of the sales process. And for good reason, these systems are complex and take a lot of set up, as well as a lot of training to use them competently. The danger for vendors during the sales process is if the client doesn’t read the manuals properly, and then doesn’t use the system properly, they’ll be making a decision on the wrong basis.”

However, there is a workaround. When Piggott’s team is supporting a procurement process, they take several complex client specific use cases and ask the shortlisted vendors to demonstrate how they would be met in their system. “You need to agree on the complexity, provide sample data and let the vendor take the time to put it into their system.”

How much?

It would seem one of the thorniest issues during the procurement process is getting a handle on pricing. Given the complexity of software systems catering to private funds, there can be a plethora of hidden costs beyond the license, including implementation, support and additional users as the firm grows. “It’s important to get an idea of how the pricing is structured; does it scale and how, e.g. by AUM, or by the number of users?” says Piggott.

It’s a journey

“You must remember that you’re buying into a project rather than a product,” says Piggott. “Having the right functions and features is key, but think about the implementation, data migration, reporting and so on - you need to spend as much time discussing those aspects as well as the functionality. A successful implementation project will define the overall success of the software solution. You could have selected the best software but if the project is not managed and resourced properly, and the solution is partially implemented, it could be a lot of wasted money.”