Is there real differentiation in the private markets technology space?

Our observations on the levels of differentiation of leading technology solutions deployed in private markets suggest that this is an area that is rapidly evolving to respond to client demand. For example:

1. We see quite limited differentiation:

• between solutions with respect to the type and size of clients targeted. It is common to see asset owners, managers and service providers of all sizes using a variety of solutions. We notice however that the high total cost of ownership for certain solutions means they are largely only used by the largest clients by AUM/AUA.
• when considering regional coverage, with most solutions available for use globally. This makes sense, given the largest clients have global operations and want to deploy a standard operating model and technology estate globally. We do notice that some solutions are more prevalent than others in certain jurisdictions (US vs EMEA).

2. By contrast, we see very clear differentiation:

• when considering asset class coverage. A few solutions offer extensive functional capability coverage across asset classes but the majority are specialised, focusing on delivering  a comprehensive suite of modules designed to support the unique life-cycle events of specific private market asset classes. Most solutions offer high degrees of configurability. This is great in theory, but the degrees of freedom this offers means implementations are often complex, have long delivery times, are risky and expensive.

To overcome these challenges, clients need to be clear on what the target operating model looks like and what the solution needs to deliver, and be prepared for significant investment. Strong implementation resources and excellent programme governance are also key.

3. There are then areas where we see a degree of differentiation:

• within operating model outsourcing with some solutions offering Business Process Outsourcing (BPO). Some also offer Data as a Service (DaaS). Data management is a particular headache in private markets given the private and unstructured nature of the data, and its multiple formats and diverse sources. These DaaS offerings are relatively new, but we believe they will become major factors in the purchasing decision.
• between new entrants and established solutions with respect to the technology they were built with. New solutions capitalise on the latest technology standards using the latest workflow design, data management  and service delivery tools, in some cases creating a cost advantage over the incumbents that will be attractive to some potential clients.

To learn more about our views, or to discuss the private markets technology landscape and how these solutions can help managers and service providers address operating model challenges, please get in touch.