How Private Equity is Mandating Change
Enterprise software companies and ISVs have demonstrated incredible resilience during the pandemic with the deployment of playbooks designed to adapt and accelerate recovery. These software companies are evolving by realigning their product portfolio to meet future customer demand, offloading unprofitable assets, and driving their digital transformation initiatives. Software companies across the world are accelerating product development by leveraging digital capabilities such as Artificial Intelligence (AI), Machine Learning (ML), automation (RPA and Low Code/ No Code), Big Data and analytics, and Cloud-native technologies to deliver best in class customer experiences and efficient maintenance.
Eager for growth, private equity (PE)- owned software companies are leading this trend. With fresh fund infusions through primary/secondary buyouts or recapitalization they are mandating product innovations, modernizing existing product suites, expanding platforms to include new products and scaling engineering, product and GTM teams. For example, one of the focuses of software companies has been building AI capabilities into existing products as well as new developments of AI/ML-enabled products to drive product acceleration. Incidentally, AI companies raised a record $33B in equity funding in 2020. As commercial applications of AI and automation scale rapidly, enterprise software companies are looking to overhaul to become digital-first.
With deep change management experience, PE firms traditionally deploy a distinct set of value levers across growth, cost and product strategies for enterprise software companies to generate higher returns. Zinnov has investigated over 100 PE software exits on the different value creation levers they applied to unlock value from their enterprise software investments. Revenue Enhancement was found to be pivotal in unlocking value, used in a greater number of deals compared to other levers, such as working capital and cost optimization, capital efficiency and tax optimization. Digging deeper, product acceleration (in portfolio expansion and modernization) takes a comparatively low time to create an impact in unlocking value, while being easy to medium in ease of execution, when compared to the other drivers of revenue enhancement.
Back to table of contents
3 min read
Let’s start by examining the primary differences between traditional products and “platformized” products. A traditional product is basically a matter of developing and implementing an end-user experience. It’s purpose-built to address the needs of customers, partners, and employees. As a result, considerable money and development effort goes into being responsive to changes and moving quickly. Inevitably, the codebase becomes larger and more unwieldy as new functionality is added to legacy code to accommodate the need for change at any of the stakeholder levels.
In contrast, a platformized product is a modernized product, by definition. Multiple platforms are developed to support a variety of different functional needs, creating a product that brings the usage of all these services together on a single platform.
The platformized product ensures the needs of the customer and market are continually addressed, but without sacrificing the quality, agility, and stability of the code itself over time. As a result, the platform is more responsive to changes during product lifecycle, growing and extending the beyond its traditional lifespan.
Harnessing the Modernization Mindset
5 minute read
As we will discuss, modernization requires a change in mindset and perspective in several key aspects: Instead of function-centered design, the methodology is focused on user-centric experiences. Rather than siloing information within departments, modernization facilitates information sharing between business capabilities. In lieu of centralized databases, the use of hybrid/multi-cloud provisioning enables decentralization, which fosters innovation, iteration, and creation.
Taking a modernization approach gives you the best of both worlds: capitalizing on the long tail of your existing mature products, while facilitating and streamlining the evolution of future products and expanding your customer base.
They believe modernization is an all-or-nothing, end-to-end proposition.
They think everything needs to be accomplished at once to receive business benefits.
A Modern Approach to Modern Needs: Traditional Products vs. Platformized Products
They believe modernization is an all-or-nothing,
end-to-end proposition.
They think everything needs to be accomplished
at once to receive business benefits.
As we’ll discuss further, modernizing has levels, each of which offers benefits. They can be addressed in a stairstep fashion to the point that it satisfies your business purpose—and passes muster with your cost-benefit analysis.
A Modern Approach to Modern Needs: Traditional Products vs. Platformized Products
Let’s start by examining the primary differences between traditional products and “platformized” products. A traditional product is basically a matter of developing and implementing an end-user experience. It’s purpose-built to address the needs of customers, partners, and employees. As a result, considerable money and development effort goes into being responsive to changes and moving quickly. Inevitably, the codebase becomes larger and more unwieldy as new functionality is added to legacy code to accommodate the need for change at any of the stakeholder levels.
In contrast, a platformized product is a modernized product, by definition. Multiple platforms are developed to support a variety of different functional needs, creating a product that brings the usage of all these services together on a single platform.
The platformized product ensures the needs of the customer and market are continually addressed, but without sacrificing the quality, agility, and stability of the code itself over time. As a result, the platform is more responsive to changes during product lifecycle, growing and extending the beyond its traditional lifespan.
Next
03
Product Modernization Across
Three Platforms
Previous
01
Pivot Point: A Critical Moment in the Software Lifecycle
As we’ll discuss further, modernizing has levels, each of which offers benefits. They can be addressed in a stairstep fashion to the point that it satisfies your business purpose—and passes muster with your cost-benefit analysis.
Next
03
Challenging Common Assumptions and Misconceptions about Modernized Product Development
Previous
01
Pivot Point: A Critical Moment in the Software Lifecycle
Many ISVs fail to consider modernization when their products reach the PivotPoint due to two common misconceptions:
Next steps
Re-imagine software products
Leverage our expertise in next-gen MACH software architectures to modernize your software products quickly.
Learn More
Rejuvenate mature products
Focus on improving revenue, efficiency and customer delight with our intelligent sustenance engineering framework.
Learn More
Re-group with our experts
Schedule a discussion with our modernization and sustenance experts who can help you chart a path forward.
Contact Us
Next steps
Re-imagine software products
Leverage our expertise in next-gen MACH software architectures to modernize your software products quickly.
Learn More
Rejuvenate mature products
Focus on improving revenue, efficiency and customer delight with our intelligent sustenance engineering framework.
Learn More
Re-group with our experts
Schedule a discussion with our modernization and sustenance experts who can help you chart a path forward.
Contact Us