Is your technology driving operational alpha or holding your firm back?

Most GPs understand that technology is essential for success, but the stark reality is that technological fragmentation is silently undermining many firms. As StepStone Group President & Co-COO Jason Ment warns, "Technology is an area where you can spend yourself bankrupt.” Yet a patchwork of disconnected systems creates inefficiencies that extend far beyond inflated software budgets. Duplicative processes, unreliable reporting, manual handoffs, and constant workarounds accumulate into technical debt that slows decision-making and diverts talent from high-value activities.

The firms that will ultimately pull ahead aren't chasing every new tool. Instead, they're rearchitecting their technology around three strategic pillars: consolidation, centralization, and intelligent automation.

As firms expand across strategies, geographies, and fund structures, the instinct is often to layer on specialized systems for each new need. This approach is reasonable in the moment, but it can create compounding problems over time: fragmented workflows, integration headaches, version mismatches, and manual handoffs that only multiply with growth.

The most successful firms take a different approach. They migrate critical workflows onto a unified, front-to-back platform that integrates accounting, investor services, portfolio analytics, and operations into seamless ecosystems.

For instance, when CEO Len O'Donnell spearheaded USAA Real Estate's acquisition of Square Mile Capital in 2023 to form Affinius Capital, he used the merger as an opportunity to consolidate both firms' systems into unified modern infrastructure. "Today, the businesses are one hundred percent consolidated through all aspects of the business. It makes us a more powerful firm," O'Donnell explains.

• Process consistency at scale: When key workflows operate on connected platforms, teams don't waste time "translating" between systems or recreating processes across departments

• Reduced technical drag: Fewer systems mean fewer upgrades, compatibility issues, and support costs that drain resources

• Streamlined tech budget: Consolidation enables firms to sunset redundant systems and reclaim licensing and staffing investments

• Faster adaptation: Whether implementing regulatory changes or deploying new AI capabilities, updates cascade uniformly rather than requiring piecemeal patches

The data supports this approach. McKinsey's 2025 analysis of asset managers found that fragmented, siloed technology stacks are the primary reason tech investments haven't translated into productivity gains. However, where firms do rewire end-to-end workflows on unified platforms, the potential efficiency impact from AI alone is 25–40% of the total cost base—but only if data and processes are integrated front-to-back.

Even firms with well-designed systems often struggle with data silos. Portfolio modeling tools contain valuations, accounting systems manage financials, reporting platforms own waterfall calculations, and proprietary databases store deal insights. Without a consolidated, structured data architecture, every report, decision, and analytical model risks inconsistency and error.

True centralization requires more than data sharing—it demands investing in firmwide data infrastructure that integrates fund accounting, investor reporting, and investment analytics into a unified foundation.

The impact extends beyond operational efficiency. A 2025 SEI report revealed that 43% of private markets staff time is consumed by replicating fund administration work across fragmented systems and providers. Centralized data architecture eliminates this waste entirely.

• Reporting speed and accuracy: When all systems rely on a single data source, investor statements, board presentations, and analytics dashboards maintain perfect consistency

• Elimination of redundant work: Staff stop re-entering and transforming data for different teams' needs, freeing capacity for strategic activities

• Foundation for AI and predictive analytics: Clean, unified data enables more sophisticated modeling and broader AI deployment

• Enhanced auditability: Centralized governance creates clear audit trails, version control, and data lineage

Even in optimized environments, many operational tasks remain repetitive and non-differentiated. These functions are essential but rarely move performance needles directly. Forward-thinking firms embrace strategic outsourcing and automation for these activities, creating enterprise-wide leverage that compounds over time.

According to the Private Funds CFO Survey 2024, nearly three-quarters of managers already outsource portions of their back office operations. The 2025 edition found that 45% of respondents plan to increase outsourcing over the next 12 months.

• Focus on differentiated activities: Teams freed from time-intensive, repetitive tasks can concentrate on strategy development, relationship building, sourcing, and value creation

• Access specialized expertise: Outsourced providers often develop deeper compliance, technology, and process capabilities than individual GPs can economically maintain

• Seamless integration: APIs, workflow orchestration, and automated handoffs make external services part of the operational ecosystem rather than disconnected add-ons

These three pillars—consolidation, centralization, and intelligent automation—create more than cost savings. They establish a technology flywheel that accelerates over time. Consolidation removes friction, centralization increases clarity, and automation streamlines execution. Together, the right technology architecture liberates human capital, sharpens decision-making, and enables AI-facilitated insights that compound competitive advantages.

There's a crucial distinction between firms that just use technology to maintain the status quo and those that leverage it to create lasting competitive advantages. The latter group doesn't just implement tools—they architect technology ecosystems that compound operational alpha over time.

Private markets GPs are navigating a pivotal moment. Operational excellence is a necessity, but operational alpha—the strategic advantage gained by optimizing your operations to achieve peak efficiency, adaptability, and innovation—can turn operational excellence into a source of enduring competitive differentiation.

Our latest eBook explores how operational alpha can be achieved by aligning culture, structure, and technology to exceed LP expectations. Unlike short-term gains or surface-level improvements, operational alpha focuses on creating a seamless ecosystem where every process, team, and tool works in harmony to fuel long-term success. Download the full eBook now→