Is a Private Equity CIO Gig Right for You?

Interview with Joe Eng, CIO of TravelClick, a software and technology provider to the travel and hospitality industry.

You’ve been the CIO at SWIFT, a banking software company, you were CIO at JetBlue, an airline, and now you are back at a technology firm, TravelClick, which is owned by a private equity firm. Those sound like three distinctly different environments.

I think there's a difference between being a CIO for a company where technology is the business, and being CIO at a company for whom technology is not its business, but a very important part of it – more of an enabler.

When technology is the business, the CIO is much more involved in the business in terms of the customer’s needs, actual products and services and with delivering them to market. And I’ve found that it’s a faster cycle – faster-paced.

At companies that aren’t technology companies, CIOs are focused on a lot more on the business process aspect of enabling technology to automate or improve the efficiency or effectiveness of a company. They are both important roles, but they are different.

What are the differences between working for a public technology company and a P/E-owned technology company?

I think private equity works in different time frames, and that drives much quicker decision-making. As a technology leader, one needs to be prepared for how rapidly you will scale the enterprise, because that's typically the purpose of the P/E investment: rapid growth.

What would you say are the qualifications and professional traits of the IT leader that is going to be successful in this environment?

I think one of the reasons I was asked to get involved in TravelClick is that I've come from larger scale environments. As these portfolio companies try to do this rapid growth, one of the challenges they have is how to do that in a scalable, sustainable manner. These are factor jumps that they’re making, not nice sloped steps from one point to another. Sometimes the situation out-scales the current leadership team, the current way of doing business, or the current infrastructure. So I think people from larger scale environments can bring those kinds of processes, and also a network of leaders from scaled enterprises, which are very valuable.

Leading IT at a portfolio company requires you to be very engaged in the business. There often isn’t a complete organizational and administrative framework, with groups to take care of things, like a big HR department, or, say, purchasing. You get very engaged in it directly because these portfolio companies are moving quickly and require a lot of leadership presence to drive change. The changes don't come by some administrative process.

So, what’s required is a blend of qualifications that includes experience with very rapid, but sustainable, scaling of systems, a lot of self-initiative and a very engaged leadership style.

You need to be very strategically engaged with your colleagues at the executive level. You are as much the chief information officer as the chief innovation officer as the chief process officer. We each have roles but at the same time I do think there is more of an expectation of being able to and expected to perform any role that is required.

But most would argue that CIOs from just about any company need to have a more strategic mindset.

Yes, I think so, but it hasn't occurred necessarily, probably because certain industries haven't really gotten that understanding yet. I've found that in the private equity portfolio company setting, the strategic engagement is clearly important and, in my experience, more magnified.

As the CIO at a portfolio company, how do you think through your decisions on IT investment?

There's more of a focus on the outcome of your investments. This is what the private equity firms are very astute at. This is their business: to engineer financial outcomes. So what becomes extremely important for the CIO is how well you can articulate, rationalize, and justify investments. You are expected to speak very clearly, matter-of-factly, and much earlier about the outcome, because that’s what it’s all about.

And investment decisions are made faster as a result of this sharpened discussion. It’s never a spending question, it’s an investment question. So you have to be comfortable with that, you have to be prepared for it and create a leadership group around you and with you that is comfortable with that.

How would you advise a CIO who’s wondering if they have what it takes to lead IT at a portfolio company; if this is a direction they may want to take their career?

First of all, you need to assess your comfort level and skill set. Do you feel that in your current environment, you are operating at that strategic enablement level and helping to set the direction of the company? How does technology drive top-line results, or the bottom-line? If you are not, for whatever reason, then I think that will make it more challenging for you in a private equity situation. Then there is the risk-reward equation to think about as well.

There is more risk and there can be more reward, certainly from a financial perspective. The comp packages are typically different. Are you up for a situation with higher risk but higher reward, compared to a public company? Public company packages can be nice, but they're more predictable and continuous.

With the public company typically, you'll get an equity grant on a yearly basis, you have typically a three-year, five-year vesting of equity. There's just much more predictability in terms of how and when that will vest –how much that will appreciate or not appreciate over a period of time. Whereas in private equity, it's mainly a grant which will only take on value upon some kind of singular liquidity event. So, you have to really think about whether you’ll be comfortable in that higher risk, higher reward type of situation.