The Hidden Cost of Waiting

For decades, private equity has mastered the art of value creation. Yet after working with hundreds of private equity-backed portfolio companies—and being PE-backed ourselves—I believe one area of the playbook is changing rapidly: technology leadership.

Consider a $50 million company with a mandate to reach $250 million in five years. Everyone agrees technology matters, yet the company delays hiring an experienced CIO because the compensation can rival or exceed the CEO's in the early years. It feels like a luxury. In reality, it often becomes the most expensive decision the company makes.

Growth Doesn't Wait for Technology

As portfolio companies grow, the demands placed on technology leadership change quickly. In many organizations, technology leadership does not evolve at the same pace as the business. In many portfolio companies, growth begins to outpace the technology leadership required to support it. Without strategic technology leadership, companies accumulate technical debt through disconnected systems, unnecessary subscriptions, weak cybersecurity governance, reactive platform decisions, and costly future migrations. By the time a permanent CIO is hired in years three or four, much of the role is spent fixing yesterday's decisions instead of enabling tomorrow's growth. The cost leakage can be significant, but the bigger issue is that the company reaches its next stage of growth without the technology foundation required to support it.

The New Thinking

Progressive private equity firms are beginning to invert the model. Rather than waiting until technology becomes painful, they are putting experienced technology leadership in place earlier in the ownership cycle. Many do this by engaging an experienced Fractional CIO during the first year of ownership. Working one or two days each week, this executive establishes the roadmap, guides platform decisions, oversees cybersecurity, rationalizes technology spend, prepares the business for acquisitions, and aligns technology investments with the five-year value creation plan. The cost of a highly skilled CIO working two days a week is manageable, and the returns can be significant over time.

Technology Becomes a Value Creator

The economics are certainly compelling. Rather than treating technology as infrastructure that simply keeps the lights on, technology becomes a growth accelerator. Better technology leadership helps companies scale with greater confidence as the business becomes more complex and prepares for its next stage of growth. Instead of playing defense, technology begins creating enterprise value.

Why ZRG and Fortium

At ZRG, we've seen this pattern repeatedly across hundreds of portfolio companies. We've also experienced it ourselves as we scaled from startup to a $300 million business and faced many of the same decisions. Those experiences are part of the reason we acquired Fortium, the market leader in interim and fractional CIO, CTO, and CISO leadership. Fortium has an amazing bench of over 150 experienced, vetted, and referenced CIOs, CTOs, and CISOs that work on an interim and fractional basis. Portfolio companies gain Fortune 500-caliber technology leadership exactly when it matters most—without the cost of a full-time executive in year one.  

A New Question for PE

The question is no longer 'When should we hire a CIO?' The better question is: 'How early can we put world-class technology leadership in place without carrying the cost of a full-time executive?' In today's market, technology leadership is no longer simply supporting growth. It is increasingly determining how much enterprise value a portfolio company ultimately creates.