Amita: Welcome everyone to the new episode of the Zinnov podcast, Decoding Private Equity series. I’m your host for today’s session, Amita Goyal, partner at Zinnov.
In this series, we take a closer look at private equity firms and the companies they own. We explore their strategies. We explore their strategies, the challenges they face, and how technology plays a key role in driving their growth and resilience.
Today, we are speaking to Fritz Hesse, the Chief Technology Officer at Riskonnect, a leading integrated risk management software solution provider.
Fritz has been instrumental in accelerating Riskonnect’s IRM solution and technology platform, enabling customers to easily bring all aspects of risk under one roof. With more than 25 years of experience leading and scaling highly successful and world-class software organizations across different enterprises and consumer markets, Fritz works to accelerate Riskonnect’s technology innovation across the globe.
Welcome, Fritz. We are thrilled to have you here.
Fritz Hesse: Thanks for having me. Appreciate it.
Amita: Thank you so much. Great. Let’s get started. So we have certain questions for you, Fritz, and we’d love to hear your perspective.
Could you talk a little bit about your experience? You’ve served as a CTO in the past for Bazaarvoice, and now at Riskonnect. Both these companies were Private Equity-owned. What are the commonalities and what are the differences you see?
Fritz Hesse: Sounds great. Well, from a high level, my experience includes, as you already mentioned, 30 or so years developing software and leading software engineering teams in both small companies and larger companies, including some that are probably well known to this group, like JD Edwards, which is now Oracle, and a number of other public and private companies.
I’ve also worked in the ERP space, FinTech, consumer applications, e-commerce at Bazaarvoice, and now risk management, and risk solutions. Most of the companies I’ve worked with have been global companies with lots of M&A activities involved under private equity, and it’s been an important part of the process.
Bazaarvoice, as you mentioned, is a global leader in what is called user-generated content for e-commerce, things like ratings and reviews, and questions and answers on products purchased in the e-commerce space. Riskonnect is a global leader in integrated risk management solutions that include things like health and safety, risk management information systems, ESG, business continuity, project management, and enterprise risk.
Tons of capabilities all amount around integrated risk management. Both of these companies have around 1,500 employees. Both have global enterprise customers with teams in the U.S., EMEA, and India. Both are software-as-a-service solutions with enterprise customers delivered in an agile practice.
Both of them have a high appetite for mergers and acquisitions and the use of AI and machine learning in their solution suites. As mentioned, both are private equity-owned, and under private equity, it’s important to recognize that the goal is around the rule of 40: optimize your spend, drive ARR, and drive for profitability. Under PE, you can make investments, but they need to create value within the holding period. So it’s key to consider what the holding period is when you do make those investments.
For me, in my role as a CTO, both of these are software-as-a-service companies, but Riskonnect also has on-premise installations. Bazaarvoice is a B2B2C technology company that has consumers at the end using the solution, so there’s high volume and scale. Riskonnect is more B2B. Users are legal, compliance, and risk officers.
The technology provided there is around data analytics and reporting. Risk Connect also has multiple product lines, but they’re built upon different technology stacks that have come via acquisition. So half of my job today is running release activities, OKRs, and metrics, and the other half is around our key integration strategy. Hopefully, that provides a good summary of the role and the difference between the companies.
Amita: Absolutely. Thank you so much, Fritz. I think both of those SaaS platforms do seem to have unique characteristics for which you need to have a strategy for each separately. Could you share some specific examples of how you effectively leverage global talent across these companies? What are your unique perspectives on the capabilities that diverse talent provides? And how have you been able to drive value for the business through global teams?
Fritz Hesse: Well, I think it’s important that diversity is a key component of this conversation. Diversity of ideas and information about what customers want, as well as diversity of ideas on how to achieve those goals. So, when you think about e-commerce, for example, in the United States versus EMEA versus Asia, e-commerce is very different in those areas. Points of view on what’s important and consumer buying patterns vary, and the metrics and monetization of how you make those products work change.
So we needed product leaders who could be sensitive to those differences and help design solutions using those various points of view. All the best ideas don’t come from one person or one geography or one educational background. I don’t think anyone can dispute the need for diversity as it generates value for our customers.
Maybe a couple of examples to help illustrate this: In one environment, access to innovation labs at universities or innovation centers for our partners and customers is important. At one company in my past, we had an entire team formed out of university research. We were able to build a center of excellence around identity verification using artificial intelligence, and that was in Europe.
At another company, we had several large customers that also had their development centers in Asia, near where we were establishing our development center. Having the development centers nearby allowed us to build stronger partnerships with those customers, sharing goals and rapid prototypes. We didn’t have to wait for items to come to the U.S. to be resolved. Another area might be around-the-clock responsiveness and deployment. Customers, especially in the e-commerce space, are shopping 24 hours a day, so your systems need to be highly available and responsive to issues that may arise.
Having development, testing, DevOps, product, and support teams in key geographic areas makes all the difference for solving challenges and restoring services quickly. We’re no longer waiting for someone from the U.S. to sacrifice their overnight hours or someone in Europe to stay up late to resolve issues because we can solve them locally using a follow-the-sun model. We’ve been able to leverage three key geographic areas to maintain support and compliance with our customers.
Finally, there’s the velocity of innovation.
Private Equity has a certain blueprint for R&D costs as a percentage of revenue. Holding to those targets creates a compelling challenge for managing cost targets while still driving innovation. One company I worked at faced high costs, high turnover, and slow time-to-fill roles in the U.S. Ultimately, this impacted our capacity to deliver new capabilities quickly. By following a strategy for hiring in a global center in India, we achieved higher loyalty, more ownership, openness to experimentation, and cost advantages. This combination provided the capacity, skills, and commitment we needed to double our innovation capacity within one year.
Amita: Absolutely, Fritz. I think that’s fantastic. As you correctly put it, diversity of thoughts through diverse global teams means you aren’t bound by a particular time zone to service your customers and can meet time pressure targets in a private equity environment to build innovation capacity. Thank you so much for that.
How has having a global team or, in some countries like India, what is called a captive model, helped optimize your vendor management and external partnerships for your portfolio companies? What advantages does having an in-house team or a GCC provide in terms of sourcing, negotiating, and managing vendor relationships?
Fritz Hesse: Sure. Well, staffing teams with a higher percentage of full-time employees, in my opinion, allows us to reduce the number of contingent staffing firms we need to work with and aligns our team around the business goals.
They become owners of the responsibility of the business rather than just service technicians. Through global centers, specifically captive centers that are employee-based, you have better control over costs, quality of skills, and IT usage in your environment.
You also generally have better control over staff attrition and protection from risks associated with vendor rate card inflation or rapid changes. When you have employees, you can drive ownership, manage costs, and have clearer access to data. It’s easier to manage than having many third-party vendors.
Amita: Wonderful. Thanks a lot, Fritz. As these global centers or global teams have evolved beyond R&D, what new value streams are they unlocking, for instance, in sales, support, and business operations? How has this expanded scope and integration impacted the core business and driven strategic advantages from global locations?
Fritz Hesse: Well, everybody has their own journey in this evolution. In some companies, it goes quickly, and in others, it takes longer with some ups and downs and sideways paths.
The Zinnov team has been a key partner for me in the past, and I’m sure for others, providing data points around the typical evolution and metrics that you may see as you evolve from just having a satellite office to really driving transformation across the business or industry.
There are some tells that I would look for in certain environments that you would expect to see change over this evolution. You would expect to have more departments asking to set up teams outside of your headquarters. That would indicate that people are interested, the business is supporting, and there is an interest in really expanding the charter from being just a development site or service center to being multifaceted and multifunctional.
Growth in geography or market-specific segments where you have your people is also a sign. You might see more sales or more customers asking for additional market offerings outside of your typical core market. You’ll start to see the charter of your development center become a charter for the transformation center.
And then finally, brand recognition is key. When you have brand recognition, it makes it easier to open doors, attract talent, attract partner conversations, and create visibility to the additional market opportunities that I just described. They become visible opportunities instead of hidden opportunities. So brand recognition really allows you to drive those conversations and expand. We’ve found these gains successfully in Asia as well as other geographies, and we’ve been very successful in growing from just a development site to a transformation center.
Amita: That’s wonderful. More than 90 percent of global companies in India are already multifunctional, so that is fantastic to hear. What are some of the key challenges you’ve faced in building and operating these global teams? The challenges vary from cultural integration to IP protection. What has been your experience?
Fritz Hesse: Well, at Riskonnect, risk is part of our DNA. And so, I do appreciate the question. We are always looking for risks and what you can do to mitigate risk or manage through it. Some of the key challenges, as you’ve already mentioned, include things like access to data or environments. Not every customer is going to allow you to have people see their data, whether it’s in EMEA, Asia, or Latin America. You need to manage for that. So, a key thing is who has access to the data and who has access to the environments that are running. You have to manage that.
Secondly, hiring practices differ by country. What works in Eastern Europe and what works in Western Europe or Asia, in specific countries within Asia or Latin America, it is all different. So, you need to hire experts that can help you navigate those specific challenges and how to address them.
Third, cultural and communication differences require training and respect for different points of view and cultural norms. Expertise that can help you navigate that is really important. So, what we’ve done in my past is certainly hire firms like Zinnov to help facilitate and guide the practices that we use and the evolution of the maturity of our environment through those challenges. You can’t solve it all in one day, but you need a journey and you want to map your journey with experts that can help you through that.
Face-to-face time is critical. I know we’re all living in a remote world these days, but really nothing beats face-to-face time for collaboration. Bi-directional travel, where possible, with visiting teams, having workshops, setting up charters and goals together, and thinking through the risks and mitigations together is really important. So, face-to-face time.
I think another key is really local product ownership and HR support. You can only go as fast as the ability to make decisions. If your product management team is 15 hours away, then you’re going to be waiting 15 hours for decisions. So, you need the ability to really arm your teams locally with the ability to make decisions, drive innovation, experiment, practice, and be sensitive to the HR norms in that environment.
It’s really critical, I think, to have local product ownership and local tech ops or development support for your teams to remove the impediments, and HR support locally that can be sensitive to the team cultures.
I think it’s important to have clear mission control, clear autonomy for the teams that are working on their deliverables, to reduce global dependencies. As I mentioned before, you don’t want to have a lot of overnight responsibilities where one team is waiting on another in another country to respond to a question and deliver because then your ability to deliver will slow down at the pace of these conversations. So, clear autonomy is really critical. Give them a goal, have them work on those objectives instead of giving them tasks. I think that is really important.
I think there’s maybe just a couple of others, such as recurring strategy alignment mechanisms. Having quarterly practices for aligning your strategies is key. Clear charters, goals, and metrics. We’ve used a lot of communication coaching and training on how you communicate because, again, conversational language is different across countries, so we need to make sure we can communicate, and it’s important to train that. We’ve also done things like cross-geography hackathons, where you can bring team members that don’t normally work together to collaborate on a hackathon and do virtual hackathons across geographies. So those are some of the tricks we’ve used.
