Why Managed Services for Private Equity Firms Have Become a Strategic Issue, Not Just an IT Issue

The economics of private equity have shifted. According to EY’s Q4 2025 PE Pulse report, global PE deal values rose 57% year over year, with exit values climbing more than 50%. That momentum is welcome after two subdued years, but it brings a less visible challenge into sharp focus: the operational complexity required to support faster deal cycles, tighter regulatory expectations, and a growing portfolio of technology dependencies.

For General Partners (GPs) navigating this environment, technology infrastructure across portfolio companies is no longer something that can be addressed reactively. It requires consistent oversight, predictable cost structures, and a level of security and compliance maturity that many mid-market firms struggle to build internally. This is why managed services for private equity firms have moved from an IT procurement discussion to a strategic conversation at the operating partner and COO level.

The Operational Complexity Problem

Private equity firms have historically operated with lean teams. PwC’s 2025 Private Equity Industry Issues report noted that as firms diversify into new asset classes and expand their product mix, they are encountering layers of operational complexity that their existing structures were never designed to support. Back office functions that once ran on manual processes now demand institutional grade capabilities in reporting, compliance, and technology management.

This complexity compounds at the portfolio level. A mid-market GP with ten to fifteen portfolio companies may be managing an equivalent number of distinct technology environments, each with its own legacy systems, security posture, vendor relationships, and compliance obligations. Without a deliberate approach to standardizing and managing that technology estate, operational risk accumulates silently. Systems fall out of patch compliance. Security controls drift. Incident response plans exist on paper but have never been tested.

Managed services for private equity firms address this problem not by replacing internal IT teams, but by providing the consistent operational baseline that most portfolio companies cannot sustain on their own. The distinction matters. This is not about outsourcing for cost reduction. It is about ensuring that every company in a portfolio meets a defensible standard of technology operations, security hygiene, and regulatory readiness throughout the hold period.

Regulatory Pressure Is Raising the Bar

Two regulatory developments are making this conversation more urgent in 2026.

The EU’s Digital Operational Resilience Act (DORA), which became fully applicable in January 2025, has introduced a harmonized framework for ICT risk management across financial entities. Among its most significant provisions is the requirement for rigorous oversight of third party ICT service providers. Financial entities must now maintain comprehensive registers of their contractual arrangements with ICT providers, conduct concentration risk assessments, and ensure that their technology partners can demonstrate resilience testing and incident reporting capabilities.

DORA also makes management bodies directly accountable for ICT risk governance, a responsibility that cannot simply be delegated to external providers.

In the United States, the SEC’s amendments to Regulation S-P took effect for larger entities in December 2025, with smaller entities required to comply by June 2026. As FINRA and multiple law firms have detailed, these amendments require covered institutions, including registered investment advisers with $1.5 billion or more in assets under management, to develop and maintain written incident response programs, notify affected individuals within 30 days of a breach determination, and implement documented oversight procedures for service providers who handle customer information. The SEC has signaled that examinations will prioritize compliance readiness under this amended framework.

For private equity firms with European operations or US registered advisory entities, these are not abstract compliance exercises. They require demonstrable, documented technology governance across the portfolio.

A managed services engagement with a provider that understands the investment sector can materially reduce the burden of meeting these obligations, provided the provider itself operates to the standards the regulations demand.

ISO 27001 certification, SOC 2 attestation, and documented incident response processes are not optional differentiators in this context. They are prerequisites.

Why Managed Services Matters for Value Creation in Private Equity Firms

EY’s PE Pulse survey found that GPs are anticipating a significant shift from multiple expansion to operational value creation as the primary driver of returns. With leverage more expensive and entry pricing more disciplined, the margin for error in portfolio operations has narrowed. Technology that does not work reliably, security incidents that disrupt operations, or compliance gaps that surface during due diligence can all erode the value a GP has spent the hold period building.

The connection between managed services and value creation is not always immediately obvious, but it runs through several critical areas; First, operational consistency. Second, speed. Third, talent efficiency.

First, operational consistency. When infrastructure, patching, monitoring, and backup are managed to a defined standard across a portfolio, the baseline risk profile of every company improves. This matters at exit, when a buyer’s technology due diligence will scrutinize exactly these fundamentals. Unresolved technical debt, inconsistent security controls, or an inability to demonstrate business continuity capabilities can all lead to purchase price adjustments or prolonged negotiations.

Second, speed. Portfolio companies undergoing integration, carve out, or platform build activities need their technology environments to be stable, well documented, and adaptable. A managed services provider with experience in the investment sector will have encountered these scenarios repeatedly and can support transitions without the learning curve that a generalist provider would require.

Third, talent efficiency. The PwC report highlighted that attracting and retaining senior technology staff remains one of the top operational challenges for PE firms. Managed services do not eliminate the need for internal technology leadership, but they do reduce the dependency on a single individual or a small team for day to day operational resilience. For a portfolio company with 50 to 200 employees, this is a meaningful risk mitigation.

What Distinguishes a Managed Service Engagement for Private Equity Firms

Not all managed services engagements are the same, and the differences matter considerably for private equity firms operating in regulated environments.

A provider suited to this sector will typically operate within recognized compliance frameworks and be willing to evidence that compliance under scrutiny, not just assert it in a sales process. They will understand the rhythms of the PE lifecycle: the urgency of a post acquisition technology assessment, the need for rapid onboarding during a bolt on acquisition, and the importance of maintaining audit ready documentation throughout the hold period.

They will also understand concentration risk. DORA has placed explicit regulatory focus on the systemic risks that arise when financial entities depend heavily on a small number of ICT providers. A managed services provider serving the investment sector should be able to articulate its own resilience posture, including how it manages redundancy, geographic distribution, and continuity of service in the event of disruption. This is not a theoretical concern. Regulators are actively building oversight frameworks around exactly this question.

Perhaps most importantly, the provider needs to understand the commercial context.

Private equity firms are not looking for a technology partner who will recommend infrastructure investments without reference to the hold period, the exit timeline, or the EBITDA impact.

Managed services for private equity firms must be commercially literate. Every recommendation needs to connect back to the value creation plan, the risk register, and the expectations of the LP base.

A Pragmatic View

It would be misleading to suggest that managed services solve every technology challenge a PE portfolio faces. They do not. Complex application landscapes, data migration projects, and strategic technology decisions still require dedicated expertise and often specialist advisory support. Managed services provide the operational foundation, the consistent, reliable layer of infrastructure management, security operations, and compliance support that allows those higher value activities to proceed without being undermined by preventable operational failures.

For COOs and operating partners evaluating their technology approach across a portfolio, the question is not whether managed services are necessary.

In most mid-market PE contexts, some form of managed technology support is already in place at the portfolio company level, often inconsistently and often without reference to the GP’s broader risk or compliance requirements.

The more useful question is whether that support is aligned with the regulatory, operational, and commercial realities the firm now faces.

In a market where deal values are rising, exit windows are opening, and regulators on both sides of the Atlantic are tightening expectations around technology governance, getting the managed services question right is no longer a secondary concern. It is part of the operational infrastructure that underpins credible value creation.