After nearly 10 years at JetBlue, where he served as chief digital and technology officer, Eash Sundaram recently took on a new role: operating executive at Tailwind Capital, a private equity firm that focuses on mid-market companies in the business and industrial services markets.
I have always loved the “CIO turned private equity executive” career trajectory, as it has all the diversity of consulting, but from the vantage point of an investor. So, I was excited to talk to Sundaram (for the fourth of our articles together over the years) about his experience in the role.
Martha Heller: Please describe your role as operating executive at Tailwind.
Eash Sundaram: Broadly speaking, my role is focused on helping transform Tailwind’s portfolio companies through the adoption of technology and technology talent, which is a core tenet of Tailwind’s value creation model, known as Accelerate Change.
I serve as an advisor, deeply engaged across the portfolio—bringing subject matter expertise in technology, including supply chain, customer engagement and overall digital strategy to our companies. A key focus here is to help the portfolio company management teams articulate a vision for transforming the business. Since I work with multiple companies across the portfolio, I can bring a broader perspective than they have on their own.
I also serve as a board member for multiple companies within the portfolio, and I evaluate companies that we are thinking about buying to understand the technology opportunity and risks.
A critical part of my role is to identify the right digital and technology leadership to help run our portfolio companies.
How has technology impacted private equity?
Private equity has historically unleashed synergies through consolidation. Funds would buy multiple companies, drive up the value by putting those companies together, and then sell the larger company at a profit. The model was ‘buy low, consolidate, and sell high.’ But those companies were often not properly integrated, which became an issue for the next owner.
But over the last few years, the purchase price for companies has really increased, so private equity cannot get the same returns by just putting a few companies together. Today, value comes only from true transformation. And since most transformation is driven by technology, the role of the technology leader has become much more important to PE firms. Additionally, buyers are more focused on integration of M&A, which is not possible without the appropriate technology investments.
Five years ago, the majority of PE firms did not have technologists on their teams. Their managing directors had financial or operations backgrounds, and they would leave technology strategy to the portfolio companies themselves. Today, PE firms are taking on senior technology leaders, since technology strategy has become as important or even more important than financial considerations.
While not Tailwind’s strategy, I am also starting to see a trend where some PE is investing in early-stage startups more often than they did in the past. Startups make decisions fast, prove a concept quickly, and they can mature a product without a lot of overhead. This can give PE firms a quicker return on their investment than with larger, older companies.
What are the skills you are look for when identifying a CIO for a newly acquired portfolio business?
I look for people who have a technology background, but they think like a business unit leader, which is different from having business acumen. Business acumen is understanding business drivers, performance, and markets. Business unit leadership is the ability to change the business model of a $500M company. CIOs of portfolio companies have to think about running a business, not running a department.
Let’s say we buy a traditional distribution company and see the opportunity to transform it into an e-commerce business. The CIO of that company has to drive a strategy that transforms the entire business at once, rather than automate HR or supply chain. It’s a complete channel shift, not a business process change.
What are trends in technology that you’re seeing across the portfolio?
Data science is driving a lot of change especially with capabilities like dynamic pricing. In most companies, product pricing has been static and based on looking backwards, because market pricing data was very expensive; those datasets were hard to get. Today, if your e-commerce is running on AWS, you can easily see how the market is pricing a product globally and match it to your own price. Small manufacturing companies can now do dynamic pricing, based on consumer demand, and dramatically improve their margins.
Data science is also behind the second big trend that I’m seeing, which is in supply chain. If you’re in a midmarket industrial company that buys products from China, you now have access to services that can track and trace products from start to finish. You don’t have to go to five different sources for that information. As with dynamic pricing, only larger companies used to have those capabilities, but due, in part, to cloud adoption, this technology is available to companies with more modest budgets.
The third trend is increased access to labor in the gig economy. We’ve been able to recruit great people to our portfolio companies by thinking innovatively about leveraging a shared ecosystem to attract global talent. In my experience, people love working in the midmarket where they can really impact the growth trajectory and value propositions of these platforms.
What advice do you have for CIO of companies that are taken private?
When PE buys a company, they are focused on speed to market. Their ownership timeline is typically three to four years; they don’t have time to wait to see what the market is going to do. So as CIO, don’t expect to set a 12-month budget and stick to it. You have to think more dynamically than that.
You also have to think about yourself as a chief integration officer, working across the company to create dramatic change. In large public companies, CIOs create change incrementally, department by department. In PE-owned companies, CIOs have to think out of the box about the new company they are creating.
That is why this is such an exciting time for experienced public company CIOs to move into private equity, whether at the fund level or in one of the portfolio companies. It is a chance for CIOs to work in a smaller company environment, create real value, and have a much greater impact.