CLOUD INVESTMENT STRATEGY

SITUATION

The global economic meltdown of 2008 left many public and private equity investors rightly cautious about the market in general and where to make investments in particular. A large private equity firm determined that IT infrastructure was a segment ripe for investment, but it was uncertain about evaluating what impact new technologies such as cloud computing would have on supply and demand. The firm engaged Capto to validate key drivers and assumptions in its internally developed business model and help make an informed decision about investing in IT infrastructure companies. 

THE SYNAPTIC SHIFT

The Capto team has been modeling investments in the outsourcing industry since the mid-1990s, so our breadth of knowledge, contacts, and relationships helped us determine that the private equity firm’s assumptions about staffing a data center were too conservative and that its time frame for return on investment was overly aggressive. 

RESULT

• The Capto SYNAPTIC model determined that the difference between operational reality and the private equity firm’s initial estimates would equal tens of millions of dollars over the life of the investment, thus enabling the firm to assess the risk and reward of its investment opportunities with far greater accuracy