Mumbai: Gary Reiner, operating partner at global investment firm General Atlantic Llc (GA), has a deep understanding of both business and technology—and the business of technology. Having served as senior vice-president and chief information officer (CIO) of General Electric Co. (GE), where he led merger and acquisition (M&A), sourcing, IT, operations and quality, Reiner joined GA in 2010. In earlier roles, he was a partner with the Boston Consulting Group, where he drove strategies and operations improvements for high-technology businesses.
Reiner is a director on the boards of Citigroup Inc. and Hewlett-Packard Enterprise (after HP split into two entities—HP Inc. and HPE). He is also on the boards of companies that GA has invested in, such as CitiusTech, Box, Appirio, Mu Sigma and SnapAV.
In an interview in Mumbai, Reiner spoke about his passion for technology despite a BA in economics from Harvard University and an MBA from Harvard Business School. He also talked about technology trends and Indian start-ups. Edited excerpts:
What’s your specific role at GA?
Other than being an operating partner, my specific role is to be part of the team which looks at technology companies that we want to partner with, that we would want to invest in and help grow. I’m involved with six such companies and we try to help them grow much faster than they otherwise would have.
How does GA identify the companies it wants to invest in?
The most important thing for us is the quality of the management team. The GA legacy is all about backing great CEOs and great management teams. Second, we look for something that differentiates these companies from the marketplace—not just now, but also in the future. CitiusTech is an example of one such company that has expertise in healthcare and technology, which is something unique and hard to replicate. This will help the company do well in all the segments of the healthcare industry. Third is the market size —how big is the market to justify our investing money in the company. Fourth, we evaluate if the asking price for equity in the company we plan to invest in, makes sense to us. So, typically, we look at five sectors—technology, healthcare, financial services, business services and retail consumer. That informs us in terms of what’s interesting to us and where we need to allocate resources.
What does your mentorship involve?
It can be in different ways—to help the management strategize; to find new markets; to help with our expertise in sales and marketing; to help with access to regions that smaller companies won’t easily have, since GA is very global and has office in practically all high-growth regions like South Asia and China; to help with intellectual property (IP)-related issues and global regulations; and also to merge with another company, if that’s what the firm wants to do.
How do you ensure that a talented management does not perceive your inputs and guidance as interference?
We are minority investors, almost always, with a few exceptions. The DNA of GA is very much that of a consultative and an advisory role rather than one of control. It is not in our nature to control, or even behave as if we do, even if we take a majority stake in any company. We only provide advice.
You are clearly in love with technology but you don’t have an IT background. And yet, you were also CIO at GE...
True. I don’t have a degree in computer science but have always had a passion for technology. I was hired by (former GE CEO) Jack Welch to do M&A. There were 12 businesses when I joined and I was hired to create a 13th business unit. So I spent my work time with Jack and we looked at every company under the sun. Then, I was asked to run sourcing—a very exciting job since I had to buy $50 billion worth of goods and services in 1992. This was all before I became CIO at GE in 1994. So I was handling both sourcing and it was a great combination since a lot of good IT is sourcing because it’s a very hard function.
Most of what you do in IT is sourced, rather than created. And so having the sourcing skills works well for CIOs and I would recommend that companies combine the sourcing and IT functions. In 1996, I took over the Six Sigma (methodology for process improvement) and when the Internet came, I took over e-commerce for GE. In other words, I took over everything in GE that no one else wanted to do (laughs).
What would you advise CIOs, whose role is changing dramatically with digital technologies?
As a CIO, you need to love technology, and you need to love it as a solution that can change things for the better. Then you need how to jolt technologists so that you learn who to bet on, and whom to trust to help you make decisions. The role of a CIO is undoubtedly about making decisions on technology but it is also about working with the rest of the organization to learn how they can accept technology to help them perform better. So a good CIO is much more a change agent than he is a technologist—to convince them how technology can change business models.
The biggest transition for a CIO is that however much you relied on sourcing 10-15 years ago, you rely on it even more with the cloud being the solution to so many things—SaaS (software as a service) as well as PaaS (platform as a service) and, in particular, infrastructure as a service (IaaS). The CIO needs to be the advocate for technologies that can change businesses.
For instance, the CIO of a bank has to take a call on whether he wants to play defence or offence on blockchain (the underlying technology that drives the cryptocurrency Bitcoin). If you are the CIO of a retailer, you will have to take a call on offence or defence on e-commerce. That’s the kind of stuff that a good CIO has to do, and needs to do.
What technology shifts are you seeing?
Let’s first consider business process automation. Here’s a simple way to think about this—about 20 years ago, companies took all their business processes and consolidated them, centralized them and called them shared services. Ten years ago, they offshored them, largely here (to India). The newest migration is to automate those processes.
There are two different technologies that are being used for this: software robots or RPA (robotic process automation) software, and the other is cognitive automation. Both are quite different. RPA takes structured data from various systems, analyses the data and compares it, calculates based on it and then executes it in a different system.
Cognitive automation is very different and also quite difficult to do but is also very interesting because it looks at unstructured data and to convert that unstructured data to structured data, which can be worked on in a structured environment. Both RPA and cognitive automation are high-growth and I suspect that both these technologies will have a productivity impact.
The second trend I want to speak about is migration to the cloud. Now look at the numbers in terms of cost differences. If you have an old data centre, you’re running it at about $9,000 per socket. If you have a modern data centre, you’re probably running it at about $5,000 per socket (per processor) and if you’re looking at a modern cloud architecture—it’s about $2,000-3,000 per socket. And cloud allows you to develop products faster, hence the migration will be rapid.
Third is cybersecurity and the need to secure your environment. My view is that cybersecurity will evolve to the point where encryption at the data level will be the key. Also, the policies around who can see that data and what they can do with that data is going to be at the data level and not at the application or the network level. The key thing beyond that is multi-factor authentication. The smartphone is a good example, where you have the phone, a password and your thumb to gain access to the device. The combination of these three things can identify you clearly and all you need is policies around each bit of data. So it does not eliminate encryption at the application and network level, but makes it less important than data-level encryption.
Fourth is using machine learning to detect malware.
Why is it that many promising start-ups die before becoming big?
Here’s what typically happens: A new company has an idea. They get a bunch of customers to buy into that idea and get them to a certain level. But what they underestimate is the ability of larger and more established companies to adopt the new idea that this company has and use their existing distribution channels, and brand and marketing clout to displace the smaller company. So to differentiate, smaller companies must ensure that there aren’t bigger companies that can easily use their scale to offset what they have done. So you have to anticipate who’s going to come in.
Is that easy to predict?
You can have a pretty good idea of who can come in that space, and the likelihood of them succeeding. And maybe the IP was not protected to begin with. You have to have a focus area and stick to it—not get distracted.
What can Indian start-ups learn from Silicon Valley start-ups?
Much depends on how you define start-ups. India has great expertise in the services space. However, one of the things that Indian companies will need to do when they get to a certain level is to decide whether they want to be a global company or an Indian one. This is not easy.