Technology is becoming more prevalent in the private equity industry and the hiring of chief technology officers is projected to increase significantly in the next five years, according to a report by administrative services provider Intertrust.

In a survey of 82 private equity professionals, 86 percent predict hiring board-level CTOs by 2023 with the goal of driving strategic change by taking advantage of technologies such as artificial intelligence, blockchain and robotics.

Currently, one in five private equity firms are struggling to keep up with the latest technological innovations, according to the report. Respondents highlighted artificial intelligence, cybersecurity and regulatory technology and compliance as their biggest tech skill shortages.

John Finley, the chief legal officer of the Blackstone Group, said in an interview with pfm that appeared in the October issue that the biggest firms are best positioned to take advantage of emerging technologies. For example, his department is looking at ways for technology to help the legal team, like using AI to assist in areas of high-volume contract management, such as non-disclosure agreements. Blackstone has a CTO who leads its Blackstone Innovations team, which in turn helps other departments within the firm improve their efficiencies.

Still, there may be some hesitation to focus on technology. In Intertrust’s survey,
some firms don’t see the need to hire a CTO or upgrade their skills at all, with 31 percent of professionals saying that their firm doesn’t currently see a need to recruit technology leaders or invest in new training. Only 33 percent of professionals said their firm is currently recruiting for a CTO-level role and upskilling existing staff to capitalize on emerging technologies.

One issue with hiring a CTO could be the difficulty of finding someone who has the right skills to fit the role. Another could be the size of the firm – outsourcing certain IT functions may make more sense than hiring a full-time CTO.

“Outsourcing IT, from my perspective, is the smart thing for all of us to do when we are not large enough to command the expertise of the chief technology officer,” April Evans, the chief financial officer of Monitor Clipper Partners, told pfm recently.

Firms need to start thinking about their technology needs and what they need to do to prevent trailing the competition, according to Michael Johnson, director of fund services at Intertrust.

“Firms delaying their investment in appointing new CTOs with influence at the top table, or not doing so at all, risk losing out on the best candidates and falling behind their peers,” he said in a press release.