Need To Meet: Arup Das, Alphaserve Technologies

Buyout firms are taking a fresh look at their disaster recovery strategies, due to a confluence of new regulatory pressures, business disruptions around the world and a highly competitive fundraising environment, says Arup Das, the CEO of Alphaserve Technologies.

The Dodd-Frank financial reform law puts a premium on the importance of technology and record keeping, Das told Buyouts, using his industry’s short-hand for disaster recovery. “DR and business continuity is a big part of it.”

By the same token, businesses of all stripes are being forced to take note of the disruptions that can be caused by unexpected events, whether they are disasters such as the earthquake, flood and nuclear crisis in Japan or the “Arab spring” civil uprisings that are taking place across the Middle East and North Africa.

And if buyout firms themselves are unenthusiastic about re-examining an unexciting and unlikely-to-be-used business expense, they may find that their investors will force their hand, Das said.

“People used to use a checkbox when they raised money. ‘Do you have a DR site?’ ‘Yes.’ Check. Done. That has been the climate for the last eight or 10 years,” he said. “Only recently are we seeing capital raising having instant scrutiny of the operational aspects of funds. ‘Show me how you do failover tests. Show me documentation.’ It’s much more of a show and tell when you are out raising capital today.”

Perhaps it should be no surprise for someone like Das to bang the drum for data backup. After all, business continuity is what his five-year-old New York company is about. It competes with a wide variety of rivals, including giants such as SunGard Data Systems Inc. (owned, coincidentally, by a consortium including Silver Lake Partners, Bain Capital Inc., Blackstone Group LP, Goldman Sachs Capital Partners LP, Kohlberg Kravis Roberts & Co. LP, Providence Equity Partners LLC and Texas Pacific Group Inc.). SunGard operates a nationwide network of disaster recovery centers and Internet hosting services. At the other end of the market are narrowly targeted specialists, such as Richard Fleischman & Associates, which focuses exclusively on technology and telecom services for the hedge fund industry. Alphaserve itself serves a range of financial services firms, including hedge funds, banks, buyout firms, broker dealers, as well as law firms and general markets.

And Das is right about one thing: Data protection has been radically overhauled in the last decade, led by the banking industry. It used to be enough to send duplicate tapes to a backup center at the end of the business day. But the attacks of 9/11 showed the weakness of that approach. Today, banks use what Das called an “active-active” backup strategy, where transaction data is stored simultaneously at a local data center and also at a secondary site, which may be hundreds of miles away.

“We’re taking the institutional solution used by big banks and making it available to smaller firms,” he said.

Of course, buyout firms have DR issues not only for their own operations, but also for their portfolio companies, Das noted. “Any company they buy in any vertical has a technology component. There has to be due diligence both upstream and downstream to make sure their house is in order in terms of technology and DR.”

Phone: 212-763-5582