Engineering Alpha in Private Equity

Finding “Free EBITDA” in Cloud Contracts & The AI Optionality Playbook

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In this news review episode, we break down the recent wave of partnerships between major cloud vendors and private equity firms, starting with the Thoma Bravo and Google Cloud announcement. These partnerships highlight an immediate lever for value creation: enterprise cloud agreements that can drastically reduce operating expenses and instantly boost P&L. Beyond the immediate cost savings, we explore the strategic necessity of maintaining “optionality” in a highly uncertain AI landscape. We also issue a warning to CTOs: stop isolating your solutions architects in “innovation labs” and expecting new technology to fix broken systemic problems.

Key Takeaways:

  • The “Free EBITDA” Play: Why your portfolio companies are leaving money on the table if they aren’t negotiating enterprise agreements with AWS, GCP, or Azure. Dave shares a real-world example of securing a 50% discount on internal bandwidth costs.
  • Why AI Optionality is King: In a highly volatile AI market, getting locked into a single LLM vendor is a massive risk. We explain why the best operational playbook involves using cloud platforms to access multiple models (like Anthropic, DeepSeek, and Gemini) to build a custom “race car”.
  • The Solutions Architect Trap: Why bringing in solutions architects to build a segregated “skunkworks” or innovation lab is a recipe for failure.
  • Tech Can’t Fix a Broken Org Chart: If your development team and your SREs report to different executives with misaligned incentives, no amount of AI or cloud architecture will help you hit your exit targets.
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    Engineering Alpha in Private EquityBy Paul Karner and Dave Mangot