November 4, 2015

All Enterprises Should Model Themselves After Today’s Startups

By Marc Malizia

Startups Leveraging Cloud Services

Never in history has it been easier to start a business and fast track growth to dominate a market. Conversely, it has never been possible to transform from market leader to market memory faster than now. New startups are disrupting the market, fast tracking growth and sucker punching the market leaders. How are they breaking down the barriers of entry and overachieving in today’s fierce marketplace?

During their initial phase, startups want to conserve capital and lower their burn rate to achieve faster profitability, they need to grow and scale fast and efficiently and they need access to talent. A Deloitte survey shows that 83% of startups leverage cloud services to gain access to technologies and skills they otherwise could not afford. The companies leveraging cloud tools grew 26% faster than those that did not while delivering 21% higher gross profit.

Building A Blueprint

infographic-startup

(Infographic Source: Pinterest)

Cloud services enable startups the ability to implement advanced technologies and practices earlier in development cycle providing them benefits typically only experienced by older and more mature companies. Startups embracing cloud technology outperform those that are slow adopters. In fact, the fastest growing 30% of companies spend more than 10% of revenue on IT while their slower growing counterparts spend 4%-5%.

No longer is a 50-page business plan and credit history required to get a loan. Crowdsourcing and micro financing allows savvy start-ups easy access to funding while social media platforms and search engine optimization techniques enable cost effective outreach directly to customers and target markets. Expensive print ad and broadcast marketing campaigns are tools of the past replaced by Twitter, Facebook, Instagram and YouTube.

Startups, driven by their need for fast growth and scalability, have outgrown the legacy thinking of building their own IT computing platform. Leveraging cloud services for compute and storage, startups can quickly scale up or down in a cost effective manner while preserving precious capital. This limitless, on demand capacity enables speed to execution for these startups which allows them to outpace their larger competitors that do not leverage similar cloud services.

Large SaaS Investment Interest

startups-saas

(Infographic Source:Bloomberg)

Startups have capitalized on the scurry of software vendors delivering their enterprise applications via a Software as a Service (SaaS) model. As referred to earlier, this has enabled these newbie enterprises access to applications they could have never afforded in the past. Complex ERP, SAP or CRM application which were not only costly to buy required a complex and expensive computing platform of servers and storage, as well as, highly skilled IT professionals to configure and maintain. The SaaS delivery model allows these small companies to pay a monthly fee and the software is delivered via a browser to the users. No setup, no purchasing of expensive infrastructure and no high paid IT staff required. A perfect formula for the cash conscious startup.

Beating The Competition

 

When outsourcing non-core business functions to the cloud the startup’s IT staff is freed up to focus on strategic initiatives which add value to the business rather than being sidetracked by routine activity which merely “keep the lights on”. Cloud Infrastructure as a Service (IaaS) providers sell compute, storage and backup services in a scalable on demand fashion. Often, these providers layer managed service on top of their hardware platform to provide additional value. By taking advantage of these services, 75% of startups feel the cloud enabled them to focus on strategic projects. This is one way in which cloud services enables two-thirds of startups to beat their competitors.

Cloud technology provides startups with a platform to quickly develop and test new ideas for viability. The outcome is the ability to quickly move on successful ideas while failing faster on bad ideas. The ability to fail fast enables the conservation of resources and energy two precious commodities of a startup.

Finally, being lucky enough to make it this far, a start-up will reach a phase of maturity. At this stage, the leaders consolidate their gains and look to optimize the company. The operating infrastructure and payroll are scrutinized for efficiency. This is the moment where internal systems are evaluated based on merit of moving to the cloud. Management creatively evaluates how cloud services can improve front and back office operations and thereby prevent stagnation. This exercise also enables the company to identify new methods available to startups which could disrupt their market and diminish their competitive advantage.

When optimizations are complete and the company is throwing cash to the bottom line the mature enterprise must now look for ways to innovate. Innovation is required to open new markets, products or services to increase the revenue stream. One method companies often employ to focus on innovation is to setup a fast-moving spinoff to explore a new business model, product or service and thus the process starts over again. WASH RINSE REPEAT…

Now we know existing businesses cannot fiscally afford to overhaul their entire business and once to mimic the actions of a startup. The goal here is to open the mind and challenge the legacy thinking of how to build IT operations. The cloud has changed the way in which we do business and those unwilling to investigate and leverage cloud service where applicable will have a tough time competing with those that do. What builds a great startup builds a great company and there are lessons to be learned by us all.

By Marc Malizia

Marc Malizia

Marc Malizia is co-founder and CTO of RKON Technologies, responsible for the company’s overall technical vision and strategy. Since he helped start the company in 1998, Malizia has played a key role in creating many of RKON Technologies’ products and professional service offerings, as well as building the company’s internal computing platform, which serves as the basis of the brand’s cloud and managed services portfolio.

Prior to RKON Technologies, Malizia was director of engineering at LAN Systems.

Malizia holds a bachelor’s degree in computer science and mathematics from University of Illinois and a master’s degree in telecommunications from DePaul University.
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