All Enterprises Should Model Themselves After Today’s Startups

Featured article by Marc Malizia, CTO RKON Technologies

Never in history has it been easier to start a business and fast track growth to dominate a market. Conversely, it has never been easier 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?

Startups Leveraging Cloud Services

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. Companies leveraging cloud tools grew 26 percent faster than those that did not while also delivering 21 percent higher gross profit.

Building a Blueprint

Cloud services enable startups the ability to implement advanced technologies and practices earlier in the development cycle by providing them with 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 percent of companies spend more than 10 percent of revenue on IT while their slower counterparts typically only spend 4 to 5 percent.

No longer is a 50-page business plan and credit history required to get a loan. Crowdsourcing and micro financing both allow savvy start-ups to easy access 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 Expensive print ad and broadcast marketing campaigns are tools of the past that have been replaced by Twitter, Facebook, Instagram and YouTube.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 have capitalized on the influx of software vendors that deliver their enterprise applications via Software as a Service (SaaS) model. As referenced earlier, this has given these newbie enterprises access to applications they could have never afforded in the past. Complex ERP, SAP or CRM applications which are not only costly to buy, but require a complex and expensive computing platform of servers and storage and highly skilled IT professionals to configure and maintain. The SaaS delivery model lets these small companies pay a monthly fee and, in return, 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 free to focus on strategic initiatives which add value to the business rather than being sidetracked by routine activity. Cloud Infrastructure as a Service (IaaS) providers sell computing, 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 percent of startups feel the cloud enabled them to focus on strategic projects. This is one way in which cloud services enable two-thirds of startups to beat their competition.

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. The ability to test ideas quickly enables the conservation of resources and energy- the lifeblood 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 often scrutinized for efficiency. This is the moment where internal systems are evaluated based on the 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 necessary to open new markets, new products or new services. Therefore innovation is required to revenue stream. One method companies often employ is to setup a fast-moving spin-off to explore a new business model, product or service and thus the process starts over again. Wash, raise and repeat.

In Conclusion

Now we know existing businesses cannot fiscally afford to overhaul their entire business at once to mimic the actions of a startup. The goal here is to open the mind and to challenge prior methodology on 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.