How Startups Can Leverage Elastic Services for Cost Optimization

May 29, 2020 - by Joey Lei

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Due to COVID-19, business continuity has been put to the test for many companies in the manufacturing, agriculture, transport, hospitality, energy and retail sectors. Cost reduction is the primary focus of companies in these sectors due to massive losses in revenue caused by this pandemic. The other side of the crisis is, however, significantly different.

Companies in industries such as medical, government and financial services, as well as cloud-native tech startups that are providing essential services, have experienced a considerable increase in their operational demands — leading to rising operational costs. Irrespective of the industry your company belongs to, and whether your company is experiencing reduced or increased operations, cost optimization is a reality for all companies to ensure a sustained existence.

One of the most reliable measures for cost optimization at this stage is to leverage elastic services designed to grow or shrink according to demand, such as cloud and managed services. A modern product with a cloudnative architecture can auto-scale cloud consumption to mitigate lost operational demand. What may not have been obvious to startup leaders is a strategy often employed by incumbent, mature enterprises — achieving cost optimization by leveraging managed services providers (MSPs). MSPs enable organizations to repurpose full-time staff members from impacted operations to more strategic product lines or initiatives.

Why companies need cost optimization in the long run

One truth that has emerged from the impact of the current pandemic is that several organizations (large and small) are not well-positioned to leverage elastic services to mitigate the operational, financial and other risks caused by unanticipated changes in the business landscape. In the absence of an enterprise ecosystem that is agile, elastic and mobile, they are exposed to risks caused by:

  • An unanticipated disruption in business continuity
  • Loss of business or revenues

To safeguard themselves, should another crisis strike, companies must start planning now. Partnering with a seasoned MSP to plan and leverage the consumption and subscription services is pragmatic so that they can instantaneously adjust expenditures that are irrelevant in the current scenario and can prepare for long-term cost reduction.

How to optimize costs with elastic services

One clear observation that has emerged due to the impact of the current crisis on businesses is that investment toward IT strategy and planning services pays in good times, as well as difficult times. Therefore, companies, whether they are currently making profits or experiencing losses, should consider long-term investment toward IT strategy and planning services and carefully plan the “new normal” costs required to scale demand and revenue.

Elastic cloud and managed services can help these companies balance the rapid changes in the demand and the need for expenditure:

  • With consumption services, companies can choose to pay only for the services and resources they use. Many MSPs are evolving to cloud service providers (CSPs), leveraging the same consumption pricing and services as the hyperscale clouds.
  • With subscription services, companies can choose flexible payment models that often afford advantageous pricing the longer one commits. Select the time frame that settles the risk and reward.
  • As several companies have stopped hiring and are trying to avoid longterm capital investments, they can meet their operational demands by contracting managed services and re-platforming their enterprise ecosystem to use cloud services.

The most efficient approach to implementing elastic services

Given the requirement and expenditure patterns for every company are different, there can never be a one-size-fits-all strategy to ensure the successful implementation of elastic services. To ensure that elastic services efficiently help optimize costs in your organization, you should follow the three-step approach outlined below:

  1. Discover: To start with, collect the last three-years’ operational revenue and expenses for your company. If you are an early-stage startup with no predictable revenue or costs, understand your competitors’ seasonal lows and highs (these are elastic needs). Perform a business-impact-analysis (B-I-A) to recognize the critical business processes and map them to the risk scenarios that lead to business disruption. Lay out the risks and then create a risk mitigation plan with your strategic IT leadership and advisors.
  2. Analyze: Adapt your current architecture to identify your business objectives and how it has altered due to new conditions, and then carry out a gap analysis and capabilities assessment.
  3. Plan: Based on your business objectives, review how and where you can leverage elastic services to fit seasonal variation better, and the risk scenarios where swiftly declining operational demand may occur.

The business landscape is evolving at a swift pace to reveal the new normal post-COVID-19. A traditional wait-and-watch response is not a wise move, especially for startups. Instead, engaging with a strategic leadership partner that can help you evaluate your current infrastructure and implement elastic services is the best move to meet your business objectives now, as well as in the long run.

This article was first published on Tech Crunch.