The decisions that a young startup company makes in the early stages of its infancy, still blinking in the light and unsure on its feet, will define its organisational capability and flexibility for years to come.

There are often so many competing demands for your time and your money, both of which are at a premium anyway, that it can often be tempting to try and spend a bit of money on everything so that you have all your bases covered.  This is not a strategic and well thought out way of going about things.

Before you begin spending money on marketing and taking on new staff, you need to ensure that you actually have a business to grow. This means getting a handle on the factors that are going to affect your cost of sales (inventory, materials, equipment, shipping, etc) and the technological foundation of your company.

What this all essentially boils down to is…how much of your investable capital are you going to initially plough into hardware and what kind of hardware infrastructure are you going to create as the basis of your future operations?

These choices are important and there are a number of options to consider.

What do you need?

Most small startups are not going to need that much hardware to get the ball rolling. You are likely to need a couple of computers, a few specialist software tools and a small server. The server may sound like overkill here but it is important in this context for two main reasons. Firstly, even if you only have three or 4 computers operating on the same “peer-to-peer” network you may start to crave some kind of centralised data coordination to cut down on the time wasted and the general inefficiencies of shifting information between a number of disparate machines.

Secondly, being part of a successful startup is anticipating future growth and adequately planning for it. By getting a small server now you will be able to grow in terms of increased load and performance requirements pretty smoothly for quite a while before you think of having to make another big hardware-related decision.

This decision is going to be hugely important and will be concerned with the issue of the scalability of your hardware.

The need to consider scalability

Scalability, in terms of both hardware and your actual business model is the ability to grow in a way that not only means that it can take on a higher volume of tasks or larger individual tasks, but also that that the corresponding level of performance is also increased. Basically the idea behind scalability is how to get bigger and better at what you do at the same time, a task which is beyond a large amount of companies who plateau and then stagnate in the market.

In terms of your start-up’s investable capital you have two main hardware-related decisions to make here: either you spend money increasing the scalability of your already existing hardware setup or you look to alternative solutions such as cloud computing.

If you decide to invest in increasing the scalability of your internal hardware infrastructure then you have a further important choice of whether you want to “scale out” by buying more individual servers to add to your network or “scaling up” by upgrading the server you already have by adding more CPU or memory. The fundamental point here is that you are paying to be in complete control of your hardware infrastructure and are therefore solely responsible for its security and maintenance.

So how does scaling up via the cloud differ from scaling up your physical infrastructure?

To the cloud?

The main difference with scaling up via the cloud is that you pay to rent the use of hardware from a third party and then connect to it via a network connection, which is usually the internet. This means the data that was formally stored in one place on your server is now scattered across a network of third party servers and you pay for what you use.

This pay for what you use model means that using the cloud to increase your hardware capacity can save your company money, money  that can be ploughed into other avenues. The main advantage of cloud computing is the ability to quickly scale up and down as demand dictates because you are not in physical ownership of the hardware involved.

But this reduction in cost will come with the caveat of a lack of control, no guarantees of performance and entrusting a third party with the security of your data. Some people would really value a server network as an important business investment while others see it as costly expense that is no longer needed in the modern world.

What do you guys think about owning your own servers as a start-up investment? Do you like the idea of control or is the cloud the way forward?

Image by: dierken

Startups – How Much Should You Be Investing In Hardware? 6

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