Cloud Tech Is Raining Start-Ups

This is an era of dynamic start-up ecosystems, with new enterprises that produce digital solutions for domestic, regional, and global markets serving a wide variety of businesses, public institutions, civil society, and consumers directly. The growth of the digital economy has accelerated in the context of the coronavirus disease (COVID-19) pandemic.

The rapid growth of entrepreneurial businesses and start-ups has been accelerated by technologies such as cloud computing. The private sector is galvanized by the possibility of being, or investing in, the next “unicorn” start-up; and the public sector is excited at the economic growth opportunities presented by technology. 

One of the most important drivers of a tech start-up’s success is its ability to be an early adopter of emerging technologies, and its openness to building its business through innovative applications, both in service of existing enterprises and institutions, but also as a new market entrant. Cloud computing has emerged as a foundational infrastructure for building nimble, highly scalable, and digitally enabled firms. Multinational cloud platforms such as Alibaba Cloud, Amazon Web Services (AWS), Google Cloud, and Microsoft Azure, as well as domestic cloud computing companies, have ramped up their capacities and diversified their service offerings to support businesses, and have enabled a new generation of start-up companies.

Lets dive deeper to why the combination of cloud and start-ups is so successful:

Cloud Infrastructure is More Cost Effective than Traditional Technology Infrastructure:

For cost-conscious start-ups, large upfront spending on on-premises ICT infrastructure, such as servers and networking equipment, and maintaining skilled staff needed for its operation can bog down their ability to focus on their core products or services. The table below provides an overview of the traditional cost categories for developing an on-premises solution versus moving to the cloud.

Cloud enables a pay-as-you go and pay-as-you-grow investment strategy:

Prior to cloud computing, companies had to buy on-premises hardware to build their own data centers before they could develop, test, and successfully launch new digital products or services. Today, cloud platforms enable start-ups of any size to store, manage, process data, and use programs through a web based interface. They also enable start-ups to build services on shared infrastructure and platforms through:

• the ability to size and scale their technology infrastructure to suit their specific needs at a particular moment, via tools like data center provisioning calculators; and
• the ability to pay only the fees for the capacity that they use. This reduces costs and can help start-ups stay afloat in competitive business environments.

Conversely, using cloud computing eliminates the need for upfront investment as infrastructure capacity for data storage and processing no longer needs to be built in advance, but can be scaled to meet demand, as needed.

Cloud computing reduces entrepreneurial risk:

The flexibility of cloud infrastructure to scale up or down also enables start-ups to take more risks with testing new product ideas in the market because the upfront investment required to prove a new idea is reduced.

Cost savings from using cloud further allow start-ups to use their limited financial resources where it counts most, such as investing in geographic expansion, user acquisition, or innovative product development.

Scalable Cloud Infrastructure is Nimbler and More Efficient than Traditional Infrastructure:

Using cloud-computing infrastructure, such as infrastructure-as-a-service, platform-as-a-service, and software-as-a-service offerings, allows start-ups to establish fast, reliable, and efficient foundations on which to develop their products. The scalability of cloud services means that startups can be agile and responsive to better meet customer demands and market needs quickly and cost efficiently, which improves their responsiveness and reliability.

Cloud computing’s scalability has played a key role in allowing start-ups to expand while maintaining product quality, which is key to keeping customers in an increasingly competitive market.

Ultimately, having reliable cloud infrastructure allows start-ups to focus less on the operations and maintenance of ICT infrastructures and prioritize other areas.

Cloud Computing Allows for Greater Resilience in the Face of Unexpected Business Environments:

The ability for cloud infrastructure to provide back-up systems (“failover”) in the case of unexpected situations, such as disasters triggered by natural hazards, improves start-up resilience. Using cloud computing ensures that companies can ensure that business continuity plans are augmented with a strong data storage and retrieval policy.

The qualities associated with cloud infrastructure have also helped start-ups address challenges from the COVID-19 pandemic, including lockdowns, and help accelerate response times.

Variety of Cloud Services Enable New On-Demand Business Services to be Created, Rolled Out, and Delivered

Another reason that cloud platforms are critical to the success of start-ups is their provision of cloud-based business services. Every start-up needs basic services like accounting, human resource management and development, customer relations, marketing, communications, and legal services. Before cloud platforms became available, a start-up might have needed to build these business management capabilities themselves or outsource them to different vendors. Today, many platforms offer a multitude of software-as-a-service solutions via “cloud marketplaces,” allowing businesses and individuals to build support systems according to their needs.

In addition, technical bridges are often available, meaning that data and processes housed on non-cloud legacy systems can be imported (also known as “lift and shift” or “rehost”) into the cloud-computing systems. This reduces the burden of having to build a new system from scratch. As a result, start-ups have not only become producers of cloud solutions, but also consumers themselves.

Cloud Technology Enables New Products Built on Advanced Technologies Such as Artificial Intelligence, Machine Learning, and Data Analytics:

Newer technologies such as artificial intelligence (AI), machine learning, and data analytics are being built and developed on cloud-computing technologies. In many instances, these are available on demand, i.e., start-ups may not necessarily need to pay for these until they are required, if at all .

In many instances, these new technologies are natively available on the cloud, making it a natural “first stop” for start-ups when building out new products and services, thereby creating a new generation of “born-in-the-cloud” start-up companies.

How do you see the potential for start-ups to generate opportunities for economic growth with the use of cloud-computing technologies? Let me know in comments.