Phases of SaaS Hardware Purchasing
March 06, 2009
By Jeff Freund
SaaS is a business model requiring an investment in infrastructure -- and hardware costs money. There are many different approaches to deploying and managing hardware, and many different preferences on the choice of hardware for the job. As a SaaS business starts up and matures, I believe there are three phases the company will go through in purchasing hardware and the overall needs of the business itself changes.
- Bootstrap - Unless you are backed by big VC bucks from day one, you are likely ramping up on a shoe string budget. Frequent cost saving measures include buying generic hardware, skimping on support, and finding deals on the used equipment market (including eBay!) This is a period when you are figuring out how the platform will operate and where the scaling points and operational needs truly are.
- Growth - During the growth phase, the company is growing, the platform traffic is hopefully growing rapidly and technical resources are best devoted to quickly deploying proven infrastructure building blocks and building a stable, scalable platform. The last thing you want during this period is to loose momentum by spending time troubleshooting unreliable hardware, or time tuning and tweaking the hardware before it is ready for prime time. This is a time to buy brand name servers (with support!), top quality network gear, etc. The added expense will be worth it in terms of ability to execute quickly.
- Mature - When a SaaS platform hits a certain point of maturity, scaling issues should have been recognized and addressed. There should be enough fault tolerances built into the platform such that anticipated hardware failures are seamlessly handled. At this point, you have the opportunity to increase margins by optimizing the hardware cost. It's time to revisit generic servers, time to benchmark different brands, and figure out how to get the best bang for the buck. Every dollar saved goes right to the bottom line.
Not all companies will go through each of these phases and of course there are those who will choose to outsource all of the infrastructure and operations from the outset. For those who choose to forge ahead themselves, think about how to maximize the value of your hardware investments, and don't be afraid to either go higher end or lower end depending on the evolving needs of the business.