Case study: How SMBs use startup software to save big bucks

Just because a company isn't large enough to roll out giant enterprise systems doesn't mean it can't achieve the same results as the bigger players.
Written by Michael Lee, Contributor

Government and large businesses spend millions of dollars on enterprise software, but what if you're a smaller player that cannot roll out or afford enterprise software? Do small businesses simply have to cut costs until they're large enough to play with the 'big boys'? And if small businesses use something now, won't they need to rip it out later, anyway? Not according to some of Australia's own startups.

Shoes of Prey

ZDNet spoke to Shoes of Prey co-founder Mike Knapp about what his company has used to create almost its entire online business. Knapp's business follows more of a classic retail store, only the storefront is online. Customers can design shoes online, see what they look like in 3D-rendered images, order them, and have them delivered.

The software for all of the business is written in Python on Google's App Engine platform, whether it's the front-end website or the back-end logic of the business. The platform also supports Java, Go, and, more recently, PHP.

Knapp himself used to work at Google, and knew the 'secret sauce' with what was going on behind the servers, which was one of the reasons that he decided to use it. However, many startups choose to use it because of its initial low costs.

"For the first few years, we really paid nothing. We paid something, but it was basically free. Now, we're getting to see some very serious usage ... so we're definitely optimising."

It can afford to do that now that the business is larger, but it gave Knapp and his colleagues some breathing space to create a minimum viable product without necessarily having to optimise code as required on a larger scale. Now that the day has come, and the focus is no longer on simply getting to market, the business can divert more of its attention back to creating better efficiencies.

"It's a pretty large app now. I don't know how many lines of code, but it's pretty massive. We're in fix-it week this week, which is like where we're ripping out old code and we're re-factoring stuff."

This helps the business cut down on some of its costs. However, businesses that still might not be ready to dig deep into their code could be fine with paying for the additional overheads until they can hire the right people, because their app would scale, albeit not optimally, instead of dying at a critical moment.

And scaling is an important issue for a retail site that might see a rush of sales at odd times of the day. When the US market wakes up at 2am Knapp's local time, the last thing he wants to do is have to get out of bed to scale up virtual infrastructure.

"If we get a lot of traffic to our website, App Engine scales for us. We've had days where hundreds of thousands of people come to the website in a very short period of time, and the great thing is that App Engine takes care of that for us," he said.

"The website is the easy part to scale of our business. The hard part is actually making the shoes. I wish we could scale our manufacturing as fast as we could scale our servers!"

The company uses Google for most of its online needs, which Knapp said has the added benefit of allowing the team to easily integrate its data across multiple products, such as Google's BigQuery offering, which is used to analyse large datasets.

"We can get a snapshot of our database, and it runs every day at 4am, and then that gets piped into BigQuery, and then the marketing analysts can run queries using the query engine, so it all works nicely together."

One of areas it doesn't use Google's platforms for is the dynamic 3D rendering of its products. For that, it's currently using Amazon's Elastic Compute Cloud (EC2) offering, but now that Google is offering a competing product, Knapp said it is also looking to move that workload across, just to keep everything on one platform.

"Now Google's got its own server, so you could do the same thing that we're doing on EC2 on Google now. That's something we're looking into at the moment — whether we actually can move everything to Google. It's nice to be on one platform."

A potential problem with this is that it does create a single point of failure that could cause a large portion of the business to fail.

"There's a general problem, I guess, which is common to all platforms in the sense that if the platform goes down, the platform goes down with it, and there's very little you can do about it at that point. But that's kind of the trade-off you make when sign up to a big cloud service."

Such issues have occurred in the past, such as in October 2012, when App Engine failed to live up to its promise of never going down. Google reimbursed its customers for 10 percent of their usage for the four-hour outage.


Value isn't only attainable by going with one provider, however. Australian startup WattCost is one such company that uses several different platforms to meet its business needs. The company has created a method of analysing electricity usage at households to better reduce bills, even when a customer doesn't have a smart meter installed.

WattCost's platforms include Xero for its record keeping, Zendesk for its customer relationship management, Google Apps for its office and email requirements, and Flowdock to coordinate internal communications and issue tracking.

Its CEO and founder David Soutar said that almost all of the software they used had come out of the startup community, and that because they can relate to how the development process works, they are willing to accept a few bugs here and there. But it also means that the businesses creating these products understand that startups don't have a lot of money to spend, and price themselves accordingly.

"The companies that come from startup roots understand that as a startup company, you don't have a lot of money to spend. Of course, they want to convert you into a paying customer eventually, but pretty much across the board, people will offer you these days six months to a year of free subscription. When you're in your early days, this can add up to thousands of dollars."

As for whether software could scale with the business as it grows, Soutar said that it often depends on the developers behind the software they rely on. For it's bookkeeping, Soutar said that Xero is growing at the same or a faster pace as his own business, and because it is receptive to small businesses' needs, it is much more willing to listen than a larger company that has already firmly established itself in the market.

"They're generally much more responsive to our work needs. Certainly, if we find something that the [software-as-a-service] packages can't do, most companies are quite receptive to suggestions as to where they can make improvements. The very best companies obviously are very proactive in that area."

Bugs aren't the only trade-offs. Soutar said that in the case of its business using Google Apps, the 'office' suite of tools suits its needs well, but if someone were to come from Microsoft Office, they wouldn't be able to achieve the same results in Google Docs. However, the upside of Google's tools is that when they do suit the business' needs, they do so extremely well.

In fact, Soutar sees the minimal features of Google Apps and similar cloud services as being a cost saving compared to "installable" applications. In particular, he pointed to Microsoft's Office suite before it, too, went to the cloud, saying that users typically only use 5 percent of the entire suite, with the other 95 percent remaining a mystery.

"That's been one of the big problems with software development over the last 10 years. They say they're becoming feature rich, but you have to spend more money to upgrade to the latest packages, which has 10 more features. The reality is that people don't need it. It's the paradox of software development," Soutar says.

"These online tools are much more agile than their installable counterparts, certainly more cost effective, and they also facilitate group collaboration a lot more, certainly in a real-time sense."

And there are areas where enterprise systems haven't yet caught up. For example, WattCost is using Flowdock to tie everything together on the social media and, to a degree, customer relationships management side. It's a combination of an internal instant messaging system and an inbox that can be hooked into other services like Twitter, Facebook, Zendesk, and GitHub.

It creates, essentially, a live channel that the company can monitor its presence out on the internet without having to use a large number of disparate systems, where things might get lost in the cracks.

"Instead of having half a dozen packages that you're looking around trying to figure out what's going on, it centralises all of the information."

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