Beyond Debate: How the cloud is a clear winner for start-up firms

Start-up firms are notoriously risky—a fact supported by overwhelming evidence in the form of the vast majority failing within just a few months or years. In most cases, start-ups have to deal with material cash constraints and any opportunity to conserve capital should not be taken lightly. This case study focuses on the IT spend of a start-up provider of procurement and distribution services in the specialty pharmaceuticals industry and highlights the savings which could have been achieved had the cloud been utilized.

The Back Story
Recently, it was requested that Qnectus examine the IT infrastructure of an early-stage company in an effort to evaluate the firm’s on-going IT support needs.  The company in question is a provider of procurement and distribution services within the specialty pharmaceuticals industry.  About six months ago, the company invested substantial upfront capital to acquire and deploy traditional IT infrastructure to support five (5) employees.  Had the startup utilized Qnectus’ cloud offering, these upfront capital expenditures could have been reduced by 94%.

Upfront IT Investments
The following chart details the firm’s upfront IT spend: {Figure 01}

As shown, the company incurred approximately $12,925 in IT spend for equipment and an additional $3,100 in IT spend for associated labor costs for a total of approximately $16,025. Note that these costs do not include any of the following: the downtime (and lost productivity) experienced during the installation, configuration, and testing of the IT infrastructure which totaled four (4) days; ongoing support in the form of a managed service contract; or printers (supplied by the founder of the company). Additionally, it is important to keep in mind that these costs were incurred to support five (5) users, despite the company needing less than that number in its early stages (at this time, only one or two users are active in a given month as operations ramp up).

The Qnectus Cloud Alternative
This analysis details a hypothetical estimate of the costs that the startup company would have incurred had Qnectus’ cloud-based IT solution been utilized.  During the first three months of the firm’s operations, the company was unable to complete a contract with a major customer—as such, the firm only ended up needing IT infrastructure and support for one (1) employee, not for the five (5) which had originally been anticipated. The following are the estimated monthly costs for each of the first three months of operations for the firm had a cloud environment been selected: {Figure 02}

As may readily be seen, the total IT cost for Months one through three were $923—approximately 6.0% of the total upfront costs of $16,025 (a 94% savings) which were actually incurred. This estimate is particularly striking given that it includes the following: hardware in the form of thin client devices; a virtual desktop environment with a Windows 7 themed OS; hosting and management of Microsoft Office; fifteen (15) day rolling backup of all data; and on-demand,
24/7 support. Additionally, it is important to note that this type of cloud infrastructure can be set up in less than one (1) business day and that it is inherently quite flexible—within minutes, additional users may be easily added (and removed just as simply) if industry conditions warrant expansion (or contraction).

Across-the-board, Qnectus provides startup companies with a right-sized IT solution that can significantly reduce (and, oftentimes, eliminate) upfront capital expenditures. In the startup phase, this is particularly important given that overspending can rapidly land a firm in financial difficulty—a situation from which extraction without the attainment of costly and highly-dilutive capital may very well prove impossible. Further, as Qnectus’ cloud solutions permit a startup firm to seamlessly adjust to any business conditions that may manifest themselves, whether positive or negative, the superiority of the cloud as an approach to IT should be evident to all.

Traditional IT Results

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