A startup coming into the game in 1998 had its work cut out for it. Whatever it wanted to create (and however grandiose it was) had to be built by the in-house team, completely from scratch. Projects that seem small by 2011 standards, therefore, were massive undertakings ten years ago - and many startups that would be launched today were dismissed as impractical back then. There are several reasons why starting and running a startup is easier today, but one of the biggest is piggybacking via software as a service (SaaS) tools.
The overall concept and key benefits of this technique are explored below.
The Overall Idea
Every startup is constrained by the resources at its disposal. This is true for the life of the business, but it looms especially large in the beginning. When you only have $5,000 in seed capital and a single programmer, it's difficult to build a vast infrastructure right out of the gate. But what if a vast infrastructure is exactly what your project requires? In the pre-SaaS days, the answer was, more or less, 'tough luck.' This was very demoralizing to startup founders, and many simply refocused their energy on projects that required less money, machinery or personnel to run. Today, piggybacking has changed all of that. While resources are obviously still a factor, startups have exponentially more flexibility.
'You don't have to hire dozens of engineers,' says Robert Williams (CEO of SocialEyes, a social-video start-up that was founded in April 2010 and is close to announcing its first product) in an interview with USA Today. 'You can use existing infrastructure and outsource other duties.' What Robert is referring to are free or low-cost 'building blocks' from web giants, including 'Google's application engine, Amazon.com's web services and Facebook's authentication technology.' Rather than having to sweat it out for months while building these features from nothing, resourceful founders now 'piggyback' on these already-developed systems and slice their launch time in half - or more.
One of the main benefits of piggybacking is rapid deployment. Let's say you are building the next big social network or membership site. In the 'old days' of web startups (again, think 1998) this meant hiring programmers to build out a full-fledged infrastructure from the ground up: login systems, databases, heavy-duty hosting packages, the works. In addition to the cost of programmer salaries (or equity) and all the needed equipment, this was all extremely time-consuming.
This is deadly to a startup. Y Combinator's Paul Graham constantly stresses how important it is to rapidly iterate - that is, roll out new features in quick succession and gather user feedback for improvements. In fact, 'launch fast and iterate' is one of his 13 one-sentence startup success principles. SaaS tools make rapid launch and iteration easier by eliminating the need for brand new development. Facebook's authentication technology, for instance, lets users log into your site via their existing Facebook accounts rather than creating new ones with you. Why do all the bug-testing and prototyping they've already done?
Piggybacking is also wise from a cost efficiency standpoint. When you do it all from scratch, you tend to pay large, non-refundable sums for each step of the process. You can't buy an enterprise-level web hosting package, decide three days in that you don't want it anymore and get your money back. Nor will it be easy to return an entire closetful of rack-mount servers in the event of a problem. For better or for worse, you're simply stuck with these high-end purchases for a prohibitive length of time after they're made.
SaaS tools offer a way out of this trap by billing you on a utility model. Take Amazon's S3 storage service as an example. The service is set up so that you can instantly use as much or as little space as you want and pay only for that amount. The moment you use less, you pay less. Facebook offers similar efficiencies. According to the New York Observer, at least one local news service has shut down its website in favor of using a Facebook page for all its content publishing.
Reduced Need for Personnel
It's no secret that startups need to keep costs low early on. And it's for this reason that piggybacking provides still another benefit: the ability to have fewer people on staff. When you build the entire infrastructure, it goes without saying that someone needs to manage it all. Unless you (as the CEO) are also a programmer and server whiz, this crucial responsibility either gets hired out or not done at all. These extra salaries can put a serious strain on a young company's slim budget. Depending on your profit margins, it might be the difference between survival and bankruptcy.
But who manages Amazon S3? Amazon does. Ditto for Facebook, Google, Grasshopper and other cloud-based solutions to common e-business problems. What you are buying (in exchange for relatively modest use fees) is the outsourcing of management tasks without paying a manager's salary.
Startup founders are pretty confident, but if your life depended on it, which would you say was more stable: Amazon's servers, or the old Gateway in your broom closet? No experienced entrepreneur would hesitate before answering Amazon, and the same applies to virtually any system you piggyback onto. Whether it's Amazon or Google, you're talking about publicly-traded businesses with professional staffs, operating procedures and track records in exactly what you are outsourcing to them. Chances are, the cloud-based solutions they provide are infinitely more stable and road-tested than what your team could create over the course of a few weeks or months.
Thus, when faced with the choice of cobbling something together yourself or plugging into an established system, the latter is always the least likely to crash.
The one thing just about every startup wants to do is grow, and growth requires scalability. If your infrastructure can't keep pace with demand and new users, you're sunk. Unfortunately, the 'bubble gum and duct tape' systems pieced together by entrepreneurs on the fly are rarely able to handle the demands of growth. This is why so many websites crash the same day a blog post or product release hits the top page of Digg. They worked hard to create something valuable, but literally could not handle the wave of success that followed.
Piggybacking provides an excellent hedge against this problem. By putting your key online business processes into the hands of web giants, popularity-induced crashes are all but certain not to happen.
As a company who got started by bootstrapping our business, we really understand the value in piggybacking, especially when just starting out. Are you using piggybacking in your startup? Thinking of using it? Tell us how!