When it comes to building new businesses, speed and scalability remain critical, propelled by the accelerating pace of change creating a winner-take-all dynamic in many markets. This is according to a new report by Mckinsey &Company. The report titled SaaS, open source, and serverless: A winning combination to build and scale new businesses, notes that most digital-first start-ups have rapidly gained a lasting competitive advantage by incorporating new technologies that enable them to innovate and scale quickly.
“Specifically, a trifecta of technology approaches has emerged, providing a formidable arsenal for companies looking to launch new businesses more quickly, securely, and effectively at lower costs”, the report says.
These include Software as a service (SaaS), which allows companies to consume all software services they need without having to create the software themselves; Serverless architecture, which enables companies to focus on writing code rather than running it and Open-source code, which gives businesses access to existing, free-to-use software libraries that can easily be integrated into a company’s own code.
According to McKinsey, each of these can offer significant benefits. But the real breakthrough is in combining all three, flexibly combining services (such as a login) from a third-party SaaS provider and integrating them with other third-party services (such as recruiting management services) and company-specific functions (such as salary calculations) in a fully serverless architecture. This tech fusion enables companies to radically simplify and accelerate the development process for both launching and scaling new businesses.
“For companies looking to launch new businesses, the core principle of combining these approaches is to both maximize the value of what already exists and reduce the burdens of development and maintenance”, the report states. It adds: “Other benefits are also emerging. As companies develop greater expertise at using serverless and build up their architecture capabilities, they are able to take greater advantage of the cyberservices offered by cloud service providers (CSPs)—although they will always need to take practical steps to manage their individual risk”.
Companies seeking to build new businesses, however, too often misunderstand the full extent of the benefits of SaaS, serverless, and open source, or they implement them ineffectively. In many cases, that’s because they believe their own legacy systems and approaches offer a more reliable foundation for launching a new business. Unfortunately, these companies soon learn that this approach not only brings with it the inefficiencies tied to legacy systems but also limits their ability to think ambitiously and creatively enough to architect the applications needed to completely enable the new business.
To make SaaS, serverless, and open source work for new businesses, McKinsey advises, incumbent companies must completely rethink their IT strategy, redesign processes, embed new approaches and mindsets, redesign security, and attract a new type of talent. The benefits of serverless in reduced time to market alone, for example, more than outweigh the challenges of making the transition. Leaders who can manage these five tasks in tandem will gain the organizational capabilities to better support business building and jump-start growth.
