Beat The GMAT - the MBA Social Network

One of the benefits of building a company from scratch, and doing it in a bootstrapped way, is that you are really forced to do even the simplest of things in new, innovative and cheaper ways than a Fortune 500 company might. In this way, even if you were to do nothing but create a company that replicates an existing business, for example, a realtor (real estate) chain such as Foxtons, you could create the business in such a way that it has significant cost advantages. With these cost advantages, your business might even be able out-compete the more traditional type of firm.

Perhaps the most stark example of emerging cost advantages that new firms have is through the gradual elimination of IT infrastructure costs. In many companies, IT infrastructure is a significant investment that covers desktop application software, computer hardware and IT support staff that manage these. If you are building a company from scratch, you can build an enterprise that has little of few of these types of costs. How? With Google Apps.

Current and upcoming features in Google Apps include

• Web based docs, spreadsheets and other office software – all of which is free, comparative to Microsoft Office.
• Management of your web site and domain.
• GDrive, Dropbox-like software that will integrate your offline storage with Google docs online, and thus also provide back-ups.
• Chromebook laptops that are integrated with Google Apps. They can be leased at approximately $300/year – and so can be cheaper than dedicated, purchased hardware.
• Google Apps, and their partners’, support staff, who provide assistance in using these services.

Clearly a Google Apps centric solution is not as feature rich as tradition solutions… but how many organizations need those rich features? And is it worth the additional cost?

Beyond the cost of IT infrastructure, there are other areas where cost advantages are possible.

• The use of offshore, remote workers that can be employed for simple tasks using oDesk and other contractor platforms. Do you really need to hire administrative staff at full US staff costs, or can a remote worker (at a fraction of the cost) suffice?
• In some cases Western workers are required, because of the nature of the work involved. In those cases, can you employing segments of the population that are normally not considered by other firms, and hence can be cheaper? These include, for example, the retired and stay-at-home mums.
• Maintaining all documents and literature in electronic form, and hence eliminating filing cabinets of paper, and reducing the amount of office space required. Just think about how much paper that your legal department has, for example.
• Allowing staff to work from home, so the office is just a place used for meetings and work that requires collaborative effort. This again reduces the amount of office space, and overhead costs, required to run a business.
• Use of Skype and Google Voice to reduce or eliminate telephone costs. Use of Join.me, instant messenger and email to enhance collaboration.

New companies that are starting right now, particularly if they are bootstrapping, are already incorporating many of these practices. Over the long-term, if they maintain these practices, these firms will have significant cost advantage over existing traditional firms. Older, more bloated, firms may not be able to compete with these next generation firms.