If you’re starting a crowdfunding business then you have a number of options open to you when considering how to get a site up and running. One option is to build it yourself. Another is to use a service provider like ShareIn to run the site for you. Certainly we have a preference for you to choose us, but there are some good economic arguments for using a specialist service provider instead of trying to build in house. There are parallels in software economics to those of supply chain economics.

In supply chain economics retailers with multiple outlets are advised to manage stock from a central warehouse facility. Ensuring that stock is in the right place at the right time is the holy grail of retail. Too much stock leads to wastage, too little stock and you risk missing sales. But holding stock is expensive. It comes at the opportunity cost of utilising the same expensive retail space to sell other products.

By relying on a warehouse to hold stock, retailers can use the space in their shop to sell products. This is a better return on capital.

More subtly, they can hold less stock to cover the same risk. With a warehouse pooling the stock holding across many outlets they are able to spread the risk of a particular line item outage across all outlets. The total stock held by the warehouse to cover stock outage risk is smaller than if the outlets had to hold the stock on site.

Because they hold less stock they can hold a larger range of line items.

With central distribution, outlets retail more line items, have more retail space and operate with a lower risk of stock outage.

Economies of scale achieved with centralisation

This analogy if useful as it demonstrates how through leveraging economies of scale costs can be reduced and a better service provided.

The same principles are true in software.

To build a platform you will need to hire specialists. They need to know about payments, regulatory requirements, UI best practice, development operations and platform scaling. These skills cost money. If you hire permanent staff this is also a large long term fixed cost. Websites are not static and require constant updates; they need to change in response to regulatory changes, software infrastructure changes (browser upgrades), security changes (e.g. SSL invalidation), UI best practice changes and fashion.  To stay competitive you’re going to need to keep your site up to date either with permanent or contract staff. However your updates are likely to be ad-hoc and lumpy in frequency; the requirements won’t be as consistent as your fixed costs.

Conversely, because of economies of scale, outsourcing is more cost effective. We can pool change requests from multiple clients across a single large development team. We’re able to be more productive with capital because of economies of scale. Our requirement workflow is more closely aligned with our fixed cost base. We can pass this efficiency on to you in the form of low service costs when compared to doing this in house.

When hosting your platform you will need to manage the risk of traffic bursts that may not always be easy to anticipate. You will need to pay the full cost of managing the risk. Again, due to economies of scale, we’re able to pool this risk across many customers and at the same time provide more robust hosting at a better price than you could achieve individually.

Finally as we have a dedicated team of specialists working on this full time we’re able to provide a rich set of functionality that’s difficult to do in house.

Due to economies of scale we achieve we can offer:

  • More reliable service
  • Richer functionality
  • Lower operating cost

Today ShareIn runs platforms for some of the UK’s biggest crowdfunding sites across a variety of sectors including property, impact investments and startups. If you would like ShareIn to get you up and running with your crowdfunding business please get in touch.

 

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