In part one of a three-part series on software scalability, former PayPal executive and serial entrepreneur Mike Fisher addresses the three things that can help (or prevent) growing software businesses from scaling efficiently.
When technology startups begin the process of scaling their business, they often rely on what veteran technology executive and AKF partners co-founder Mike Fisher describes as a “Law of the Instrument” approach.
“It’s akin to the old hammer-and-nail analogy – when you’re a hammer, everything looks like a nail,” says Fisher, who served as PayPal’s VP of Engineering and Architecture as the company began to scale in the early 2000s, and has authored two books on the art and process of scalability. “Along those lines, if you’re a technologist, the default is to try to fix or address everything by improving or evolving the technology.”
Unfortunately, Fisher says, scaling a technology company requires much more than that.
In addition to developing bigger and better information architecture and technology systems, software companies must also properly manage the growth of their organizations – adding personnel and establishing leadership hierarchies (often for the first time) in ways that don’t disrupt the company’s ability to communicate and operate effectively.
“That can be an incredible challenge,” Fisher says. “When I started working for PayPal, we had 35 developers. You could yell over desks and cubicles to communicate. When I left PayPal, we had 250 developers and the company was preparing to double that. We had to split the product apart, have engineers work on smaller modules in a more efficient way, and somehow still try to maintain a culture of open communication.”
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That scaling process wasn’t easy, even for a burgeoning business with plenty of access to capital and advisors who had scaled businesses before, says Fisher.
“At times, it felt like we would go from an all-out sprint to a standstill, which seemed counterintuitive given that we’d more than quadrupled our headcount and had more capacity to perform the tasks required of scale,” Fisher remembers. “The problem was that growing the organization created this technological debt – there were so many more people touching the code, so it slowed everything down.”
Ultimately, Fisher says, PayPal — and a number of similar tech companies that Fisher and his partners have worked with — was able to successfully navigate that challenge by addressing three key focal points and avoiding the pitfalls associated with each.
1. Systems Architecture
The reality of scale, Fisher says, is that a tech company’s engineers can spend all the time they want writing great code, but if the systems architecture (how the code is deployed on the hardware) isn’t designed correctly, the business is going to have scaling issues.
“Yes, the code should follow accepted software design patterns,” Fisher explains, “but the properly designed systems architecture is most important. If it’s not done well, you’re going to find it very difficult to scale, even if you have great software.”
“[Scalability] is not purely a technical or architectural issue. It’s a people and process issue, as well.”
2. Organizational Structure
After the right systems architecture has been put in place, Fisher says technology companies must turn their attention to their organizational structure. In other words, how can you best organize people and teams to optimize scale?
“I would say that at least half of technology companies believe that the thing preventing them from scaling efficiently is architecture,” Fisher says. “That might be an initial problem, but it often evolves into an organizational issue. The reality is that even if you have the right architecture in place, you still need to hire and develop people who possess the capability of scaling as quickly as the company does.”
3. Corporate Processes
Building on the previous two points, Fisher says that technology companies must also implement the appropriate level of process in order to properly manage system architecture and organizational structure.
“When you have three engineers, two founders, and a salesperson, you don’t need a ton of process; you can just yell across the room to communicate,” Fisher explains. “But when you have a team of 20 or 40 engineers, a group of product managers, and a formal senior management team, it’s absolutely critical to have processes that standardize workflow, communication policies, and responsibilities.”
Building a Three-Legged Stool for Scalability
Ultimately, Fisher says, technology companies must be able to look at each of three of the things above and fuse them in a way that creates stability, consistency, and predictability as the business grows.
“If you think about it like a three-legged stool, you can’t sit on that stool if any one of the legs is missing,” Fisher says. “You need all three in place for the stool to be functional. That’s how founders should look at scale. It’s not purely a technical or architectural issue. It’s a people and process issue, as well.”
In fact, Fisher says that he has found that scaling architecture is very often the easiest part. It’s the other two components that most frequently trip up tech businesses.
“There are some pretty standard ways to develop systems and scale architecture,” Fisher says. “But then it becomes, how do you put the right people in place to manage it? And how do you ensure that those people communicate and operate in a way that’s truly efficient? Those are the pitfalls that sink a lot of businesses as they scale.”
How have you addressed these issues in your attempts to scale?