How to evaluate software scalability: Technology Due Diligence
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Software scalability refers to the ability of a software application to handle an increasing amount of work or users. In other words, it means that the company can handle more users and data without having to worry about the application's performance, stability, or maintenance. This is particularly important for growing companies that are looking to expand their user base, increase sales, or enter new markets. It is thus also very important for investors looking to invest into such companies. Therefore one of the first questions that an M&A investor will ask when considering investing in a Tech company is whether the software is scalable.
Running a Technology Due Diligence will allow them to answer this crucial question. Let’s see how.
Why is software scalability important for M&A investors?
Imagine a company that offers a SaaS CRM platform. As the company grows, so does the number of clients using the CRM. If the CRM is not scalable, it will start to experience performance issues, such as slow page load times, crashes or unavailability of the database. This can lead to frustrated customers, lost sales, and damage to the company's reputation.
On the other hand, if the SaaS CRM tool is scalable, it can handle the increased transactions without compromising its performance or stability. This means that the SaaS company providing the CRM can continue to grow its client base without having to worry about the limitations in performance of the software.
The reason why scalability is so important is also because it plays a crucial role in cost savings, efficiency and ultimately ROI. When a software is scalable, it can handle more work without requiring additional hardware, infrastructure or people. This means that the company can save money on hardware and human costs and grow profits exponentially.
Furthermore, software scalability allows for faster development cycles and shorter time-to-market. When a software is scalable, it can be easily adapted and modified to meet the changing needs of the market or customers. This means that the company can quickly launch new features, products, or services without having to worry about the limitations of its software application.
With all this in mind, we can easily understand why it is important for an M&A investor to run a proper Technology Due Diligence to evaluate the scalability of the software.
Factors impacting software scalability
Several factors can impact the scalability of software. These include:
- Architecture: the software's architecture should be designed in a way that allows it to scale efficiently. The architecture should be modular, with components that can be added or removed as needed.
- Database: the database is a critical component of software scalability. It should be designed to handle large amounts of data and be scalable as the business grows.
- Source Code: the code should be written in a way that allows it to be easily modified and scaled. It should be modular rather than monolithic and designed to handle increased demand.
- Infrastructure: the infrastructure supporting the software should be scalable. This includes the hardware, network, and other components needed to support the software.
How can Technology Due Diligence assess software scalability?
Here are some key factors to consider when evaluating the scalability of a software application. All these factors can be revealed by a Technology Due Diligence, provided it includes source code scanning and an in-depth analysis of the Git history.
- Architecture and design: a software application with a modular architecture and a clear separation of concerns is generally more scalable than a monolithic application with a tightly coupled design. Look for software applications that are designed to handle horizontal scaling, which involves adding more instances of the application rather than increasing the resources of a single instance.
- Performance testing: it is important to evaluate how well the software application performs under stress and load. This can be done through performance testing, which involves simulating the expected usage of the application and measuring its response time. Some Technology Due Diligences may offer performance testing as an option to the process.
- Monitoring and alerting: it’s important to have visibility into the performance and health of the software application in real-time. Look for software applications that have monitoring and alerting systems in place, which can detect performance issues, errors, or crashes and notify the relevant parties. This can help identify scalability issues before they affect the users or the business.
- Development practices: the development practices used to build and maintain the software application are also fundamental in building scalable, resilient software. A Technology Due Diligence can use code scanning to identify whether the coding culture is healthy; For instance, a scan of the Git History can reveal whether best coding practices such as continuous integration and deployment (CICD), automated testing, and code reviews are in place. These practices can ensure that the software application is scalable, maintainable, and extensible.
How can Vaultinum’s Technology Due Diligence help?
Vaultinum’s Technology Due Diligence solution provides an in-depth analysis of a Tech company’s IT environment as well as deep dive, through a code scan into the source code and the Git history, to help investors evaluate the quality of the software they are considering investing in and make informed decisions.
Technology Due Diligence results are delivered within 3 weeks and cover the following 3 aspects: cybersecurity, intellectual property & third-party licenses, scalability & maintainability.
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