Why Software Scalability Is So Important For Investors

min readpublished onupdated on

In the increasingly competitive investment landscape, Technology Due Diligence is proving integral for investors. One key factor they pay close attention to is "software scalability", which can significantly influence the future growth and success of a tech company. Scalability is a critical factor in the success of software applications, influencing their performance, responsiveness, and ability to handle increased workloads. As technology advances and user demands evolve, understanding the various angles of scalability becomes essential for developers and businesses.

Why Software Scalability Is So Important For Investors
Why Software Scalability Is So Important For Investors
Table of contents

Understanding the concept of software scalability

"Software scalability" refers to the capability of a software system to handle a growing amount of work or its potential to be enlarged to accommodate that growth. In simpler terms, a scalable software can effortlessly adapt and expand to increasing user demand without compromising its performance.

For instance, imagine a mobile application that performs excellently with a few hundred users. However, if its user base grows into millions and the app starts to lag or crash, it's clear that the software is not scalable. This lack of scalability can hinder the potential for growth, making it a risky investment.

Conversely, a scalable software application will continue to perform well regardless of the increasing user demand, representing an excellent opportunity for business expansion and investment.

The different aspects of software application scalability

Vertical Scalability

Vertical scalability, often referred to as scaling up, involves increasing the resources of a single server to handle additional load. This can include upgrading CPU, RAM, or storage capacity. While vertical scaling is relatively straightforward, it has limitations, as a single server can only be upgraded to a certain extent. High-end hardware might be costly, and there's a ceiling on how much performance can be gained.

Horizontal Scalability

In contrast to vertical scalability, horizontal scalability, or scaling out, involves adding more servers to distribute the load. This approach is highly scalable, allowing applications to handle increasing traffic by adding more server nodes. Cloud computing has significantly facilitated horizontal scalability, allowing organisations to dynamically allocate resources as needed.


Elasticity is the ability of a system to automatically adapt to changing workloads by provisioning and de-provisioning resources in real-time. Cloud computing platforms, provide elasticity by allowing organisations to scale resources up or down based on demand. This flexibility ensures optimal resource utilisation and cost efficiency.

Database Scalability

Database scalability is a crucial aspect, considering that databases often serve as the backbone of software applications. Scaling databases can be achieved through techniques like sharding, partitioning, and replication. Sharding involves distributing data across multiple database instances, partitioning involves dividing a database into smaller segments, and replication involves creating copies of a database for redundancy and improved performance.

Microservices Architecture

Adopting a microservices architecture involves breaking down a monolithic application into smaller, independent services. Each microservice can be developed, deployed, and scaled independently, allowing for greater agility and scalability. Microservices also facilitate fault isolation, making it easier to manage and scale individual components.

A Cautionary Tale of Ignoring Software Scalability

Ignoring software scalability can have significant consequences, as exemplified by the early days of Twitter. Launched in 2006, Twitter (now X) rapidly gained popularity, with users sending tweets in increasing volumes. However, the platform was plagued by frequent downtimes, causing a lot of frustration among users. The infamous "Fail Whale" became a symbol of the platform's inability to handle the growing user demand

This was largely because Twitter's initial architecture wasn't designed for scalability. The software couldn't handle the massive growth, which led to frequent crashes and performance issues. Investors and users alike were worried about the platform's future.

Twitter had to undertake a significant overhaul of its entire infrastructure to address these issues. This process was time-consuming, costly, and caused reputational damage. If scalability had been a priority from the start, Twitter might have avoided these issues and grown more smoothly.

This serves as a reminder for investors to prioritise software scalability during Technology Due Diligence. The cost of overlooking scalability can be high, and it's far better to invest in a software asset that is prepared for growth from the outset.

The Role of Software Scalability in Investment Decisions

Investors, particularly those involved in the tech industry, are always on the lookout for scalable software solutions. The reason for this is twofold: 

1. Future Growth and Expansion 

Scalable software can easily accommodate growth. As the user base of a software application grows, the software can scale up to meet the increasing demand without compromising on performance or user experience. This ability to scale means the company can potentially cater to a much larger audience, leading to increased revenues and profits. This is an attractive prospect for any investor, who is looking for returns on their investments. 

2. Cost-effectiveness 

Investing in scalable software solutions is also cost-effective in the long run. It may require initial financial outlay for development and deployment, but the ongoing costs associated with managing and upgrading non-scalable software can be much higher. Therefore, investing in software scalability now can save money in the future. 

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. 

Utilising Technology Due Diligence for Assessing 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. Source code scans delve deep into the software's structure, identifying potential bottlenecks and weaknesses that could impede scalability.

  • 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. 


In conclusion, software scalability is a crucial factor for investors when conducting Technology Due Diligence. It gives them the confidence that the software can manage increased demand and grow with the business. Moreover, it is a more cost-effective solution in the long run, maximising the return on investment. 

Investors understand that in the current digital age, the ability of a software solution to grow and adapt is paramount. Hence, software scalability plays a crucial role in their investment decisions. As a tech company, investing in scalable software isn't just about better performance; it's also about attracting investors and securing your business's future growth. 

Scalability isn't just a feature; it's a future-proof strategy for tech businesses and a golden ticket for investors. Embrace software scalability today for a better, more prosperous tomorrow. 

Vaultinum, a leading provider of Technology Due Diligence solutions, is an excellent example of a tool that aids investors in understanding the scalability potential of a software asset. Vaultinum's proprietary code scanners meticulously examine the software's structure, identifying potential scalability issues that could affect its future performance and growth. 

This advanced technology has proven invaluable for investors. In numerous cases, Vaultinum's insights have prompted investors to re-evaluate the value of a deal, negotiate better terms, or even walk away from investments where the scalability potential was inadequate. 

By providing a clear and comprehensive picture of a software's scalability, Vaultinum ensures that investors can make informed decisions. It highlights the importance of not just understanding a software's current performance, but also its capacity to grow and adapt to future demands. 

By integrating Vaultinum's Technology Due diligence Solutions into their investment assessment process, investors can confidently invest in software assets that offer a promising return on investment and are equipped for future growth. 



The opinions, presentations, figures and estimates set forth on the website, including in this blog, are for informational purposes only and should not be construed as legal advice. For legal advice you should contact a legal professional in your jurisdiction.

The use of any content on this website, including in this blog, for any commercial purposes, including resale, is prohibited, unless permission is first obtained from Vaultinum. Request for permission should state the purpose and the extent of the reproduction. For non-commercial purposes, all material in this publication may be freely quoted or reprinted, but acknowledgement is required, together with a link to this website.

Philippe ThomasPhilippe is the CEO of Vaultinum. An expert in new technologies and high finance, and after 20 years in the international fintech industry, Philippe now heads Vaultinum.

Recommended for you