If you’re gearing up a VFX studio from scratch or expanding an existing operation, you’re likely grappling with some pretty central budgetary questions.
How many computers do you need? Should you buy or lease your machinery? How many software licenses are required? Do you want to start working with cloud now, or would you prefer to keep everything on-prem until you feel more established?
In order to survive in the industry’s feverishly competitive market, where studios arrive on the scene very quickly and can extinguish just as fast, you have to make smart financial decisions. You have to choose an economic model that will allow your business to remain flexible and robust.
Yet too few studios go through the necessary exercise of hard number crunching to determine which economic model might work best for them – one of the reasons so many fail so quickly.
To better protect your business, the approach you choose (cloud, on-prem, or hybrid), should be a decision led primarily by the head rather than the heart, says Mathieu Mazerolle, Athera’s senior product manager.
“You have to ask yourself a big question – do you want to just acquire a bunch of stuff, or do you want to focus on creating your art?”
Mazerolle is referring to the mistake that so many new studios make – in their excitement, caving to the temptation to run out and purchase the latest computers and gadgetry, rather than focusing on what matters.
“At the end of the day the value that you’re bringing into the world is coming from your talent. And the computer and the machine and the computing power and even the software licenses – those are machinery that you should suffer the upfront value as little as possible,” says Mazerolle.
The pay-as-you-go cloud model is a great way of eliminating the need for capex (capital expenditure), yet it’s frequently passed off as too expensive, or simply because it’s little understood.
“It’s really just another economic model that happens to have some really strong situational advantages and those situational advantages tend to apply to very volatile, fast moving industries, like most of high tech and VFX, says Mazerolle.
Many will choose the traditional on-prem option to work with, taking on the liability of depreciating machinery, simply because they feel they know what they’re getting into. But running the numbers, Mazerolle says smaller studios will frequently find themselves better positioned competitively having a more elastic model.
With the cloud, if something breaks down – it doesn’t physically belong to you, so it doesn’t affect your bottom line and is easily replaced. You can get access to that same software or compute power with the click of a button. If the technology changes, cloud evolves with it. If business wanes, you can scale down – no computers sitting around collecting dust and losing value to worry about. The moment a new project rolls in, no matter what its size or scope – you’re ready to take it on.
“If you haven’t gone through the exercise of understanding how cloud-based economics works, and its strategic advantages for you, then you can’t really say ‘cloud’s not right for me,’” says Mazerolle.
So what’s the best approach for studios starting from scratch?
Studios starting from scratch are very well positioned to take measured risk, which means they can make some pretty bold decisions – such as using newer technology like cloud.
“If you’re new, cloud just makes sense – it’s appealing because everyone knows that people are moving to cloud, but slowly. As a new guy you can just go there right away because nothing is holding you back,” says Mazerolle.
Cloud also happens to be a great way to get off the ground without needing to have hard cash on hand. By paying only for what you use, in theory you can spend as much money as you need to make money and not have any kind of debt or bank loan hanging over you afterwards.
“It means that as you get more established, maybe you will begin to acquire more stuff to become more of a hybrid cloud and non-cloud thing, who knows – but to get off in the most cost following way from the beginning, you have to do the numbers. Cloud is good for no capex up front,“ says Mazerolle, pointing out the financial disadvantage of owning lots of depreciating computers.
“So with capex, the problem is this PC I bought for my artist actually becomes a liability to me over time. A lot of people don’t think about this, because they’re thinking about how shiny it is on day one. But if you’re running a business over time, you have to think of the book value of things.“
Athera’s pay as you go cloud approach offers an opex (operating expenses) model that’s geared towards adapting efficiently to change, unencumbered by the liability of infrastructure – something a very dynamic new VFX business with evolving needs should be thinking about.
What about the best economic model for expansion?
As growing studios vie for their position in the industry, they have to be able to keep up with the highly individualized demands of each new job.
Bigger studios might beef up on infrastructure to meet the unique demands of a project. Smaller operations – even those that are rapidly expanding – simply don’t have the luxury of mass cashflow at their disposal to operate this way. They have to find a more cost effective way to adapt while they grow.
The elasticity and scalability of cloud offers smaller studios the ability to do the things that the big studios can, without the need of their massive scale in order for it to be economically viable.
Cloud’s adaptability also allows smaller studios to more easily weather the inevitable peaks and troughs in their business. In order to keep growing, many will take on projects that move their needle above and below their water line.
“So you kind of have to become giant for a small period of time and then become small. That’s where the cloud is really cool, and why for smaller studios, the economics of cloud just really make more sense,” says Mazerolle.
The only way to know whether to start or expand your studio with a cloud, on-prem, or hybrid approach is to go through an exercise of examining your heart and mind, doing some hard number crunching according to your unique situation, and then asking yourself some important questions, such as:
Do you want to be elastic and scalable? Do you want to be a step ahead of the competition by remaining cutting edge? And would you like to have instant access to unlimited storage and processing power to meet the demands of projects as they roll in?
If you answered yes to any of these questions, you must consider the strategic advantages cloud-based economics can offer to you.
To find out more about Athera and what it can do for your business, check out our website. If you’re considering cloud for an upcoming project, contact us for an engagement on a Proof of Concept basis by emailing firstname.lastname@example.org.