An increasingly controversial figure, one ingredient of Elon Musk’s success is lowering costs. Let’s see how
Elon Musk has increased the accessibility of his products and services by designing and developing components in-house, i.e. supply parts. The simplest and most common similarity? The farm that slaughters and sells meat. Generally, meat here costs less than from a simple butcher, for the same cut and breed. It is much more difficult to see a pizzeria that also produces flour, much easier to see a restaurant that produces its own ingredients (agriturismo). This process is called verticalization, Elon Musk did not invent anything, but he did it in a sector where verticalization costs much, much, much more. And it requires investors who give you a lot of money and trust…
What does all this have to do with statistics?
Data science lives, as does computer science, on computers. And computers require energy. But let’s proceed in order.
To have statistical solutions at a lower economic cost you can host those solutions on your company servers, which obviously raise the cost in skills, for management, just as producing batteries requires specialized people both for production and for the industrialization of the process. Musk for a period purchased batteries from a specialized supplier, just as you can have the entire IT infrastructure in the cloud, that is, on third-party computers. But doing things yourself in the medium term increases margins but also responsibilities. Legend has it that the cloud doesn’t abstract the IT infrastructure but avoids having to deal with human resources companies for the search and selection of certain IT figures.
Let’s take a less statistical but more IT example. To host a website seriously, you need no less than €300/year and you’d have decent performances (e.g. loading times). With a €300/year repayment plan you get a server with divine performance for 5 years, excellent for 10. If you want to have a more secure or redundant IT infrastructure, your infrastructure will have good performance for 10 years. However, you can do very little with redundancy if you have a site with 1000 visits per year. With 100 thousand it already makes more sense.
If you don’t want to have your own server, for example because you are afraid of floods, you can have a non cloud server of third parties such as Hetzner.
Now let’s talk about energy. Having your own infrastructure allows you to control another cost item: bills. But while for the server it is enough to have a rented location, to control this other cost item it becomes more important to have a location of your own. Having a roof or in any case a space where the sun almost always shines, allows the installation of various solutions that use sunlight, such as photovoltaics. And this allows you to lower the costs associated with having a machine on 24 hours a day. Photovoltaics also allows you to lower the costs of salespeople, if they use an electric car to carry out their work.
The infrastructural issue is the easiest to see, while the software side becomes more abstract. For example, having a CRM in-house, through open solutions, possibly hosted on a different server than the website, allows for example to save thousands of euros for Hubspot, with some features being equal.