Reviewed by Aug 27, 2020| Updated on
Scalability is defined as a property of a model, system, or function that defines its capacity to cope with and operate in good condition when the workload is expanding or increasing. Systems that are able to scale well would be in a position to keep up to or even increase its performance level or effectiveness despite when under pressure of higher operational needs.
In markets, scalability often refers to the ability of financial institutions to control the higher demands from the market. When it comes to the corporate environment, scalable companies are those that are able to maintain or enhance profit margins when the volume of sales increases.
Why Scalability is important?
Be it in financial content or from the viewpoint of the strategy of a business scalability describes an enterprises capability to expand with not having been affected either by its structure or resources that are available when there is a demand for the increment in its production.
The concept of scalability is now extensively relevant due to technology being more and more accessible for the customers and has made it easy for businesses to acquire customers and expand their market presence and scale.
Some information technology companies, for instance, possess an incredible capability to quickly scale themselves, thus giving themselves a great chance to acquire more customers. One of the main reasons why this is possible is that they can meet the rising demands when under immense pressure. The companies with a low operating cost and minimal to no burden of warehousing and inventory will not be in need of too many resources or workspace to increase significantly over a short time.
Systems scaling to cope with the requirement will maintain its efficiency level. The concept of scalability is related to economies of scale. When there is increased production with an increase in cost and reduced profits, then it referred to as diseconomies of scale.