Value creation and evolution of a value network a longitudinal case study on a platform as-a-service provider presented by Arto Ojala & Nina Helander at HICSS-47 conference.

1. UNIVERSITY OF JYVÄSKYLÄ
Value creation and evolution of a value
network: A longitudinal case study on
a Platform-as-a-Service provider
Arto Ojala
University of Jyväskylä
Nina Helander
Tampere University of Technology

2. UNIVERSITY OF JYVÄSKYLÄ
Background
 In cloud computing, different service providers
cooperate with each other to create value for other
firms and end-users
 A service provider is, in many cases, dependent
on other firms in the market.
 To operate successfully with partners and
customers in the cloud ecosystem, a firm has to
consider the value that it offers for other firms in
the network, and how this value can be delivered
to the customers and end-users.

3. UNIVERSITY OF JYVÄSKYLÄ
Background
 Current studies on cloud computing have mainly
focused on SaaS providers whereas PaaS and IaaS
providers have gained less attention.
 PaaS firms have to develop extra value for content
providers in such a way as to increase the
attractiveness of the platform.
 In addition, they have to cooperate with IaaS providers
which operate their platform on servers, and which
deliver the content to end-users.

4. UNIVERSITY OF JYVÄSKYLÄ
Purpose of the research
 This paper seeks to contribute to information systems
(IS) literature by examining:
– 1) the direct and indirect value that a PaaS provider generates
to its partners in the network,
– 2) how a PaaS provider develops its position in the value
network, and
– 3) how the value network evolves over time.

5. UNIVERSITY OF JYVÄSKYLÄ
Network theory
 Business networks are consisted of direct and indirect
relationships between organizations
 In business networks actors perform activities through
which they transfer and transform resources (ARA)
 Networks change over time, sometimes radically, but
usually they evolve over time

6. UNIVERSITY OF JYVÄSKYLÄ
About value and value creation
 Value creation has been widely studied issue in
business life
 Value can be understood as the trade-off between
benefits and sacrifices
 Benefits and sacrifices are monetary and nonmonetary in nature
 The framework of Walter et al. (2001) utilized in this
study to enable value measurement:
– Direct value functions: profit, volume, safeguard
– Indirect value functions: scout, access, market, innovation

7. UNIVERSITY OF JYVÄSKYLÄ
Method
 A longitudinal single-case method
 The interviews with the employees of the firm took
place in 2005, 2010, 2011, 2012, and 2013.
 Altogether 13 interviews (5 with CEO, 8 with other
employees)
 The case firm acted as a PaaS provider in a new
business area, cloud gaming. It also had a relatively
long history in the cloud gaming markets, thus
facilitating a longitudinal perspective.

8. UNIVERSITY OF JYVÄSKYLÄ
The case firm
 G-cluster develops interactive gaming platforms and
games-on-demand services as a PaaS provider.
 In the G-cluster business model, licensed games (from
content providers) are run on the firm’s platform that is
operated by the game servers belonging to an IaaS
provider.
 These servers transmit the game content as an MPEG
stream to the devices of end-users, over the
broadband network.
 The client devices receive the stream, display the
game, and transmit users’ commands back to the
game servers.

9. UNIVERSITY OF JYVÄSKYLÄ
Discussion
 Based on the findings, the direct value can be divided
into:
– 1) resources enabling the service
• E.g. content from the game publishers for the platform, IaaS
services from network operators, and a delivery channel from
network operators and portals.
• All these were resources were needed but which, as a small firm,
it could not produce itself.
– 2) functionalities needed for the product
• E.g. the menu to select the game (provided by portals) and
invoicing system (provided by video-on-demand service
providers).

10. UNIVERSITY OF JYVÄSKYLÄ
Discussion
 G-cluster was able to develop its market position by:
– i) cooperating with several partners, who benefited from the
G-cluster service and marketed it forward to network
operators (IaaS providers),
– ii) offering unique indirect value to game publishers (content
providers) in addition to direct, financial value,
– iii) developing its platform further to become less dependent
on third parties, and
– iv) removing some partners from the value network when
these became unnecessary.

11. UNIVERSITY OF JYVÄSKYLÄ
Discussion
 The value network evolved from a complex structure
involving several actors (in 2005), towards a simple
network structure that included only the most critical
partners, content and IaaS providers (in 2013).
 The findings here indicate that although the number of
partners in the network decreased over time, the
number of the most critical partners (content and IaaS
providers) increased.

12. UNIVERSITY OF JYVÄSKYLÄ
Discussion
Micro position
Direct value
Indirect value
G-cluster -> Game publishers
-Financial value
Game publishers -> G-cluster
-Content (games) for the platform
-No piracy
-No second-hand markets
-Longer markets for games
-New revenue models
-References
G-cluster -> Network operators
-Financial value
-More content for the services
-Delivery channel
-IaaS services
Network operators -> G-cluster
-Market potential
G-cluster -> Video-on-demand service providers
-New feature for the service
-Pre-existing customers
-Marketing
-Brand name
-Networking with game publishers
-Market potential
Video-on-demand service providers -> G-cluster
-Invoicing system for the service
-Networking with IPTV providers
G-cluster ->
Set-top box manufacturers
Set-top box manufacturers -> G-cluster
-New feature for the service
-Market potential
G-cluster -> Middleware software providers
-New feature for the service
-Networking with IPTV providers
Middleware software providers -> G-cluster
G-cluster -> Portals
Portals ->
G-cluster
G-cluster -> Server manufacturer
Server manufacturer ->
G-cluster
-Market potential
-Networking with IPTV providers
-Financial value
-More content for the services
-Delivery channel
-Menu for the games
-New feature for the services
-Market potential
-Pre-existing customers
-Marketing
-Brand name
-Market potential
-Networking with network operators

13. UNIVERSITY OF JYVÄSKYLÄ
Conclusions
 This study focused on a PaaS provider’s value
creation, and it contributes to an understanding of a
PaaS provider’s activities in the value network.
 Secondly, this study provides detailed knowledge on
how a PaaS provider can cooperate with other firms
and form a value network that provides
complementary services for its platform.
 Thirdly, this study incorporates network theory and
literature on value creation, and extends IS research
by conceptualizing the value creation and evolution of
the value network in the context of cloud gaming.

14. UNIVERSITY OF JYVÄSKYLÄ
THANK YOU FOR YOUR
ATTENTION!
Contact information:
arto.k.ojala@jyu.fi
nina.helander@tut.fi