Value creation and evolution of a value network a longitudinal case study on a Platform-as-a-Service provider
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This study examines the value creation processes of a Platform-as-a-Service (PaaS) provider in the cloud gaming sector, highlighting the direct and indirect value generated for its partners within the network. Findings indicate the evolution of the provider's value network from a complex structure to a simpler one, emphasizing essential partnerships while reducing unnecessary collaborations. The research contributes to the understanding of PaaS activities and networks by integrating network theory with value creation in cloud ecosystems.
Value creation and evolution of a value network a longitudinal case study on a Platform-as-a-Service provider
- 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