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The Impact of Cloud Computing Towards Early Stage Startups in Sweden:
Case of Three Stockholm-Based Early Stage
Startups
ABRAHAM SETIAWAN
Master of Science Thesis Stockholm, Sweden 2015
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The Impact of Cloud Computing Towards Early Stage Startups in Sweden: Case of Three Stockholm-Based
Early Stage Startups
Abraham Setiawan
Master of Science Thesis INDEK 2015:46 KTH Industrial Engineering and Management
Industrial Management SE-100 44 STOCKHOLM
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Master of Science Thesis INDEK 2015:46
The Impact of Cloud Computing Towards Early Stage Startups in Sweden:
Case of Three Stockholm-Based Early Stage Startups
Abraham Setiawan
Approved
2015-May-26 Examiner
Terrence Brown Supervisor
Serdar Temiz
Abstract
In the last decades, the technology in ICT sector has advanced significantly. Rapid improvement of Internet services and virtualization techniques have caused the birth of a handful of computing paradigms, including the cloud computing. There are a number of major global cloud service providers that offers various cloud services to individual and companies. Consequently, there are increasing numbers of companies that are moving to the cloud leading to proliferation of cloud computing market.
This thesis explores the impact of cloud computing towards early stage startups in terms of usage, benefit, competitive advantage, and dependency in order to be sustainable in the focus of a specific country: Sweden. Stockholm has become one of the top tech startup scenes in Europe and has given birth to a great deal of startups, some of the internationally recognized ones including Spotify, Klarna, and King while there are other ones that have a potential to catch up with them. In order to give an insight about what the impacts of cloud computing towards the early stage startups, three Stockholm-‐based early stage startups from 3 different field of business were interviewed. To ensure the anonymity of the startups, the companies are referred to The Healthy Company, a startup that sells healthy food through pop-‐up bicycle; The Invest Company, a startup that develops mobile application to connect startups and investors; and The Learning Company, a startup that summarizes business books that take 8 hours to finish into just half an hour. Based on the findings of this study, there are several characteristics that are similar in all 3 startups regardless of their field of business. Keywords: cloud computing, cloud services, entrepreneurship, early stage startups, Sweden
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Table of Contents
Abstract ................................................................................................................. 3
Acknowledgement ................................................................................................. 5
1. Introduction ....................................................................................................... 7 1.1 Background ................................................................................................................................................... 7 1.2 Research Question and Aim ................................................................................................................... 8 1.3 Scope ................................................................................................................................................................ 9 1.4 Thesis Disposition ...................................................................................................................................... 9
2. Literature Review ............................................................................................. 10 2.1 Startup .......................................................................................................................................................... 10 2.2 Cloud Computing ..................................................................................................................................... 11 2.3 Case Studies of Cloud Service Providers ....................................................................................... 16 2.4 Cloud Computing Adoption in Europe ........................................................................................... 20 2.5 Cloud Implications To Startups ......................................................................................................... 22 2.6 Evolution In Startup Ecosystem ........................................................................................................ 23 2.7 Potential Benefits of Using Cloud Computing ............................................................................. 24 2.8 Challenges of Cloud Computing ......................................................................................................... 26
3. Research Methodology .................................................................................... 28 3.1 Research approach .................................................................................................................................. 28 3.2 Research paradigm ................................................................................................................................. 28 3.3 Data collection ........................................................................................................................................... 28 3.4 Data analysis .............................................................................................................................................. 29 3.5 Limitation .................................................................................................................................................... 29 3.6 Delimitation ............................................................................................................................................... 29 3.6 Ethical Consideration ............................................................................................................................. 30 3.7 Sustainability Consideration ............................................................................................................... 30
4. Interview Results ............................................................................................. 31 4.1 The Healthy Company ........................................................................................................................... 31 4.1.1 The Healthy Company Overview and Products ....................................................................... 31 4.1.2 The Healthy Company Implementation of Cloud Services .................................................. 32 4.1.3 The Healthy Company’s Competitive Advantage by Using Cloud Service .................... 32 4.1.4 The Healthy Company Dependency Towards Cloud Services ............................................ 33
4.2 The Invest Company ............................................................................................................................... 33 4.2.1 The Invest Company Overview and Products ........................................................................... 33 4.2.2 The Invest Company Implementation of Cloud Services ...................................................... 35 4.2.3 The Invest Company’s Competitive Advantage by Using Cloud Service ........................ 36 4.2.4 The Invest Company Dependency Towards Cloud Services ................................................ 36
4.3 The Learning Company ......................................................................................................................... 37 4.3.1 The Learning Company Overview and Products ..................................................................... 37 4.3.2 The Learning Company Implementation of Cloud Services ............................................... 38 4.3.3 The Learning Company’s Competitive Advantage by Using Cloud Service ................. 39 4.3.4 The Learning Company Dependency Towards Cloud Services ......................................... 40
5. Discussion ........................................................................................................ 41
6. Conclusions and Future Research ..................................................................... 44 6.1 Future Research ....................................................................................................................................... 45
References ......................................................................................................... 46
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Acknowledgement I would express my gratitude to my thesis supervisor Serdar Temiz who has guided and inspired me with his knowledge, wisdom, and motivation so that I can finish my thesis. In addition, I would also thank all the interviewees who willingly took their time to share the information that I need to be able to do my research. By the same token, I would give my thanks to my family and friends who have supported me since the preparation and during my study period at KTH. On top of it all, I would give my thanks to God for His favor. To God be the glory.
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List of Figures Figure 1 Evolution of IT Computing Model .............................................................................. 7 Figure 2 The three stages of a startup .................................................................................... 11 Figure 3 Layer of cloud service model .................................................................................... 13 Figure 4 Types of Cloud Deployment Models ...................................................................... 15 Figure 5 Google Apps for Business ........................................................................................... 17 Figure 6 Microsoft Azure .............................................................................................................. 18 Figure 7 Amazon AWS Features ................................................................................................ 19 Figure 8 Percentage of Cloud Adoption in Europe ............................................................ 21 Figure 9 Public Cloud Market in Europe 2011-‐2014 ........................................................ 21 Figure 10 Evolution of Startup Ecosystem With Cloud Computing ........................... 24 Figure 11 Potential Benefit of Cloud Computing ................................................................ 25 Figure 12 Cloud Impacts on The Healthy Company .......................................................... 41 Figure 13 Cloud Impacts on The Invest Company ............................................................. 42 Figure 14 Cloud Impacts on The Learning Company ....................................................... 43
Terms IaaS (Infrastructure as a Service): the IT infrastructure that is provided through
the cloud, including storage, servers, bandwidth, networks, and other resources
to serve for any purpose the consumers may have
PaaS (Platform as a Service): the platform provided through the cloud that
enables software developers to develop, deploy, manage, and run cloud-‐based
software
SaaS (Software as a Service): the software that runs on the cloud and can be
accessed by users through Internet connection
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1. Introduction
1.1 Background
Technology is deemed to be a tool that helped a lot of people doing their daily activities and work process more effectively and efficiently. As the time goes by, the number of regular mails has been declining since people started to use emails that deliver the message instantly. Since the initial public launch of Voice over Internet Protocols (VoIP) in 1998 (Hallock, 2004), more and more people have started to take advantage of the technology to communicate with each other regardless of geographical locations, and video calls that came later on enabled them to see each other while making a call.
In the last decades, the technology in ICT sector has advanced significantly. Internet services and virtualization techniques have been growing rapidly, causing the birth of a handful of computing models (TechTarget, 2015). From the Mainframe IT computing model where everything was centralized, it shifted to enterprise IT computing model, in which it started to be more decentralized and have shared service. Then it shifted again to the cloud-‐computing model, offering always on distributed service (Bias, 2011).
Figure 1 Evolution of IT Computing Model (Bias, 2011)
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The term cloud computing itself was first coined in late 1996 inside the offices of Compaq Computer. A small group of technology executives was plotting the future of the Internet business and calling it “cloud computing” (Regalado, 2011). As written on the first printed document ever with the term “cloud computing” (Compaq Computer Corporation, 1996), their vision was to move the business software to the web, and they believed that what they termed as “cloud computing-‐enabled applications” such as consumer file storage would be of common usage. The early major milestone of cloud computing would be Salesforce.com, a company established in 1999 that produces web-‐based enterprise solutions (Özcanli, 2012). Since then, more and more companies adopted cloud computing with the major companies like Microsoft and Google stepping in later on (Prakash, 2012) and offering various cloud services to individuals and companies. Consequently, there are increasing numbers of companies that are moving to the cloud leading to proliferation of cloud computing market.
Cloud service has gained popularity in the past few years and now is a widely implemented technology with customers ranging from end-‐users who use the technology for personal usage to large organizations for business usage. Cloud storage helps to store the company’s data and cloud-‐based software helps the organization to carry out the business process more efficiently.
According to the multinational professional services network PricewaterhouseCoopers (2010), the development of cloud computing is anticipated to bring about as much progress in the IT industry as the development of e-‐commerce. Even though larger organizations are more probable to diffuse the new technology within the organization because of the larger market share and more resource availability (Hall & Khan, 2002), the implementation of cloud services itself is ironically still being heavily debated in the large enterprises (Canellos, 2014), and often the arguments rotate around the security of the platform itself (Passary, 2014) with some security accidents occurred in the past (Kang, Barolli, Park, & Jeong, 2013). However, in accordance to the rapid growing of smartphone and tablet penetration (DeGusta, 2012), cloud computing has been seen as a technology that makes mobile users a lot more convenient. Therefore, a lot of startups have seen this service as a big opportunity and have tried implementing cloud service with a hope to grow their businesses faster. Country leader of IBM Croatia Damir Zec even said on his speech in a conference that now 85% of software is being built for cloud (Zec, 2015). This high number reflects the proliferation of cloud computing.
1.2 Research Question and Aim
Startups have a major role in job creation, technological innovation, and for
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early stage startups, having an efficient yet cost-‐effective tool is essential in order to be able to grow fast. This thesis research focuses on early stage startups that are using cloud services in their business operation.
Following the proliferation of the cloud computing and the growing number of cloud services implementation in startups, more research needs to be conducted to reveal the puzzle of how it actually impacts the early stage startups in terms of usage, benefit, competitive advantage, and the dependency to use the services.
The aim of this research is to understand how the usage of cloud-‐based services impacts early stage startups in Sweden. Therefore, the research question of this degree project can be formulated in the following way: How does the usage of cloud computing impact early stage startups in Sweden?
The research question will address the usage of cloud services in early stage startups with the implementation of the technology. This thesis is intended to give insight to entrepreneurs of what impact the cloud services can bring to the businesses. Scholars and academic will also find valuable insights from this thesis in the field of entrepreneurship and distributed computing in general.
1.3 Scope
Before describing the scope of this research, it is important to know that in this thesis the words cloud computing, cloud-‐computing service, cloud-‐based service, and cloud service are used interchangeably. This thesis will focus on the cloud computing impact towards early stages startups in Sweden. Being more specific, the interview will be based on Stockholm-‐based startups. Even though it might not give a general insight of the Swedish startups, Stockholm is irrefutably one of the top tech ecosystems not only in Sweden, but also in Europe (Wauters, 2014), and with the fast growing numbers of startups with the help of startup events, incubators, and competitions, it can still provide good insights to Swedish startups.
1.4 Thesis Disposition
This thesis consists of 6 chapters. The first chapter of the thesis is the introduction chapter, in which describes the background of the thesis as well as the research question and aim of this thesis. The second chapter is the literature review where all relevant literatures and theories are described. The third chapter is the methodology, explaining what kind of methodology was used and how the data was collected. The fourth chapter is interview results containing the data collected from the interviews. The fifth chapter is discussion, and the sixth chapter is the conclusion and future research.
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2. Literature Review
The literature review will explain and demonstrate the most relevant theories and concepts within the fields of startups and cloud computing. It will focus on the startups in the phase of early stage in particular and what implication can cloud computing bring to the startups, as well as giving an overview of cloud computing adoption in Europe. However, it is worth to note that the cloud computing technology is still evolving, and there are not many researches done yet in terms of cloud computing implementation in early stage startups.
2.1 Startup
Startups have a major role in job creation, technological innovation, and regional growth (Schumpeter, 1934; Luger & Koo, 2005). Building on the criteria of startups, which are new, active, and independent, Luger and Koo (2005, p. 19) define startup as a business entity “which did not exist before during a given time period (new), which starts hiring at least one paid employee during the given time period (active), and which is neither a subsidiary nor a branch of an existing firm (independent).”
From the data gained from Global Entrepreneurship Center, there are around 300 million entrepreneurs worldwide trying to start about 150 million business annually, and with the ratio of one third will be launched, that leaves 50 million new firms that are born each year, or about 137,000 firms each day (Mason, 2015). However, the ratio of firm’s birth and death are almost equal, making 120,000 of active organizations terminate their operation daily (Mason, 2015). This almost equal birth and death ratio of businesses may be caused by different factors, but the lack in resources, skills, and strategy are most likely one of the reasons.
Author and entrepreneur Steve Blank (2010) wrote that similar to a child never is a smaller version of an adult, a startup is never intended to be defined as a smaller version of a large company. Startup progresses through three distinct phases: the scalable startup, the transition, and the large company (Blank, 2010). Each phase has its unique set of goals, challenges and decisions that requires different resources, skills, and strategy.
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Figure 2 The three stages of a startup (Blank, 2010)
The scalable startup stage is the very early stage of the progression. A startup will keep on trying business models until it finds a fitting one. Product/market fit is also a vital requirement in order for the startup to survive. After a startup has found a suitable business model and product/market fit, it will need to find a sales model that can be repeated. “A structured course correction designed to test a new fundamental hypothesis about the product, strategy and engine of growth” (Ries, 2011, p. 103), also known as pivoting, is commonly observable in this stage. When everything runs in order, the startup will start to hire managers and then move to the second stage, the transition.
The transition stage prepares the organization to become a large company. First it needs to reach cash-‐flow breakeven, which represents the point where total cost and total revenue are equal, meaning there is no net loss or net gain (Atrill & McLaney, 2011), before it starts to gain profit. Then, with rapid scaling, hiring new senior management team and a quite significant amount of employees ranging in around 150 people, it will move to the final stage of the large company.
This thesis will focus on the first stage of the startup, which is the scalable startup. This means that the startups have not started to gain profit from their products and services and are still finding the most appropriate business model for their organizations. The term early stage startup is used in this thesis to refer to the scalable startups.
2.2 Cloud Computing
Many academic research experts and industry research consultancy firms have tried to come up with the definition of cloud computing, and while the core of the definition is somehow similar, it varies based on the point of view of the researchers and the organizations (Madhavaiah, Bashir, & Shafi, 2012). For this thesis, the definition is based upon the work of Mohan (2011, p. 44) that has a
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closer relation with startup and entrepreneurship field, which defines cloud computing as a “techno-‐business disruptive model of using distributed large-‐scale data centers either private or public or hybrid offering customers a scalable virtualized infrastructure or an abstracted set of services qualified by service-‐level agreements (SLAs) and charged only by the abstracted IT resources consumed.”
According to Rosenberg and Mateos (2011), cloud computing has five main characteristics that define it as a technology:
• Pooled computing resources -‐ resource pooling means that cloud
computing takes advantage of pooled computing resources that may be externally bought and controlled as well as having an internal resources that are pooled and not dedicated.
• Virtualization of computer resources -‐ each physical server is divided into several virtual servers where each one acts like a real server that can independently run an operating system and a full range of applications. Because of the virtualization, the capabilities of the service can be accessed over the network through a variety of computing devices, making this characteristics also referred as broad network access (Edlund & Livenson, 2012).
• Elasticity or dynamic scaling – cloud computing provide rapid elasticity, which is the ability to dynamically adjust the quantity of resource consumed according to the current demand.
• Automation of new resource deployment – also known as on-‐demand self service, meaning that an application deployed in the cloud can provision new instances on an on-‐demand basis within minutes.
• Metered billing – the cloud model applies a pay-‐as-‐you-‐go model, so there is no annual contract nor there is a commitment for a certain amount of use, in contrast with the managed hosting system where there usually is an initial installation fee and annual contract fee. This characteristic is also known as measured service since the resources are automatically controlled and optimized based on the metered system (Edlund & Livenson, 2012).
In order to successfully deliver IT resources as a service, cloud computing includes a set of hardware, networking, storage, services, and interfaces (Oliveira, JulioMurlick, Pereira, & Vicentin, 2013). The services include software delivery, infrastructure, and data storage through the web based on user requirements (Chee & Franklin, 2010). Since all processing and computational resources are available on the web, accessing cloud services only requires a computer or mobile devices connected to the Internet as client hardware (Buyya,
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Broberg, & Goscinski, 2011). This practicality makes it possible to utilize cloud services anytime and anywhere the users want to.
There are three layers in cloud computing services: “Software as a Service” (SaaS), “Platform as a Service (Paas)” and “Infrastructure as a Serice (Iaas) (Slabeva, Wozniak, & Ristol, 2010). These different types serve different purposes and meet different customer needs, and comes with different responsibility level from the customer and provider’s end (Gastermann, Stopper, Kossik, & Katalinic, 2015).
Figure 3 Layer of cloud service model (Gastermann, Stopper, Kossik, & Katalinic, 2015)
1. Software as a Service (SaaS) – The application is run completely on the cloud provider’s infrastructure and customers have the ability to access the application through IT devices via Internet, without having capability to manage and control the cloud infrastructure. There is no need to install any software on the customer’s devices and updating it. The provider does the updates on the server side so the customers always have the latest version (Gkikas, 2014). Organizations that are using SaaS model are not required to pay for licensing for the applied model is a pay-‐per-‐use model, meaning that the fees are based on what the customers use, which may lead to a decrease in the expenses of that organization (Gong, Liu, Zhang, Chen, & Gong, 2010). Organizations use SaaS applications to carry out specific processes such as emailing and customer relationship management system, with examples of this model including Google Apps such as Gmail for emailing and Picasa for managing pictures, Microsoft Office 365 for creating and managing office documents, as well as Salesforce.com for customer relationship management.
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2. Platform as a Service (PaaS) – platforms are the abstraction layer
between the software applications (SaaS) and virtualized infrastructure (IaaS), and this layer is targeted towards software developers to build, deploy, manage, and run the applications based on the specification of a certain platform without the need to consider the underlying infrastructure (Slabeva, Wozniak, & Ristol, 2010). In general, the cloud providers support various programming languages, libraries, and other proprietary tools to ensure an easier, faster, and less expensive development experience (Gkikas, 2014). Consumers can opt for PaaS to cover all phases of software development process or to specialize in a specific area like content management (Slabeva, Wozniak, & Ristol, 2010). Examples of PaaS are Google App Engine that allows applications to be run on Google’s infrastructure, Oracle Cloud Platform, and Salesforce’s Force.com platform.
3. Infrastructure as a Service (IaaS) – the cloud service provider provides the consumers the whole virtual data center of resources including the storage, servers, bandwidth, networks, and other resources to serve for any purpose the consumers may have (Gkikas, 2014). PaaS and SaaS providers can avail themselves of IaaS offerings according to standardized interfaces, in which IaaS providers usually offer virtualized infrastructure as a service instead of raw hardware infrastructure (Slabeva, Wozniak, & Ristol, 2010). Foster et al. (2008) point out the level of raw hardware resources, including compute, storage, and network resources, as the fabric layer. Hardware level resources are abstracted and encapsulated through virtualization to be brought to the upper layer and end users through a standardized interface as unified resources in the form of IaaS (Foster, Zhao, Raicu, & Lu, 2008). Examples of IaaS are Amazon Web Service including Elastic Compute Cloud (EC2) for processing and Simple Storage Service (S3) for storage as well as Oracle Cloud Infrastructure.
Aside from the cloud computing layers, there are also different types of cloud deployment. Cloud deployment is the method in which cloud computing is designed to provide a particular service, and the deployment methods vary based on how the cloud provides the service to the users; the different deployment types of cloud computing is explained below (Kalapatapu & Sarkar, 2012):
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Figure 4 Types of Cloud Deployment Models (TechinMind, 2012)
1. Public Cloud – this deployment method is the most traditional and
mainstream. In public cloud, third party providers provision resources dynamically and share them with the cloud users as well as billing the users on a fine-‐grained utility computing basis, making this deployment type also known as external cloud. Small businesses see this type of cloud deployment exceptionally viable since public cloud provides easy resource management, scalability, and flexibility with the billing system based on the pay-‐as-‐you-‐go model. However, there are several drawbacks in this deployment type, including the lack of visibility and control over the computing infrastructure. Security and compliance issues are also present since the computing infrastructure is shared among different organizations. However, this does not seem to be a huge concern for early stage startups (Edlund & Livenson, 2012). Examples of public cloud including Amazon Web Service and Google AppEngine.
2. Private Cloud – in contrast with public cloud, this deployment method dedicates the infrastructure exclusively to a particular organization. Since this cloud solely belongs to a particular organization, private cloud is more secure compared to public cloud. However, the utilization of private cloud is more expensive because continuous maintenance is required. Private clouds can be further classified according to the geographical location of the server.
a. On-‐premise clouds – when the cloud is hosted by the organization itself, that deployment can be referred as on-‐premise cloud. An example of this type of cloud includes a
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sizable amount of confidential data such as in military-‐related organizations.
b. Externally hosted Clouds – when the cloud is solely dedicated for a particular organization but is hosted by a third party that specialize in cloud infrastructure, this type of cloud can be referred as externally hosted clouds, and also known as internal clouds. This type of deployment technique is cheaper than on-‐premise clouds. Examples of this cloud include small businesses utilizing services from Amazon and VMware.
3. Hybrid Cloud – this deployment technique fuses the positive features of both the public cloud and private cloud deployment model. In a hybrid cloud method, less critical services are hosted on public cloud, while the vital services with strict security requirements are hosted on private cloud. This type of cloud deployment was born because the criticality, flexibility, and scalability requirement of a service do not fall into public cloud and private cloud domain.
4. Community Cloud – similar to public cloud, the key factor that differs community cloud is the distribution of the sharing rights on the computing resources. In community cloud, the computing resources are shared amid organizations within the same community. Therefore, community cloud provides for a specific group of organizations carrying out same functionalities. For example, all government organizations in the province of Skåne may share computing infrastructure to community cloud to manage citizens-‐related data in Skåne.
2.3 Case Studies of Cloud Service Providers
Without people realizing, cloud services are being used all over the place on daily basis both in personal life and business life. Services that is very visible and comprehendible to end-‐users like e-‐mail and online document manager are example of cloud service in SaaS layer. In addition, popular social networking websites such as Facebook, Twitter, and LinkedIn are all run under cloud computing system. These kinds of services are very helpful in making daily life more convenient.
Gordon and Marchesini (2010) point out that the implementation of cloud computing services in business perspective can lead to money saving and more efficient operations. Organizations utilize social networking websites to connect with their customers, execute marketing tactics to promote their products and
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services, as well as to communicate and collaborate internally within the organization. In addition, web based e-‐mail solutions offer the consumers the flexibility and mobility to access their application from any place at any time, being the major reason why some of the biggest cloud service are web based e-‐mail providers since e-‐mail is vital in business process nowadays. Office document managers like Google Docs and iWork Pages enable consumers to create, edit, and share online documents, including work simultaneously with multi users on a single document, enhancing collaboration and teamwork. Storage cloud services including Google Drive and Dropbox provide a convenient method of accessing a file through different devices and backing it up with seamless syncing.
Several major international cloud service providers such as Google, Amazon, IBM, Microsoft, Oracle, and Cisco have been providing a broad range of cloud services and solutions to individual and organizations. Based on the social and market trends criteria (Gkikas, 2014), the following cases are some of major organizations offering cloud services.
• Google Google is well known with its Google Apps such as Gmail, Google Drive, Google Docs, and Google Calendar. Those applications are based on cloud computing and are in SaaS layer, with all the data stored in Google’s data centers. This means that users can access those applications with any IT device connected to the Internet and there is no need to install any software or save any data in their devices.
Figure 5 Google Apps for Business (Lanhome Technologies, 2015)
In addition, Google also provides a PaaS layer called Google Cloud Platform (Google, 2015), in which enables the developers to build
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and run applications on Google’s infrastructure. With Google powerful compute infrastructure, it has a great performance offering a convenient way to develop, deploy, and iterate the applications without the need to consider the underlying infrastructure. Snapchat and Rovio, creator of Angry Birds, are some of the organizations that are using this platform.
• Microsoft Microsoft offers a complete range of cloud computing service layers towards its consumers called Microsoft Cloud, having a high performance to process massive data stream and can rapidly scale to meet consumers’ needs, powered with range of features that can increase communication and collaboration within organizations (Microsoft, 2015). On SaaS layer, Microsoft Office 365 provides the consumers with agile, responsive, and mobile tools for the modern organizations. The office applications that we know like Word, Excel, PowerPoint, Outlook, OneNote, Access, and Publisher are now running on cloud computing, making it possible for consumers to work when and when they need to on any IT devices. Meeting leading global compliance standards such as HIPAA, FISMA, and ISO 27001, it boasts robust security, compliance, and privacy along with data loss prevention.
Figure 6 Microsoft Azure (Microsoft, 2015)
Microsoft Azure is both PaaS and IaaS, making it possible to build, deploy, and manage applications in with extensive amount of flexibility. It supports any operating system from Windows to Linux, programming languages from C# to Java, also tools and framework from SQL Server to Oracle. High availability and scalability with pay-‐
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per-‐use system are also key features along with the global network of Microsoft data centers across 19 regions.
• Amazon Amazon has its cloud service infrastructure called Amazon Web Services (AWS) that offers a complete set of highly available services, which are designed to work together to create sophisticated, scalable applications (Amazon, 2015). It is possible to build a system for a company from the ground up with foundation services provided including compute, storage, networking, databases, analytics, and content delivery system.
Figure 7 Amazon AWS Features (Chan, 2014)
Among the vast choices of features provided is the Amazon Elastic Compute Cloud (EC2), offering scalable computing capacity in the cloud. Elasticity is the key in this feature, as it allows consumers to scale the computing capacity up and down on demand within minutes (Gkikas, 2014). Amazon EC2 offers a range of instance types designed for different use cases, ranging from small instances for low volume applications up to cluster computing instances for high performance computing workloads. On the Operating System perspective, it allows consumers to run Microsoft Windows and Linux, which are leading Operating System for enterprises. It also boasts a robust security system, full control, and virtualization (Chan, 2014). Another feature of Amazon Web Service is Amazon Simple Storage Service (S3). It offers unlimited data storage for any type of objects
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with a very high level of durability that is replicated across multiple facilities. With the price is as low as US$0.03/GB a month, it does not compromise the security and control. Amazon S3 allows granular access control and permission over objects with encryption at rest and in transit using 256bit server side encryption and HTTPS protocol, respectively. It has a high performance throughput supporting parallel download and upload, allows importing and exporting data via physical device handling service, and allows consumers to choose the geographical location of data remains (Chan, 2014). Apart from the huge enterprises like Vodafone and Adobe, startups such as Airbnb, Foursquare, and Spotify are also running on Amazon Web Services.
2.4 Cloud Computing Adoption in Europe
In November and December 2011, International Data Corporation (IDC) did a survey to estimate the demand in cloud computing in Europe. The survey was conducted online and the participants were 1,056 organizations from 9 different European countries. The countries that participated in this survey were UK, Sweden, Czech Republic, France, Germany, Hungary, Spain, Poland, and Italy. In addition, the companies that were interviewed were segmented according to the size of the company, in this case the number of employees: 1-‐9, 10-‐99, 100-‐249, and more than 250 employees (Cattaneo, Kolding, Bradshaw, & Folco, 2012).
Based on the survey, European organizations have a varied level of cloud
readiness and cloud adoption (Cattaneo, Kolding, Bradshaw, & Folco, 2012). Organizations that use cloud computing are divided into three groups, which are organizations that have cloud fully deployed in more than one application area, organizations that have cloud fully deployed in only one area, and organizations that have cloud on a limited or trial basis. On the other hand, organizations that are not using cloud computing are also divided into three groups, which are organizations that are planning to adopt cloud, organizations that thinking of adopting cloud but have no plans yet, and organizations that have no usage or intention of adopting cloud. Figure 8 below shows the proportion of the different stages of cloud adoption in European organizations.
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Figure 8 Percentage of Cloud Adoption in Europe (Cattaneo, Kolding, Bradshaw, & Folco, 2012)
From this survey, the percentage of organizations that use cloud computing
shows the incredible number of 64.5%. The adoption of cloud computing will increase as there is a growing number of organizations that adopting cloud services (Gkikas, 2014).
In 2011, the market of European public cloud software service reached
€3.5 billion and €1.1 billion for the hardware service and account for only 1.6% of the total IT cost in business. According to IDC, the public cloud services in 2014 showed a significant increase in revenue, reaching roughly €11 billion, and reached 3.6% in the total market (Cattaneo, Kolding, Bradshaw, & Folco, 2012).
Figure 9 Public Cloud Market in Europe 2011-‐2014 (Cattaneo, Kolding, Bradshaw, & Folco, 2012)
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2.5 Cloud Implications To Startups
Technology in general has several particular characteristics that distinguish one technology from the others. As explained in chapter 2.2 above, there are 5 characteristics that define cloud computing as a technology. These 5 characteristics turn out to have implications towards startups. Researchers Edlund and Livenson (2012) have analyzed the implications as follows:
On-‐Demand Self-‐Service means that the users can provision computing
capabilities such as server time and network storage without the need of human interaction between the users and cloud service providers, in an on-‐demand self-‐service manner. To startups, this means that they can easily and quickly get IT infrastructure that they need. For small companies who are on their very early stage, sales contract negotiation is not their strongest side. Furthermore, for early stage companies, the need of server time and network storage is extremely unforeseeable, therefore on-‐demand self-‐service characteristic of cloud computing is deemed very valuable. Example for this was Yieldex using Amazon Web Services to demonstrate their publishing service in front of investors for the first month costing only 40 USD in total. On-‐demand self-‐service characteristic of cloud computing made this possible by allocating cloud resources for the actual meetings, and freeing the resource after the meetings right away, without human interaction and on-‐demand.
Broad Network Access means that the cloud computing capabilities can be
accessed over the network through standard mechanism with various computing devices such as smartphones and laptops. The implication it has towards startups is the emergence of an entirely new range of services by using cloud services and distribution platform for mobile clients. A small company can grow overnight into a much larger company by offering services in a scalable method with this delivery chain. Examples for this are the Apple App Store distribution platform and Android applications that are supported by Google App Engine backend.
Resource Pooling means that the computing resources of the cloud service
provider are pooled to serve several customers utilizing a multi-‐tenant model, and according to customers demand, the different physical and virtual resources are assigned and reassigned dynamically. Although the customers usually do not have any control or knowledge of the precise location of the resources, the users can identify the location at a higher level of abstraction, such as the country or the datacenter. The resources that are pooled include storage, processing, memory, network bandwidth, and virtual machines. To startups, this is one of the motives to choose public IaaS over having their own infrastructure, because of the cost-‐effectiveness.
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Rapid Elasticity means that the cloud computing capabilities can be rapidly and elastically provisioned, sometimes even without human interaction, to either scale out or scale in. In the customer point of view, the available capabilities to be provisioned frequently seem to be limitless and can be purchased in any quantity at any time. Towards startups, rapid elasticity makes the organization can rapidly adjust its service to meet the customer needs. As a result, the organizations enjoy the benefits from a cost-‐effective scalable business model. Example of this trait is Animoto, in which the service was built directly on IaaS, transferred its photo presentation application to Facebook and triggered a huge peak in usage. Animoto utilized RightScale and Amazon to be prepared to manage the peak in a cost-‐effective way. Other examples including Dropbox and other storage services also utilize this feature to be able to sell storage space on demand elastically to steer clear from huge overhead in capacity.
Measured Service means that cloud systems control and optimize the
resources automatically with the support of a metering method at a certain level of abstraction that suits the type of services such as storage, processing, bandwidth, and active user accounts. Both the providers and customers can monitor, control, and report the resource usage of the utilized service. This characteristic has implications towards startups in terms of pricing. When the startup can calculate the cost of a particular business transaction, startups can take advantage of this to make a decision such as making a price list for the end customers. In the cloud service market, resource usage metrics are directly converted to monetary values and service level agreements (SLAs) making this process easier for the startups.
2.6 Evolution In Startup Ecosystem
In startup world, cloud computing has opened up huge opportunities for new entrepreneurs to launch their startups. Customer needs and demands are difficult to estimate, meaning that there is a high risk of developing tools that do not meet the customer needs or that are too costly. With cloud computing, startups can form a scalable business models with consumption based pricing (Edlund & Livenson, 2012), providing better cost-‐control for startups. As a result, a lot of changes have happened in the startup ecosystem as predicted by Paul Graham (2007). More startups are launched with faster phase change from testing to the next step, and a lot of them rely on cloud computing.
Figure 10 shows the implication on the startup-‐investor ecosystem. Along with numerous changes in IT such as open source, network, mobility, and commodity low cost hardware, cloud computing lowers the cost for startups to start. With cloud computing, entrepreneurs can quickly launch their idea into
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startups, and consequently get quick feedback on their ideas. This applies to investors as well as they get quick feedback on their investments (Edlund & Livenson, 2012). Because of this situation, the risk and need for initial capital is lowered thus more investments and startups can be launched. Startups can also take more time to develop before taking external capital into account.
From the investor’s point of view, the implementation of cloud computing in startups is also very attractive. Investors do not have to invest in expensive IT infrastructure in the early stage of the startups. The option of purchasing their own infrastructure will arise only after the organization matures and decide they need to do that for security reasons or minimization of total cost (Edlund & Livenson, 2012). At the same time, shutting down startups that cannot meet the expectation is very easy. Since the startup uses virtual IT infrastructure, there is no need to consider the IT infrastructure leftovers.
Figure 10 Evolution of Startup Ecosystem With Cloud Computing (Edlund & Livenson, 2012)
2.7 Potential Benefits of Using Cloud Computing
The potential benefits of implementing cloud services in an organization have been widely discussed and can be visualized by the figure below.
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Figure 11 Potential Benefit of Cloud Computing (Gkikas, 2014)
Among those potential benefits, Oliveira et al (2013) point out and summarize them into five main benefits:
• Scalability – this feature lets the services to be customized and charged according to the contractors’ business demand, including aspects like changes in bandwidth consumption, periodic influence on amount of data transactions, data storage space, and even gradual upgrades for obsolete application.
• Usability – it impacts on how the cloud computing systems and resources will be integrated within the organization. Cloud services can be accessed by different types of computers and mobile devices running different operating systems, meaning that the employees working in a business function and IT function can have different user policies and system managements. As a result, cloud service alters the way of working as well as eliminates geographical barriers.
• Quality of service – Cloud providers are responsible for service availability and the customers are entitled to have access from wherever and whenever they want it, based on the quality levels agreed upon contract. Cloud service providers should be able to sustain the expected performance, without extensive latency, for the organizations that have made a contract with them, especially the ones that process huge amounts of data transaction, while also taking into account the existence of users who work outside the organization building or at locations with limited bandwidth.
• Cost – with cloud computing the customers only need to pay for the service contracted for with the agreed quality level and the technical
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support. Thus, customers can save the expenses on hardware and software, and even though there might be some increased cost in network bandwidth demand, it does not have a significant amount in cases of low data transactions rate.
• Security – this potential benefit is still highly debated since there are malicious behaviors and cybercrimes roaming in the web, especially when the data is stored outside the realm of the organization. However, a study by Ponemon Institute (2013) shows that companies are very vulnerable to cybercrimes resulting to millions of dollars cost. Choosing a trusted cloud service provider with a strong and robust security system is more secure compared to smaller organizations trying to build their own data center, in which they are not expert in that field. The possibility of electricity failure that can damage the data is also nullified since the data are secured within the cloud server of the cloud provider with redundancy approach (Bauer & Adams, 2014).
2.8 Challenges of Cloud Computing
No matter how advanced a technology is there are still several challenges that it has to face. The same thing with cloud computing. There are several shortcomings in this particular technology. Arutyunov (2012) has compiled several shortcomings in this technology as follows:
• Permanent Internet connection – this might be the strongest shortcoming against cloud computing. Since this technology heavily relies on the Internet, there are no jobs, applications, or documents that can be carried out without Internet access.
• Work is difficult under conditions of slow Internet access – aside from requiring permanent Internet connection; some cloud services need a fast Internet connection with high bandwidth to be able to work properly.
• Programs may run more slowly than on a local computer – when the user needs to transfer a large amount of information, the program they are using will run faster on a computer compared to running it through the cloud, not only because of the Internet speed, but also because of the overcrowding on remote servers and troubles on the path between the user and the cloud.
• Not all programs or their properties are available remotely – comparing a program that runs locally and their cloud counterparts will most likely end in the latter not having as comprehensive functionality as the former. Example of this is Google Docs spreadsheet not having as many functions as in Microsoft Excel.
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• Software – in SaaS, since the provider has full control of the software, the user has access only to utilize the service and cannot customize it to fit their needs.
• Security – this is still being highly debated whether this can be regarded as benefit or shortcoming. It is true that a trustable cloud provider has a fairly reliable system, even much more reliable than startups that are not focusing on IT infrastructure. However, there is no technology that ensures the absolute confidentiality of data at the moment.
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3. Research Methodology In an academic research, a research methodology is required in order to
ensure that the research and the data collection are conducted accordingly. This thesis takes the qualitative approach with the interpretivism paradigm. The data is collected through case studies from literature and interview with 3 early stage startups in Stockholm region.
3.1 Research approach
This research takes the qualitative approach (Collis & Hussey, 2009), which implies a case study involving collecting and analyzing qualitative data research study that was conducted to get an insight about the question of interest from the literature and conducting interviews. Case study is a methodology to explore a single phenomenon in a natural setting with various methods in order to acquire a thorough understanding (Collis & Hussey, 2009). The focus of case study is to “understand thy dynamics present within single setting” (Eisenhardt, 1989, p. 534), and case study has characteristics of aiming to understand a certain phenomena within a particular context on the top of exploring it (Yin, 2003). Case study is also appropriate since it addresses the question ‘how’ and ‘why’, does not require control of behavioral events, and focuses on contemporary events (Yin, 2003). Due to the reasons explained above and also the time constraint, qualitative approach by case study was viewed suitable for this thesis.
3.2 Research paradigm
This research uses interpretivist paradigm (Collis & Hussey, 2009), which believes that social reality is highly subjective and shaped by our perceptions. The researcher interacts with the social world being investigated and the researcher’s thoughts will affect the research subject. Since interpretivism focuses on describing rather than measuring complexity and with the research purpose of extending literature by exploring rather than validating, interpretivism is viewed appropriate for this research.
3.3 Data collection
The qualitative data was collected through case studies from literature and conducting semi-‐structured interviews. The unit of analysis of the interview was Stockholm-‐based startups that use cloud-‐computing services on their business process. Semi-‐structured interviews allow the discussion flows in order to get a
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clear insight of the situation inside the organizations. Thirteen companies that match the criteria were contacted through convenience sample of my extended network. During the data collection period, 1 company refused to be interviewed, 1 company agreed but when the researcher did a follow up the company did not give any answer, and 3 companies agreed to be interviewed while the rest never responded.
3.4 Data analysis
After the data has been collected, data analysis is conducted through qualitative approach. The data was collected from various sources including textual, graphs, statistics, and images. From these sources, the data is analyzed and then a conclusion is drawn (Krippendorff, 2013). The data sources are transcribed and examined carefully, be it in the form of textual and non-‐textual, to find similarities and differences that serves to structure an argument regarding how cloud computing impact early stage startups.
3.5 Limitation
Limitations are situations that can barely be controlled by the researcher that can influence the result of the thesis. The thesis was limited by the short timeframe and the data were collected from convenience sample. Furthermore, it was hard to find companies that are willing to be interviewed. Out of 13 companies contacted, only 4 companies actually agreed to be interviewed initially, even though one of them never responded again after commencing the follow up communication leaving only 3 companies interviewed in the end. Despite having several recurring themes, they are based on a small sample size of 3 early stage startups that are implementing cloud-‐computing services within their organizations. Also, there is no way to tell if the interviewee is telling the complete truth about their organization. There were no means to have access to their cloud services and library since those contain the private information of the companies. This sample should not be used to generalize all startups that are using the services.
3.6 Delimitation Delimitations are the situation that can be controlled by the researcher that
can influence the result of the thesis. It is also the boundaries set by the researcher to define the perimeter and objective of the research. The literature review is done in the area of startups and cloud computing with the correlation between the two. Other related literature more specifically related to the technology of cloud computing is not addressed since there are reasonable
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amount of previous studies and to make the topic of the research more focused on the impact of cloud computing towards early stage startups. Furthermore, this thesis also does not address the different outcome of different layers of cloud computing because each layer serves different purposes and consequently different startups implement different layers.
3.6 Ethical Consideration This thesis put ethical aspect into consideration. One of the most important
values in ethics is that the participation of this thesis interview is voluntary. All the interviews that are done in this research are done voluntarily. The interviewees agreed to take their time and answer the questions regarding the researched topic. Anonymity and confidentiality were also offered to the interviewees, and actually one of the companies opted in for confidentiality. Therefore, in order to be consistent, all company names and the interviewee names are not disclosed to respect the company in regard. The interviewees were respected for their opinion and knowledge about the topic, and the interviews were conducted in the time and place of the interviewee’s choice in order to make them feel comfortable and be able to speak openly about the research topic.
3.7 Sustainability Consideration Aside from ethical, this thesis put sustainability aspect into consideration.
One of the most non-‐sustainable actions during academic research is the excessive use of paper. In this thesis, the researcher attempted to ensure the minimal use of paper. The interview was recorded and transcribed using digital media instead of traditional paper. Also, the thesis consultation with the supervisor and thesis submission to the faculty is done digitally.
Furthermore, the topic of this thesis also brings up the sustainability aspect of the early stage startups. The use of cloud computing in early stage startups helps them to save money by the absence of the need to build their own IT infrastructure. Therefore, they can focus more on their core business through finding the appropriate business model for the company and quickly pivot if necessary in order to sustain their company for a longer period of time.
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4. Interview Results
Three interviews were conducted with top-‐level executive boards in Stockholm-‐based startups. The discussion followed a semi-‐structured way with the topics of what kind of cloud-‐computing services they are using, the competitive advantage they have gained using the cloud computing services, the evolution of cloud-‐computing service implementation in their organization, and the dependency level of cloud-‐computing services in their business process. The open-‐end questions allow the interviewees to thoroughly explaining their company situation and therefore enable the researcher obtaining comprehensive information. In order to maintain the anonymity of the informants and the organizations, the companies will be referred to the following names: The Healthy Company, The Invest Company, and The Learning Company. The interviewees are also referred as interviewee[number].
4.1 The Healthy Company
4.1.1 The Healthy Company Overview and Products
The Healthy Company is a healthy meal company based in Stockholm. With the aim of innovating fast food, The Healthy Company is providing healthy meals at key infrastructure points through pop-‐up bicycles stores in major European cities starting with Stockholm.
The company was found in February 2015 after building on the initial idea
that was started in October 2014 by 4 founders and they are employing 2 interns at the moment, making 6 people working in the organization in total. Interviewee01, one of the founders and co-‐owner of The Healthy Company, was interviewed for the purpose of this research.
The customer number varies depending on the quantity of food and
beverages the company bring on their pop-‐up bicycles. In the morning they can sell 50 smoothies to 50 different customers and on lunchtime on the same day they can sell 30 wraps to 30 different customers. There are around 5 to 10 returning customers to the same point of sales while the rest of the customers are new customers.
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4.1.2 The Healthy Company Implementation of Cloud Services
The Healthy Company implements several cloud-‐computing services in various forms to carry out their business process. One of the founders of The Healthy Company developed their own tool that is based on ownCloud platform called Portknox, a cloud-‐based application to host all of their calendars, contacts, and notes. Portknox is used as an alternative to other file management applications such as Dropbox since they are hesitant to use Dropbox because they are concerned about the security issues.
The Healthy Company takes advantage of Evernote to put their
documentation of short meeting and notes during the employees are mobile, as well as the code for accessing the door for their incubator space. Another tool they are using is Bitrix24, which is a suite of social collaboration, communication, and management tools. With Bitrix24, The Healthy Company does the ticketing system to assign, manage, and track the tasks to a certain employee. Despite being an intra-‐organization tool, Bitrix24 has a social network stream in Facebook-‐form model that enables employees of the company to post questions and conduct discussions privately.
Prior to implementing those services that they are currently use, The
Healthy Company conducted some discussions and tested several other services to see which one suits the needs of the company, as Interviewee01 stated during the interview, “So there have been discussions and test runs and sayings like “Hey I don't like this, I would rather prefer that” and yeah then we have those tools.” A number of ticketing system and workflow applications were tested before the company decided to settle with Bitrix24. In case of Portknox, since one of the founders of The Healthy Company is also the developer of the application, they are able to customize the application in order to match the company preferences.
The Healthy Company enjoys the benefit of cloud services in various ways.
They found that it is the simplest, most effective solution for their company, also being the most economic. A huge advantage of using cloud services for their company is that it helps them to be more effective, mobile, and synced in terms of collaboration and communication. Meanwhile in terms of the cost of operation, since the services they currently use are free of charge therefore they are not spending any expenses for file hosting.
4.1.3 The Healthy Company’s Competitive Advantage by Using Cloud Service
Three of the founders have a background in Information Technology, which helped them to implement cloud-‐computing services easier and more efficiently
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compared to other companies that are running in the restaurant/food-‐truck industry. However, The Healthy Company does not consider itself to have a major competitive advantage in their industry by using cloud services.
“No, not really. It’s not our key business so it’s just like it helps us to get a bit
more effective, and be more on the go, and be synced, but I think it’s kind of standard these days that most of the organizations use. Most of us have a background in IT so we maybe have an advantage using the technology, a bit easier and more efficient than others, but I wouldn't say that we have a competitive advantage for our business compared to other restaurants or food truck or whatever it is.”
The main reason is aside from not being the core business of their
organization, the implementations of cloud services are getting pretty standard in organizations in general, including the restaurant/food-‐truck industry, with sets of team-‐planning applications that are easy to use such as cloud storage, Google Docs, and Google Calendar.
4.1.4 The Healthy Company Dependency Towards Cloud Services
The business process of The Healthy Company is not on a high dependency level towards the usage of cloud services, as Interviewee01 mentioned during the interview, “I mean, all our data is in there. I mean we could survive without that. We can still do business and sells smoothies and wraps or salad without using the cloud. From the operation point of view it wouldn't be a big thing, but on the administrative point of view that could harm us.” However, even though the business operation can be carried out without using cloud services since the key business aspect is selling healthy food, it may greatly affect the administrative area, since The Healthy Company is using several cloud services to host and sync their files as well as to greatly enhance their collaboration and communication.
4.2 The Invest Company
4.2.1 The Invest Company Overview and Products
The Invest Company is a Stockholm-‐based startup that aims to connect startups with investors. In order to achieve that purpose, they have developed a mobile application that has a swipe-‐right-‐to-‐like feature, similar to Tinder. Investors can scroll through different startup and see a short overview of the startup including name, logo, and how much capital they are seeking. If the investors got interested with a particular startup, they can click at the startup to see more information. Similarly, startups can look at different investors and get
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short information about them. There is also a discovery page feature that presents startup in categories within biotechnology or energy for instance, also grouping startups into their respective incubators as well as listing startups that are attending specific events such as Startup Day and STING Day.
Interviewee02, the CEO of The Invest Company, was interviewed for the
purpose of this research. She has overall responsibility in the company including managing the team and ensuring everything works according to plan as well as setting the goal and direction of the company. Aside from the 4 founders who have a previous startup experience, there is 1 developer in the company called Interviewee03 who was also interviewed briefly to support the main interview with technicalities.
The initial idea for The Invest Company was brought by the founders in the
end of December 2014, when the 4 founders were performing a group project from Stockholm School of Economics and realized that it is quite hard to get funded as a startup due to the lack of information and contact. Aspiring to have a more effective and less time consuming method to do that, the team began working on the idea before releasing the beta version of the application on 25th April 2015 in Apple Appstore. Currently they are working to improve the features from the feedback received from customers and planning to develop the application on Android platform as well.
Since the company was first established, The Invest Company tested
different ways to achieve their core idea to connect startups with investors, including conducting interviews with both startups and investors to see what value they can contribute with and then including it as a feature in their application. As it turned out, investors are really interested about tracking the team progress so the investors really take into account the amount of work the team do and how fast they progress. The application allows the investors to track the teams from distance without always having to conduct meetings, and at the same time allowing the team to update their progress wherever they are.
The Invest Company has over 40 startups and 20 investors that are using
their service at the moment. In the contrast of their belief that it is hard to attract investors since they already have so much to offer the startups, the company has received a lot of positive responses from the investors. In addition, they collaborated with Startup Day to open a booth and pitch at that event and drew the attention of plenty of people solely because they were inclined to acquire more information about the idea and therefore received numerous potential collaboration partners, making that event hugely responsible for 60 downloads on that single day. They have also caught the attention of a magazine and an article about their company is about to be published. At the moment, they have
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started the initial marketing campaign and working on their current goal, “The current goal it is to really be established in Stockholm and in Sweden, we have our test market to see how it goes. And then the goal after that when we’re satisfied with out product in Sweden we want to go to startups hub in Europe as we can see in Dublin, London, Berlin, they also have this clusters of startups.”
4.2.2 The Invest Company Implementation of Cloud Services
The Invest Company implements several cloud service to carry out their business process. For an effective file management, they implement Dropbox in their company and they use Google Docs to work on different documents. A lot of communication is happening within Facebook Group and Facebook Chat.
For the application itself, Interviewee03 claimed that they are not using
cloud services at all when questioned whether they use cloud services to build the application, “No, we use Parse as a back-‐end. It’s very easy to setup. It’s like a database and backend system without having to write the backend code.” However, the Parse platform on the statement that he uttered appeared to have a characteristic of PaaS. After doing a research about that particular platform, the researcher was able to confirm that Parse is in fact a cloud service in the layer of PaaS. The researcher then confirmed it again with Interviewee02 and Interviewee02 agreed that Parse is a cloud-‐based platform. Parse is backed up with a powerful cloud database that runs MongoDB on the backend. It also provides native SDK for various devices; push notification services, and analytics tracking to the application.
In the beginning stage of the company, they have not been using all the services they currently use. The company started to implement Dropbox later on in the process and became a really helpful tool to the company. In the future they are planning to implement a customer relationship management system to keep track on the investors and startups they have approached, in which they are currently using excel sheets for that process and they are not satisfied with the performance.
The reason why The Invest Company implements cloud services in their
company is because of the collaboration and communication feature. Cloud services really become useful when they are apart to get instant updates on the documents, pictures, and all the materials used for presentation and marketing efficiently. In addition, cloud services reduce the cost of operation of the company. They are currently using the free package for the services they are using, making it very economic. They also believe that when it is time to upgrade the services to the paid package because the free package cannot satisfy the
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company demands anymore, they will be ready to do so since it is still cost efficient.
The Invest Company believes that cloud services have a major contribution
towards the user growth of their application. The company chose to develop a mobile application instead of a website as the main focus because it triggers the users to be more active since it’s more accessible to them; even in this busy society users can use their small spare time when waiting for someone or the bus to update their progress as a startup or to track the progress as an investor.
4.2.3 The Invest Company’s Competitive Advantage by Using Cloud Service
Even though there are companies that have the same purpose with The Invest Company, there is no other company that is based in Sweden and they are based on websites instead of applications. A lot of them are based in United States; not being based in Sweden, those companies do not really comprehend the real situation about startups and investors in Sweden, thus not having a Nordic focus.
Compared to those companies with websites that often lack of activities,
The Invest Company believes that they have a competitive advantage. By using a cloud-‐based mobile application, users can be more active because it is available whenever and wherever the users are. With the increase of activity, more people can see what is happening in the application therefore it can attract more people to use the service, making it more like a social network than just a database.
4.2.4 The Invest Company Dependency Towards Cloud Services
“I think it’s extremely dependent. I mean the whole idea is based on that so without the cloud computing I don't even know if the company would exist because then you go back to having events and things like that. That already exist and it works, and I think it’s a good compliment to our product but I mean cloud computing is the key now.”
The Invest Company is extremely dependent on the usage of cloud services in their company. The application is built on a cloud platform; that means without implementing cloud services their company might not have been existed, since startups and investors would still have been using the traditional method such as attending startup-‐related events in order to get connected.
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4.3 The Learning Company
4.3.1 The Learning Company Overview and Products
The Learning Company is a Stockholm-‐based startup that summarizes business concepts from business books that need around 8 hours to be read to text in mobile platform that the readers can read for around half an hour and applying it straight to work. The main difference between what The Learning Company is working on with many other companies in the industry is that they focus on creating stories around the summaries, meaning that instead of just having a list of bullet points, they include the summaries in case-‐like stories so the readers have easier time to connect with the stories and relate to them.
The founder and CEO of the company tested the concept for the very first
time in around 2012, before running another test on Internet Discover Day. Interviewee04, the CMO of The Learning Company, was interviewed for this research purposes. He started to work with the company full time for about 1 year ago, and his main responsibility revolves around marketing, many of them related with events such as preparing and attending events to connect with potential customers. He also works with online marketing, such as improving the Twitter flow, working with social media, webpage, and their other channels. There are 3 people that are situated in the office in Stockholm, as well as additional 5 to 6 advisors as part of the core team that they meet every week. Moreover, the company has their external network of advisors in which they are working with on product basis that is more connected to a specific project. The Learning Company also has initiated their expansion to Asia and United States.
As for the current goal of the company, Interviewee04 mentioned, “So what
we want to do is that we want to bridge the gap between what science knows and what business does. So we really want to be in that sweet spot. We’re really making sure that business professionals got that knowledge and can apply that in their work. So the first step there is to work with companies to help them get that knowledge into their workplace so they can accelerate growth of their companies. The second step would be working more with individuals and allowing individuals to connect with that knowledge base.”
The Learning Company is a graduate of a startup incubator fast-‐forward
program in Stockholm. During the program period of January to June 2014, the company received very rapid feedback and they were developing the business in a very intense pace. In addition, prior to the program they also have received feedback on their business model canvas from more than 100 Stanford students. Those feedbacks helped the company to iterate their business model to be what
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it currently is, as well as continual feedback for their business idea in the past couple years.
The Learning Company currently is running a pilot program for 10
companies internationally and looking for some of the final pilot customers for that program. In terms of number of users, they have not gone out with the number of current active users yet. The growth of the users in the company has a different way compared to customer product that might have an exponential growth because customers refer to their friends if they find the product useful. Since The Learning Company is working with companies, they get a spike in number of users for every new company that they work with, and that is pretty much connected to the amount of work that the company put, making the growth rate more stable.
4.3.2 The Learning Company Implementation of Cloud Services
The Learning Company implements several cloud services to carry out their business process. Wrike is used as a task management system as it allows the user to create tasks and assign the tasks to different users. All employees within the company use that service to manage and track ideas and projects. For mailing purposes, The Learning Company uses Google Web Service because it allows them to integrate their corporate email with Google email service Gmail. Adobe Creative Cloud is also used to carry out projects related to design area. In terms of file management, the company takes advantage of using Dropbox, and for internal communication, The Learning Company uses Slack, which integrates all the team communication in one place supported with instant search feature and available in all devices.
The Learning Company started with only using quite few services, but as
the team grew they started to use more services. On the early stage it was more focused on the demand of a specific function such as design application and file management application. However, since they have already implemented a couple of services already, the important thing that the company considers when selecting a cloud service in the current stage is the integration between services and seeing how well it works with the mix of solutions they are currently working with. Slack has proven to have a good integration system as it integrates with Dropbox and many other services.
The reason why The Learning Company implements cloud services for
their business process is the aspect of time, as it eliminates the need to develop everything from ground up, as Interviewee04 mentioned, “When it comes to being a startup, you need to move fast. Especially now in our phase you really need
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to move fast, because learning especially mobile learning is fast growing, and there are more companies getting interested in the sector. So you don't really have time to create everything from scratch.” Cloud services help The Learning Company to not focus on developing their non-‐core business that they are not expert in and instead focus on their core business.
Cloud services helps The Learning Company to collaborate more efficiently
with all the employees within Stockholm office and other offices in Asia and United States. Moreover, due to the fact that cloud services have helped The Learning Company to work faster, it reduces the cost of operation. However, since the company has not done a cost-‐benefit analysis for specific program to see specific contribution with using a certain vendor, there is no specific number that can be shown. Also, even though cloud services do not affect the growth of the number of users, it helps the company as they scale their user base due to scalability feature of cloud computing.
4.3.3 The Learning Company’s Competitive Advantage by Using Cloud Service
The Learning Company does not believe to have a competitive advantage by using cloud computing services since every startup are using those kind of services. “I’d be surprised if there is a startup in our industry in Stockholm that is on the mobile scene that is not using cloud computing service at all whatsoever.” The wide usage of cloud services in startups has greatly influence the usage of cloud services in The Learning Company, in the sense that Stockholm startup community is quite inclusive, meaning that if one startup is using a tool that they find very useful they tend to share to other startups that they are using that particular tool. Since almost every startup are sharing certain information with each other, it is very likely that the information about new applications or tools as well as use cases such as how to use a specific tool or a new feature got recently offered got spread really quickly.
The Learning Company also avoids using a very obscure programming
language that no other startups know about since they cannot ask as much people for help in case of trouble. The same goes with cloud services, the company avoids choosing a service that no other startups have used previously, otherwise a comprehensive training for the employees will be compulsory because it is very hard to get support, especially if the provider is a relatively small company that does not have a good support system.
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4.3.4 The Learning Company Dependency Towards Cloud Services
When asked about the dependency of cloud services, The Learning Company may opt for a non cloud-‐based software if they have to instead of adding a subscription to cloud services, however this may harm the company in terms of collaboration. “The problem there I would say is that one of the main benefit with many of cloud computing services is they have a lot of good collaborative functions, and many desktop services, they tend not to have as good collaborative functions, which can be problematic since we’re working with remote team. So we have employees or team members in Asia and US so collaborative functions is very important for us.” Therefore, The Learning Company is very dependent to cloud services in terms of collaborative features.
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5. Discussion This chapter will try to convey the interview results into a systematic data
and comparing it with the literature. The compared data will be the basis for the conclusion of this thesis.
From the interview result, The Healthy Company appears to be using 3
types of cloud-‐based services as a tool for file management, for writing documents, and social collaboration, communication, and project management. All of the cloud services they are using are based on public cloud deployment. The Healthy Company enjoys the benefit of implementing cloud-‐based services in making the communication and collaboration of the company more effective while at the same time reducing the cost of IT infrastructure significantly. They do not believe that implementing cloud computing can give them competitive advantage and they can survive without cloud even though it might harm the administrative aspect. The table of cloud impacts on The Healthy Company is as follows:
Name The Healthy Company Types of Cloud Services -‐ Portknox: file management (public cloud)
-‐ Evernote: documents (public cloud) -‐ Bitrix24: social collaboration,
communication, and project management (public cloud)
Benefit -‐ Effective communication and collaboration -‐ Cost-‐effective
Competitive Advantage Does not believe to have competitive advantage Dependency Can survive without cloud service, but harms the
administrations Figure 12 Cloud Impacts on The Healthy Company
The Invest Company appears to utilize another form of cloud service aside
from the tools for file management, documents, and social collaboration and communication. The application they are developing is built on a cloud platform as backend, in which helps them to shift their focus from considering the IT infrastructure to achieving their goals. As with The Healthy Company, the cloud services that are being used by The Invest Company are also on public cloud deployment method. Similar to The Healthy Company, The Invest Company also benefits from cloud computing in terms of making communication and collaboration more effective and reducing the cost of IT infrastructure in the company. They also believe to have a competitive advantage, as they are the only cloud-‐based application on the market that connects investors and startups. The
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Invest Company is very dependent on cloud computing because their mobile application is built on a cloud platform. The table of cloud impacts on The Invest Company is as follows:
Name The Invest Company Types of Cloud Services -‐ Dropbox: file management (public cloud)
-‐ Google Docs: documents (public cloud) -‐ Facebook: social collaboration,
communication (public cloud) -‐ Parse: backend platform for the application
(public cloud) Benefit -‐ Effective communication and collaboration
-‐ Cost-‐effective Competitive Advantage Believes to have competitive advantage with the
only cloud-‐based application on the market that connects investors and startups
Dependency Extremely dependent on cloud service, the mobile application developed by the company is built on a cloud platform
Figure 13 Cloud Impacts on The Invest Company
The Learning Company appears to use the most tools compared to the 2 previous companies. They are using cloud computing for file management, collaboration and communication, project management, design related work, and mailing services. Similar with the 2 previous companies, all cloud services The Learning Company is using are based on public cloud deployment. The benefits from using cloud-‐based services can be seen in The Learning Company as they have a more effective communication and collaboration especially with the employees in other offices as well as lowering the cost because the can have a faster pace of work by not needing to consider the IT infrastructure. The Learning Company does not believe to have a competitive advantage by implementing cloud services because they are using tools that are similar with other companies in the startup community. In terms of dependency, The Learning Company is dependent on the collaborative feature the cloud is giving. However, if they have to, they can opt for purchasing the desktop version of the application instead of subscribing to the cloud. The table of cloud impacts on The Learning Company is as follows:
Name The Learning Company Types of Cloud Services -‐ Dropbox: file management (public cloud)
-‐ Slack: collaboration and communication (public cloud)
-‐ Wrike: project management (public cloud)
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-‐ Adobe Creative Cloud: design (public cloud) -‐ Google Web Service: mailing (public cloud)
Benefit -‐ Effective communication and collaboration -‐ Cost-‐effective because of the faster pace of
work Competitive Advantage Does not believe to have competitive advantage Dependency Dependent on collaborative features
Figure 14 Cloud Impacts on The Learning Company
Based on the findings above, there are several characteristics that are
similar among those 3 early stage startups. First of all, they all use various cloud-‐based tools to help them carrying out their business process. Furthermore, the tools they are using are based on public cloud deployment; this substantial usage of public cloud tools is aligned with the rise of the public cloud services on the market (Cattaneo, Kolding, Bradshaw, & Folco, 2012). Also cloud computing reduces the cost of IT in a sense that the organizations do not need to consider about building their own IT infrastructure, thus reducing the barrier of entrance of startups and making them moving in a faster pace (Edlund & Livenson, 2012). Those 3 organizations also believe that they have an effective communication and collaboration because of the implementation of cloud-‐based services. In bullet points, the base of the conclusion would be as follows:
• Early stage startups are using public cloud services due to the
easiness of the resource management, scalability, and flexibility with the billing system based on the pay-‐as-‐you-‐go model. Even though this type of cloud deployment may encounter several security and compliance issues, it does not seem to be a huge concern for early base startups.
• Cloud computing reduces the cost of IT for early stage startups because they do not need to build their own IT infrastructure and can quickly focus on their core business, thus cloud computing reduces the barrier of entrance for startups and enabling them to move in a faster pace.
• Cloud computing makes the communication and collaboration in early stage startups more effective since the cloud-‐based services they are using allow them to view and contribute to the organization task and progress in real time simultaneously with various IT devices with Internet access regardless of their geographical location.
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6. Conclusions and Future Research
The point of this thesis was not to draw general conclusions towards the impact of cloud computing of startups; otherwise a quantitative study with bigger sample of interviews would be necessary. However, the interview results have shown some similar patterns in some areas.
The first chapter introduces the background of this research as well as the
aim, research question, and scope of the research. A brief evolution of technology has been mentioned and it was then directed to cloud computing technology. Later on it was narrowed down to find out how cloud computing impacts the early stage startups in Sweden.
The second chapter elaborates the concept and literature in terms of cloud
computing and startups. The definition of startup has been written, with early stage startups in which this thesis is focusing on. A thorough explanation about cloud computing has also been written, with the characteristics, layers and deployment type of cloud computing, as well as case study of international enterprise cloud service providers. Furthermore, the second chapter also addresses the cloud computing implementation in Europe along with the implication of cloud computing towards startups, continued with evolution of startup because of cloud computing. Benefits and challenges of cloud computing technology have also been addressed.
The third chapter explained the methodology used for this thesis, including
the approach, paradigm, as well as data collection and analysis. This thesis uses qualitative approach with interpretivist paradigm. The qualitative data is collected from case study in the form of literature review and interview of 3 Stockholm-‐based early stage startups. Ethical consideration in conducting interviews is also addressed in this chapter.
The fourth chapter includes the interview result with 3 Stockholm-‐based
early stage startups. It addresses the overview of the company and the product, then continued by the types of cloud-‐based services they are implementing within their organizations. The benefits of cloud computing that those 3 early stage startups are enjoying are also addressed in this chapter. In addition, competitive advantage and dependency of cloud-‐based services have been written as well.
The fifth chapter is the discussion chapter where the interview results are
compared with the literature to draw a conclusion of the research. The similar characteristics found in all 3 early stage startups that have been interviewed are compared with the literature and then a conclusion is drawn.
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This research that is focusing on the impact of cloud computing towards early stage startups in Sweden can be concluded in this points:
• Early stage startups are using public cloud services due to the
easiness of the resource management, scalability, and flexibility with the billing system based on the pay-‐as-‐you-‐go model.
• Cloud computing reduces the cost of IT for early stage startups, consequently reduces the barrier of entrance for startups and enabling them to move in a faster pace.
• Cloud computing makes the communication and collaboration in early stage startups more effective.
6.1 Future Research Cloud computing is a continuously evolving technology with more and
more features developed that can address various needs in business field. While this thesis addresses the impact of cloud computing towards early stage startups in Sweden, the number of companies interviewed is very limited and the region is limited to Stockholm only. In future research, it is possible to conduct a research with a large number of participants in various locations in Sweden or possibly a larger geographical scope as well as various stages in startup development in order to perceive a general conclusion about how cloud computing impacts startups.
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