Tradeoffs of Using Multiple IT Providers for Startup Growth

Abstract

A fundamental strategic decision for startups providing digital products and services is the choice of IT provider. We investigate whether using cloud-based tools from a single information technology (IT) provider or multiple IT providers is associated with greater entrepreneurial growth. Access to cloud-based IT platform services provides resource-strapped startups with digital tools, complementary technologies, and computing resources necessary to build their product applications, rendering this early-stage IT resource acquisition decision vital to entrepreneurial growth. We find that adopting multiple IT platform providers enables startups to explore a broader array of technologies from a multi-platform ecosystem and relates to a 44% increase in venture funding and a 15% increase in customer acquisition. However, startups with a tighter fit with a single technology provider or greater technical capabilities benefit less from using multiple IT providers. We use these findings to provide novel evidence supporting the connection between production inputs and ecosystem participation.