EDWARD'S FIRST PROJECT Starting with personal funds of less than CDN$20,000, the two founders had intended to seek angel funding immediately. In order to do that, they needed to show that they were on track to building a viable business. First, they needed a Web site, and a staff of developers to create a working model of their software program. For Unnaco's software platform, the company asked Edwards to create a functioning database on top of a UNIX-based operating system. Edwards realized that the 15-year- old server and packet switching hardware that they had recently purchased to run the software was outdated and inadequate. He convinced the founders that they would have to acquire newer equipment to achieve the desired functionality. Reluctantly, Edwards's request was met after a week of indecision. When the new hardware arrived in April 2010, Edwards offered to telephone the major software companies to purchase the requisite software licenses. Thus, Edwards was surprised when the founders decided to take the discussion out of the office by inviting him to a lunch meeting. Unnaco had been in operation for four weeks at this point, and had only five employees. THE REQUEST Over lunch at the "Market" (as the Wayward Market was known in Montreal), Edwards was informed that no more funds existed for the purchase of software. Edwards was told that it was his responsibility to load software onto the machines. Edwards had several other projects that were awaiting his attention, but he did not want to disappoint his friends and others. Relying on several industry contacts, Edwards acquired new, cracked versions of software required to run Unnaco's operations. Known in the software industry as "warez," these were fully functional software programs made available to the public by software engineers who had cracked the software's security and validation codes. Legitimate users typically purchased a software license from the supplier, who included a code to validate. He explained: Of course, I know it's an ethical dilemma. But which side of the line do I stand on? The white line, the black line, or do I thread the fine line in the middle? ACQUIRING FUNDING One month later, in May 2010, Unnaco secured CDN$3 million in funding from various angel investors in Canada and the United States. The founders were extremely proud of having secured the amount, in spite of the fact that the continued downturn in the economy was affecting investor confidence. Euphoric, they embarked on an office expansion, hired another 45 people, and prepared a fall marketing campaign. Edwards was rewarded with a bonus of CDN$5,000, payable upon completion of a year's work, but was reassigned as a network administrator. Edwards did not notice any attempt by the founders to acquire software license agreements. RAPID GROWTH AT UNNACO With the infusion, a newly hired team of 8 engineers began coding the first beta release of UAC. The team of marketers were given the latest Zinux smartphones and travel budgets to fly to seminars and conferences to promote UAC at key industry conferences, including Zinux's GDC (Global Developers Conference) in Ontario. The Canadian media, hungry for stories in the slow August to September period, pounced on the chance to tout Unnaco as the most promising start-up in the app development market, generating thousands of media impressions in the process. SLOWED DEVELOPMENT The internal climate at Unnaco was different. The team of 8 engineers had split into two fractions, bickering over creative control of the project. In the process, engineering work for UAC stalled, and key engineers tendered their resignations in frustration. By November 2010, Unnaco had only a rough working model of CIC. However, plans were still in place to approach venture capitalists in December for CDN$15 million, and interested parties were still being promised a December beta release. THE FOUNDERS STEP IN The two founders began taking control of the situation in late November, firing 4 of the software engineers and giving the remaining team new goals to meet. Within two weeks, the situation stabilized and a climate of productivity returned. It seemed that a sense of urgency at Unnaco had re-emerged, and on the 21st of December, the founders announced to employees that the beta version was ready. A press release was issued on the 26th of December, announcing that a limited version of Unnaco' UAC was being rapidly adopted by consumers, reaching 15,000 licenses awarded. The licenses for the limited versions had been awarded at no cost in order to rapidly gain market share. Unnaco, paraphrasing a company press release, explained that it intended to charge developers for its 1.0 release. THE UNEARTHING As part of his monthly duties, Edwards performed a file clean-up of Unnaco's internal file folders. One of the founders had purchased a new laptop and had asked Edwards to load new software and transfer old files for him. While manually transferring the files on the morning of December 28, Edwards recovered a deleted e-mail. In the e-mail fragment, the founder outlined that 15,000 fake accounts had been created by him to download the CIC program. The e-mail had apparently been written to the other founder in order to inform him of this occurrence. Scrolling further, he chanced upon a more recent e-mail fragment from the Ontario Workplace Safety and Insurance Board (WSIB): ...You have not filled out the necessary forms to register your company with the WSIB. . . the employees of Unnaco are not covered and cannot claim benefits if they are involved in a workplace accident. You are in direct violation of workplace safety standards. Perplexed, Edwards shut down the computers and headed out for his break. EDWARDS'S DILEMMA Finishing his run, Edwards decided to take an extended lunch to stroll around Montreal's Parliament buildings. Even though it was unusually warm for a February in Montreal, Edwards had other things on his mind. Has Unnaco paid for the software we use to create UAC? What do these e-mail fragments mean? We are not covered under the WSIB. If I had fallen and broken my neck while changing light bulbs or electrocuted myself while wiring computers, I would have been finished. Calming himself, Edwards headed back to his desk at Unnaco. He had a lot to think about. Source: Ivey Case Study, 2020-03-30 QUESTION 1 Provide TWO (2) solutions on what should Edwards do pertaining to the dilemma he faces? (10 Marks) QUESTION 2 Suggest to whom Edwards should speak to concerning the solution. Support your answer ONE (1) justification. (5 Marks) QUESTION 3 In your position as Edwards, propose an action that you would do differently and support your answer. (5 Marks) UNNACO: NAVIGATING THE ROUGH SEA INTRODUCTION John Edwards, network administrator for Unnaco, laced his shoes as he prepared to head out for his exercise break in Montreal. It was February 7, 2011, and Edwards needed to decide what to do with the information he had uncovered while performing a routine file- clean of his company's servers. Located in Montreal's trendy Glebe neighborhood, software developer Unnaco was preparing to present to venture capital firms for its first major round of funding. It was also fielding media interview requests the following week from the Montreal Citizen and The National Post, both interested in writing news stories about Unnaco phenomenal increase in software licenses for its Unnaco App Creator, a mobile application software development platform. UNNACO Unnaco was founded in March 2010 by two successful entrepreneurs to create software applications for the Zinux platform. The founders had noticed the growing popularity of Zinux devices and wanted to capitalize on the recent launch of the Zinux tab. Furthermore, independent research by firms such as Forrester Research and Gartner suggested that the consumer market would continue to demand these and other products designed to access content on the Internet. Fueling the popularity of Zinux OS-based devices was Zinux's unique combination of appealing design, intuitive user interfaces, and the proliferation of downloadable and inexpensive applications (or "apps") for entertainment, business, and other uses. Unnaco had developed an application development platform - Unnaco App Creator (UAC) that allowed novice users to create their own Zinux app without any software training. They began to popularize their product by allowing consumers to download a limited version of their software free of charge. In order to attract media attention, Unnaco had been targeting business customers for UAC, reporting on December 15, 2010, that the number of business software licenses. awarded for both its rough and beta versions had jumped from 1,500 to 20,000 in the last two months. STAFFING UNNACO The founders had assembled their teams largely from personal connections, and Edwards was employee number two and their first engineer hired. Although hired as chief product developer, Edwards was initially tasked with everything from setting up desktop computers for the public relations consultants and marketing personnel to fixing broken light bulbs. His projects also included configuring Unnaco's hardware and software to run its Web site and internal operations.