Thursday, February 5, 2009

Product Vs Service


Would like to give some insights between the product based orgranization and the services based organization.
It is a common notion among the freshers and also among some of the people in the industry to consider services company as completely devoid of innovation and thriving solely on labor arbitrage. I was myself guilty of similar thinking for a long time.
However, after the little experience I have in the industry and watching both Services and product development side by side, I have realized that both have their own unique challenges and it is not at all fair to put services companies on a lower pedestal than product companies.

Firstly, there aren't really any true product companies. No company can simply build and sell products without providing services around them. Microsoft - the epitome of software product development - has a very large fraction of its work force providing support and associated services around its products. Apple, IBM, Sun - you name it - all develop products and provide services around them. If anything - many of these companies (notably IBM) have realized that services is a much more profitable business to be in. IBM Global Services is probably world's largest software services company.

Secondly, unlike common perception, services companies constantly innovate to remain competitive. The innovation may be in the form of better processes, better hiring strategies, or in developing complex technical solutions for their clients. It is true that many large software services companies do routine incremental maintenance work for systems that were architected elsewhere. However, that is true for large product companies as well which need to invest majority of their resources in maintaining and updating previous versions of their products. If anything, a services company has better chances of doing interesting work in varied technologies as against a product company which is likely to be tied to a single platform and a single product. For a services company, every client and every project is an opportunity to pick up a new technology. The portfolio and technical breadth of services companies is undeniably greater than those of product companies.

The greatest advantage of working in a services company is that you learn to listen very carefully to what your customers are saying. On the shoulders of its clients, a services company gets an opportunity to look closely at varied business models, ship varied products and learn from mistakes and successes of others.

The product company on the other hand the product based company has its own systems in place and is more of ‘content’ than ‘presentation’.Let me elaborate a bit. A product company is not necessarily great because it innovates. What makes a (good) product company truly stand out is its ability to place its bets on building something in a way that nobody else has, and then giving it all the company's got. Product companies invest in R&D, they take chances, and in their DNA is the ability to know “what” to build without somebody telling them to. The what is a very key element.

The technical challenges and innovation will be similar but a services company does not own the intellectual property and also does not take the responsibility of the success of the idea. This responsibility makes a product company special because it makes long term revenue for the company. (And explains the swelling packages offered to the employees!)

Which one’s for you. You decide yourself..

Product companies are about innovation, service companies are about understanding, listening to clients and addressing the solution within deadlines. The processing of listening to the market is the common aspect of both. However, the kinds of people required for these roles are fundamentally different. Think consulting firm, and you can imagine the big B school MBAs in client relationship roles. There is a lot more emphasis on soft skills, on formal processes, less emphasis on precision or sustainability, less time for innovation, less thought on the code line and more on getting to a solution that works in time. Product companies require more creative people, but their social skills might not be as good. Again this is an observation and not a rule of thumb.

Final words:-
  • A product company uses its people to create intellectual property.

  • A services company rents its people out so others can create intellectual property.

  • A product company takes a $20/hour Java programmer and uses his skills to create a $20 million product.

  • A services company takes a $20/hour Java programmer and rents him out for $25/hour.

  • A Developer gets bored in the product company very easily but will have much time to do personal work.

  • A Developer gets irritated in the services company as he will not have much to do personal work.

  • A product company has a free way to learn any thing.A services company has a narrow way to learn only required things to the company.

~ Gangadhar Kotu (గంగాధర్ కోటు)

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