thinking in geek tagline’s are so web2.0

Products vs Services

JD writes:

I fully believe that services companies simply don’t scale in a manner that provides the right level of return on your investment. Margins are thinner, managing people is very hard and you get that all as baggage in exchange for being able to make easier money at the start. Those dollars can look attractive but if you’re not careful you’ll find yourself a few years down the track owning a services company with no products. Be vigilant and ensure you’re only providing services that you require to deliver on your product vision.

This is an interesting comment – it’s a thought that I’ve had and the type of thing I’ve said on many occasions – but I “currently” think it’s wrong. I’ve said this most strongly and held this opinion most vehemently just after I’ve finished working for services based businesses.

In reality – all business is service based – try selling a product without any service or support. While I was working for Fujistu[1] they acquired Amdahl for a song. Why? Amdhal was a failing product based business – the problem was that they’d struggled to compete with IBM’s innovation in the mainframe space. What did Fujitsu want with a failing product business – it’s top tier service team. These guys had 20+ years supporting mainframes which were doing 5 9′s availablity (99.999%) etc – they were really valuable – whether you were doing services or products.

Running and growing businesses is hard – there aren’t any short cuts.

[1] I used to work for Fujistu (yep the guys who make air conditioners).

Hi Josh,

When speaking about company types I usually refer to their primary purpose. For example I don’t tend to call Microsoft a services company just because they have a support desk (or an entire services division for that matter) as their primary purpose and income is generated from products.

The key being build once, sell many as opposed to build custom every time (even if it is just integration of products).

It’s all about creating the best overall experience for your customers and you can’t do that without providing some level of support, you are right.

Just correcting my own definition for you

Cheers,

– JD

Thanks for the clarification – would you describe Live.com as a product or a service?

Live.com is a product internally, they build it once and refine it over and over. It is a service to the users.

Having said that the issue I take here is looking at Microsoft too much given they are in so many areas – they are also a hardware company, one of the largest research institutions on the planet etc. However most of their income comes from Windows and Office licenses.

Hope this helps,

– JD