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Services Vs Products Company February 2, 2007

Posted by Gaurav Dhiman in My Professional Life.

Service based and product based companies are different from each other in many dimensions. As I am from India, I will take service software companies of India as an example.

Service software companies (like Wipro, Infosys, HCL Technologies etc) do not have focus on one or some specific technologies and domains, where as product software companies (like Microsoft, Intel, CadenceAdobe etc) are very much focused on their domains. By domain I mean, the area for which you have knowledge and in which you play a significant role. For example, Cisco moves in the domain of networking. They solve networking problems, and don’t know much about Databases. On other hand Oracle works in Databases space and don’t know much about embedded, networking or chip designing areas. Similarly Cadence Design Systems, who works in a very niche area of EDA (Electronic Design Automation) tools that are used for chip and board designing, don’t know much about other types of software. So we can say product companies are deeply rooted to domain, technology and research & development. If we look at service based software companies, their core strength is in providing solutions to any type of problem in any type of software, whether it is database, embedded, web application, remote network monitoring etc. They play in every area. So we can say service based software companies are more broadly rooted, with there roots spread to every area, just opposite to deeply rooted product companies.

Big service software companies have a model of verticals to divide their scope of work. With this model they categorize their projects in different verticals to manage the company work as a whole. The verticals here mainly mean domains in which service companies normally execute projects. For example, domains or verticals can be banking, retail, embedded etc. Domain or vertical is the area to which the software serves. For example, software used in Banking comes under banking domain, similarly software used in retail business (eg: POS devices) are categorized under retail vertical. Under these verticals different projects are placed.

Similarly product companies also divide their work in such verticals, but their verticals resemble to each other a lot than verticals of service software company. Just for instance, I will give you the examples from my experiences and learning in CA (Computer Associates) and Cadence where I worked earlier. In CA, the whole organization was divided into 5 main areas of work, which they used to call as brands (equivalent to verticals in service industry). The brands were related to different domains, like security, storage, databases, web applications and network management. Each brand have it’s own set of products. For instance security brand have products like antivirus, firewall, Intrusion Detection Systems (IDS) etc, falling in same category. In Cadence too, I observed the same type of division. They are have three area and those are Chip Designing, Chip Verification and PCB Design. In each of these areas they have number of products serving the same purpose.

Third difference is that product companies have very specialized and skilled employees. As they have very specific market to target at, so they need very specific and quality skill set. This is the reason that product based companies mainly prefer people with good enough experience in the same area. On other hand service based companies serve number of clients, having varied requirements in all together different technologies, that is why they need to have large and varied resource pool of engineers, whom they can deploy in different projects with minimum effort. Engineers in these companies have much wider knowledge about different technologies as they are not bound to one technology or product and get a lot of opportunity to work in different areas. Due to this reason, lot of companies that visit campuses of engineering colleges in India are service based companies, as they can make the fresher work in any area. Moreover I think its good for fresher as well, as they get a good playground to know different technologies in services based company and later on when they choose to be in one specific technology or domain, they can switch to a product company.

If we look at the employee strength of these two type of companies, we will come to know that product companies have very limited strength compared to service based companies. At the time when I was in HCL, it had 40,000 people, but when I joined CA there where only 15000 employees worldwide, where as CA got established much earlier than HCL. In Cadence also worldwide strength of employees is 5000 only, where as its one of the top companies in EDA domain. We can not directly compare the companies on their employee strength; rather we should compare them on their market share and revenues. On market share and revenues, product companies are much ahead of service based companies.

In today’s blog entry, I just covered the broader points, but if we look deeply in the working environment and culture of both services and product based companies we will surely find number of differences.

I personally like product based companies. Reason is that they are much focused on their work area, its good for engineers to learn a specific domain and technology, they provide good working culture and facilities and above all they give you bulky pay packets.



1. Virendra Kumar - June 14, 2008

Thanks for this wonderful post. I am currently caught in a situation where I have to choose between these two worlds, and your post will definitely help me reach a decision.

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