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Product Vs Services
Satish Mugulavalli
Wednesday, June 1, 2005
My passion for product companies prompted me to start Teneoris Networks – a digital home software startup. I have always been driven by a strong desire to “create” and a need to understand the bigger picture.

It’s never exciting to do something that is one part of a bigger activity that you don’t relate to or understand. Because of this, my entire career has revolved around the product industry.

Whatever could be the advantages of working in a services company, I’ve personally felt, product companies are more exciting place to work, especially if it’s a startup. There are few fundamental differences between service and product companies. To begin with, a service company can be boot-strapped with fairly low investment. A product company however will have to go through the challenges of getting the business plan approved by potential angel investors and Venture Capitalists. Secondly a service company will tune its employees to work for clients, whereas product engineers would be market driven. Third is revenue generation: In most cases software firms have immediate returns with low average revenue per employee, but in product firms the returns are long term with very high average revenue per employee. Fourth is what we can call skill-generation: Service companies usually create excellent people-managers whereas product companies create product managers and eventually business managers. Finally service companies grow directly as number of employees increase whereas product companies grow with the number of end-users using the product.

I strongly believe that in a product company there is a huge sense of accomplishment. Picture this: You show the big television to you mom and tell her you were one of its inventors or point out to the car on the street to your neighbor just to tell him that you designed the engine.

Product managers become immortal. Who does not know the creator of Ford Mustang, Apple iPod or Netscape Browser? The funny part is even failed product managers become immortal. A good product company can prepare you to be an entrepreneur pretty early in life. Most product startups love people who have the initiative and throw responsibility at them.

In my opinion, product engineers have better job security because of all round skills they develop while working for such companies. Now imagine that with all this you have added enormous wealth that would be created for these engineers if the company becomes successful. You just cannot lose.

But wait before you decide to choose a career. Listen to some of the pain points in a product firm. Career in a product company doesn’t make you a master of all technologies in the world rather it will retain you into one field for a long time. Product firms don’t make you a manager as quickly as a service company would.

You may not have an opportunity to say that I have ‘X’ number of colleagues reporting to me. The product requirements may change often and overnight, resulting in chaos. There may not be a standard process in product startups due such changes.

Ultimately, whether it is a service or a product company I have always believed that it’s better to join a company and make it successful rather than joining a successful company.
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