Amit Dhandal & Rahul Bagal are Co-Founder and Director of IncubXperts, a software services organization, focused on building web and mobile-based solutions for Enterprises, ISV, and Product companies. In this article, they help get newbies and junior engineers to understand the difference between a product-based company and one that is service-based.
The IT & BPM sector has become one of the most significant growth catalysts for the Indian economy, contributing significantly to the country’s GDP and public welfare. The IT industry accounted for 7.4% of India’s GDP in FY22, and it is expected to contribute 10% to India’s GDP by 2025.
According to India Brand Equity Foundation, the current emphasis is on the production of significant economic value and citizen empowerment, thanks to a solid foundation of digital infrastructure and enhanced digital access provided by the Digital India Program. India is one of the countries with the quickest pace of digital adoption. This was accomplished through a mix of government action, commercial innovation and investment, and new digital applications that are already improving and permeating various activities and different forms of work, thus positively impacting the daily lives of citizens.
Information technology pervades all aspects of our life. From paying neighborhood grocers with a smartphone to booking airlines ticket to healthcare, this sector has become an integral part of our lives. This is why IT professionals also earn decent pay.
One question that often niggles a fresher who is keen to join an Information Technology company is whether to join a product-based company or a service-based one.
When Amit and Rahul speak, they both share dimensions that overlap with each other. Amit worked in the OPD (Outsourced Product Development) whereas Rahul was part of a captive center for a US-based technology company. So when they talk about it – they have one thing in common besides a few that will be shared in the article shortly.
They both speak very highly about the ability of a fresher/junior to learn fast and be proactive at learning. Whether one is in a product-based company or service, what prevails is the ability to learn when nobody is teaching!
However, let’s spend a couple of minutes to understand the two terms – Product and Service clearly. One difference between the two is Product is something that is offered out of the box with no or minimal customizations. It’s built once and sold multiple times. A typical product company is focused on building one or multiple products (product lines). A software technology services company focuses on becoming a technology partner for organizations that have technology needs. Such organizations could be product companies themselves or Enterprises that have inherent technology needs.
Software Product based companies’ example could be say a banking product “Oracle Financial Services”. This is a core banking product used by a Bank to digitize its operations. Or say Microsoft, Google, or MakeMyTrip i, which has a web application that lets users log in and book hotels, air travel, and likewise. An app like Whatsapp or Facebook is also a good example of a Software product company.
On the other hand, an example of a services-based IT company could be “Infosys” or “TCS”. Although many of these companies now also have their products, however, their core offering is still service. They work with product companies (like Uber, and Cisco), or large enterprises (like JP Morgan, and Nokia).
The IT industry in India in the last two decades has seen exponential growth. This is mainly due to the advancement within the IT industry, liberalization policies of the government, and elimination of import duties on technology products by the Government of India. The Government has also taken initiatives like setting up Software Technology Parks and Special Economic Zones which have worked as a catalyst in the growth of the Industry.
The IT sector has increased its contribution to India’s GDP from 1.2% in 1998 to almost 10% in 2019. According to NASSCOM, the sector aggregated revenues of 180 billion dollars in 2019 with export revenue standing at 99 billion dollars and domestic revenue at 48 US billion dollars, growing by over 13%. As of 2020, India’s IT workforce accounts for 4.36 million employees. The United States accounts for two-thirds of India’s IT services exports.
Despite the global expansion by Indian IT companies, the share of the off-site mode of exports of software services continued to increase and stood at 88.8% in the financial year 2021-22 as compared with 87.1% during FY21 and 82.8% five years ago, the Reserve Bank of India’s latest annual survey on the country’s computer software and information technology enabled-services exports shows.
The survey shows that the country’s on-site services accounted for an 11.2% share in FY22, which declined from 12.9% in the previous year.
India’s exports of software services, excluding exports through commercial presence, are also estimated to have increased by 17.2% to $156.7 billion during 2021-22. Computer services, including IT services and software product development, continued to account for over two-thirds of total software services exports at 67.8% in 2021-22. The share of IT-enabled services, including BPO and engineering services, however, declined to 32.2% in 2021-22 from 34.7% in 2020-21.
So now the question is when it comes to working with either Product based company or services, which is better to work with?
Amit has played various key roles like CoE head, and solution architect for various services companies like Wipro, Cybage, GlobalLogic shares a few tips.
- A solution mindset is more important than technology. You should be able to understand the challenge and solve the same with the technology that the customer is comfortable with (generally).
- Understanding customers’ business is important to be able to make sense of what you are doing. You will have to take initiative to build this knowledge yourself.
- Timelines are very important. Progress prevails over perfection.
- Generally, you will get a larger breadth of technology working with a services company. You may end up working on multiple products during your initial years. This gives much-needed exposure in that phase of career when it matters.
Rahul, who has spent the majority of his time taking care of payments products at Fiserv, speaks about how product companies differ:
- In product companies, deadlines matter but what matters more is perfection!
- One typically ends up focusing on a single technology stream and continues to dive deeper into the same technology for years. (Well unless the leadership decides to change the Product’s technology stack!)
- Product companies value domain knowledge to a large extent along with technical skills.
- Sales and growth-oriented culture are common in Product companies. They create something that needs to be sold later. While services companies focus on delivering incremental value to their customer and attaining growth.
As you can see, a product based or a service based, both have peculiar dimensions. Each has its share of learnings and growth. Services companies offer wider breadth and exposure whereas Product companies offer the opportunity to go deeper into a particular technology and domain.
Amit suggests an option to work for a services organization during the initial phase and later transition to a product-based company. This prepares juniors well as they get wider exposure to various technologies for a few years initially. Rahul concurs however he further adds that a services company that is working on a “product” could be an ideal fit! One can essentially get to work on a product while working in the services company!
