Comments on: Web Worker 101: Products or Services?

By: CJ Singh

CJ Singh — Tue, 11 Mar 2008 08:42:20 +0000

Excellent post. I am sure a lot of us have faced this decision. We have learned to follow the hybrid approach as you suggested. The best part about consulting is that it exposes you to unknown domains while getting you paid. We always try to spot gaps and opportunities in these new domains for our product development endeavors. It has been working out great.

By: Duane

Duane — Mon, 10 Mar 2008 16:21:59 +0000

The model for corporate IT is generally a hybrid, IMHO

You make a product and then sell ‘Professional Services’ to do the short-term integration or customization that a particular client might need — be it some specific workflow alteration or an addition to say a log file or even something simple like branding (fonts, colors, logo, etc.) for OEM

If you need the Professional Services to fund the “Product” then you are a services consultant (paying your bills and hopefully re-investing some of your consulting cash into hiring someone to help to complete your product), after your 1.0 and customer buy-in your next “gig” is professional services to launch it. If all goes well that consultant you hired can be your first sales engineer or you can franchise out the PS work to many groups who can then act as a reseller for you… apply some generous discount to your list price and let them work for you for a commission..

Even Open Source software follows this model. There is value in the number of users and monthly fees to use your product and there there are the non-recurring fees to setup, train, do an “in-netowrk” install rather than an ASP model.

You can easily use the money from your services practice to fund and launch your products business and all that ‘re-investment” is great for your accountant at tax time :D

Hope that helps

Cheers
Duane

By: Wayne

Wayne — Sat, 08 Mar 2008 22:21:31 +0000

Thanks for the blog posting. One of my favorite books on the software development ("The Business of Software", by Michael A. Cusumano) also stresses the same points. Overall, he associates product developent to "writing a book" versus software consulting, which is like "working for a bank". Like many other software companies, our organization started as a consulting company but slowly transformed itself into a software vendor with the development of our online project management service (Joint Contact).

By: Khürt

Khürt — Sat, 08 Mar 2008 14:06:24 +0000

What about a combination of both? You could a product for a specific market and sell consulting services around the product. It could be something you do fo 50% of your income with the remainder coming in from other consulting gigs.

By: Cathy

Cathy — Sat, 08 Mar 2008 00:15:05 +0000

One way you can raise the ceiling on consulting income is to charge by the project rather than by the hour. If you’re fast, you can charge a fair market price yet make more.

With that said, I’ve been 100% services but am launching a product this year and am looking forward to it.

By: Jay

Jay — Sat, 08 Mar 2008 00:03:32 +0000

I have a whole potential book’s worth of story to tell centered in no small part around exactly this.

If you set out to do software, then do consulting to pay the bills/self-fund, it’s easy to forget the original goal. Especially if you have partners whose goals turn out not to have been the same.

By: J Lane

J Lane — Fri, 07 Mar 2008 22:51:21 +0000

It’s tough. When you think that you’ve only got X number of hours in the day, you almost start to feel guilty if you spend some of those hours on non-billable work.

It’s a lot like writing a book. If you calculate out hours spent vs. the advance you get, you usually end up working for peanuts. Of course, if your book does well, you’ll do well in royalties raising that hourly rate… but that’s a big IF.

By: jtpratt

jtpratt — Fri, 07 Mar 2008 20:36:06 +0000

You know, consulting is nice, but you’re only as good as your current job (money-wise). Products are the only thing that you can initially setup and walk away from and rake in profits for years and years passively.

In this way every project you work on (with products) can have a “long tail” – while consulting has no long tail, except a reputation that gets you more jobs. You might be able to charge more over time, but you can’t snowball profits out of that like you can products.

By: Scott Hemmeter

Scott Hemmeter — Fri, 07 Mar 2008 20:22:16 +0000

I have gone through a similar decision. Historically, I've been all consulting. The last 4 years has been focused on Salesforce.com related services. My goal is to not be at the mercy of where my client wants me, so I started building products. My first is a mapping integration for Salesforce customers. My goal is to have a few products that account for ~75% of my income. Then some services work to enhance the products for specific clients and/or build custom, related tools for them. Consulting still, by far, brings home the bacon. We'll see how it goes. Products are an experiment right now.

By: Jason Green

Jason Green — Fri, 07 Mar 2008 20:03:14 +0000

Wow. I have this exact decision to make right now. I like doing consulting, and the connection with customers. However, I really want that passive income.

I think the hybrid solution would work best for me. I need the consulting money to pay the bills, but I also need to get some passive income going.

Thanks for this post. It really got me thinking.