There is No Product
“There is no spoon” was one of the most powerful dialogues or rather a concept that I picked up years ago when I first watched The Matrix. The essence still holds true, what is seemingly hard or impossible to do cannot happen. You can’t bend the spoon, that’s impossible. Instead realize the truth, there is no spoon.
The other day I and a friend of mine who works for a company that builds trading software for Hedge Funds were having our so called ‘productive chats’. Apparently their clients had moved away from them and my friend was facing the heat. He always faced the heat, clients wanting every small thing every week and he ends up bleeding his keyboard. So I asked him, “why don’t you move to a product company, services are a nightmare”. And he snapped back, “I am working in a product company” and I asked him how’s this a product firm when you had to work for every client’s wish every day. It’s not even SaaS, it’s just services wrapped in that whole cloud product illusion.
The point is the fine difference between what a product is and what a service is, especially in Tech has now blurred, even more hazy than it was 10 years ago. Let’s take a step back. Before the advent of modern web based tech industry we know of today things were pretty clear. A car is a product and a car repair was a service. And similarly a radio was a product and a radio repair was a service. It was an easy life. As Silicon Valley boomed and transitioned went from innovating transistors to modernizing web things began to change, for better or worse.
Before the novel idea of SaaS (Software-as-a-Service) came into being, things were not very difficult to make sense of. Microsoft was doing just fine sticking to classical models, it made and sold Windows like a car. The R&D was done, the design was made and then an assembly line shipped the final product through the network of distributors with a price tag that was more or less same for everyone. People bought it and used it, no talks of complicated stuffs like pay as you go.
But the world of technology was changing and that too at a very rapid pace. The era of Windows was going away, things were changing overnight and software companies had to fix patches or introduce new features every fortnight. Adobe in those days made a bold move, it realized early on the whole notion of getting paid by customers once while they ship updates for lifetime was not making any business sense. So it introduced the concept of pay-as-you-go which in simpler terms meant rent. People in those days weren’t used to this, they were from the generation who owned things and renting stuffs wasn’t for them. To add more to the drama Adobe also introduced the concept of downloading and using the product and do away with the disc they used to sell. The people now had to give money for something every month they can’t even touch.
And then we saw Salesforce and SaaS took over. It was the first time the concept of ‘Cloud’ hit people, and it hit them hard. How SaaS changed the face of technology in itself deserves a separate dedicated post but it’s enough to say that renting was the new fashion. The service industry took the world by storm, be it IT or Technology Consulting or IT Implementation or SaaS directly from the OEMs of the tech world. Here was the real money, rich clients from Wall Street wanted their softwares to be up and running all the time but they didn’t know a thing about technology so companies rode the wave, at least for a few years.
Around the time of the dot com bubble things again took a turn. More and more people were using the internet like never before and here was a market from where the money would come. How it would was a question everyone thought they would figure out later. This ‘later’ was a point in time when you had those people hooked to you and for which you needed to give them something they loved. That was the advent of startup culture, the boom of the VC backed product based companies and the fashion of developers wearing those ‘Hack Me Up’ tee-shirts. What was happening basically was that bright minds were solving complex problems and were in return making a lot of money. The money of course was not revenue from their so called business models but from the VCs who were tapping users at scale. Growth at this stage demanded perfection in terms of technology. This was the time when the notion of Product and everything related to it was the future.
Product, this word in the tech space was a rage. It had some of that aura, no one talked about how the money would come but all that was discussed about a product that does this and that. Complex sexy algorithms, new age programming languages and tools and yes of course the rainbow colored codes came into being. Everything was product and product was everything.
But the money never quite came, users never paid for Facebook and even won’t. The whole idea of getting them stuck to your product failed miserably. The notion that they would pay once they were habitual didn’t really fly off because when the WhatsApps of the world started charging the Hikes and WeChats offered free stuffs. But the industry was growing and users were indeed paying for something, it was not for the product but for the services. Amazon and Flipkarts were at their core not offering their product but the services of delivering stuffs to users. Minus that website and still users will pay them giving them orders for phone. Uber at it’s core is again a referral service which takes commission from driver’s income for the business it brings them. But the developer community is always a bit edgy about the word ‘Services’, for them and for the ones who are from the MITs and Stanfords being into services is if not offending but a little lower in standard than being in product development. Companies realized this early on and although they started selling the way it was done earlier, sell as a service but develop as a product. It brought out the best of two worlds, the money was made in a way that services industry always made, more and more every month while the quality and perfection was maintained like it was in a product centred R&D driven company.
And what better example of this than the AWS and of course the other cloud service providers. Cloud played a big big role in this shift of how the world took a turn. Not only did it allowed things to be divided, developed and managed independently but also provided means to sell them piecewise (I will have a separate post on this sometime later). Even the traditional concepts of Services were in a way productized. Companies like Zipcar and Zoomcar can very well do their business (in a talking sense at least) over SMS, Emails and Phone but developing and scaling up large scale business via a website helped them in positioning themselves a product based company working on cutting edge technologies and solutions.
The question them becomes is there any true product based company left then, and making huge money. In the tech space Netflix is always an interesting example of almost everything. They had a hybrid model of delivering discs which is more like a service and offer a web based collection of movies which in a sense looks more like product. While the world moved towards differential pricing and a more service based commercial model Netflix is riding the ride in a classical product based stuff and making money too.
The point is, the distinction between what a Service based business is and what a Product based business is doesn’t really hold much value today. Things have become pretty complex and businesses are changing rapidly to adjust to the markets. Analyzing AWS is an interesting caselet, theoretically it has close to 2000 products but it sells everything as a service, maybe that’s the new norm now or at least a fashion that looks will be here for quite sometime.
