Products Versus Services
A dilemma that many IT services companies may be familiar with, your services are doing extremely well in the industry. You keep getting repeat business and everything is fine. Should you diversify into products? For the uninitiated, a diversification into products involves high initial investments and hence high risks as well as returns.
So why do companies venture into products? They do so because once a product is established in the market, it generates consistent revenues and returns far beyond what services can generate (services generate returns of 10-20% on an average). So if you are a startup, it is great to begin with a services model and grow your team . Once you are well established on revenues and cash flows, begin working on products. This helps grow both the divisions without losing focus.
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