Dario Ristic

The Product vs Service Dilemma

In the IT industry, there are two fundamentally different business models: product-based and service-based. Understanding this distinction matters more than most companies realize.

Product-based companies build software once and sell it repeatedly. Think Microsoft, SAP, or SaaS platforms where customers pay for licenses or subscriptions. The focus is on perfecting a product, managing roadmaps, and scaling globally.

Service-based companies sell expertise, custom development, implementation, and support. Think consulting firms, system integrators, custom software development agencies. They bill for time, not products. Every project is unique. Revenue requires constant client acquisition.

Here's what I learned working with system integration companies: service-based companies face unique pressures that force rapid transformation. Unlike product companies that can iterate over years, service companies must adapt overnight. Today's client demands tomorrow's capabilities, and if you can't deliver, they find someone who can.

Let me explain why service-based IT companies are being pushed toward product thinking, and what this means for how they operate.

Why Service-Based IT Companies Must Change Fast

Service companies live in a different reality than product companies. Understanding these pressures explains why transformation isn't optional—it's survival.

1. The Client Demands Reality

Product companies release when ready. Service companies deliver when clients need it—often yesterday. A client wants a digital transformation initiative launched in 3 months. Another needs a cloud migration completed before the audit cycle starts. Today's project deadline becomes tomorrow's crisis.

In practice, I saw this pressure daily at system integration companies. Clients expected:

Service companies can't say "we'll add that feature in the next quarter." They must demonstrate capabilities now. This forces a relentless pace that traditional IT consulting approaches can't support.

2. The Talent War

Top engineers have options. They want to work with cutting-edge technology, modern methodologies, and teams that move fast. Service companies competing for talent can't offer exciting product visions—they must offer exciting project experiences.

If you're still using waterfall processes, deploying quarterly, or building only what the client explicitly asks for, talented people leave. They go to companies offering faster development cycles, more autonomy, better tools.

The organizations I worked with learned this the hard way. They lost good people to companies promising "faster innovation" and "modern development practices." The solution wasn't matching salaries—it was transforming how they worked.

3. The Innovation Gap

Here's the uncomfortable truth: service companies historically execute requirements, not innovate. Clients define requirements. Vendors implement. The vendor's value is execution quality, not product vision.

But that model is collapsing. When clients need digital transformation but don't know exactly what "transformed" looks like, they need partners who can innovate, not just implement. This requires service companies to think like product companies:

This shift requires fundamental operational change.

4. The Margin Compression Reality

Service businesses sell hours. Revenue scales linearly with headcount. When market rates don't increase while costs do, margins compress. The solution isn't always hiring more people—it's being more efficient.

Product companies invest once in building something valuable, then monetize it repeatedly. Service companies must find ways to reuse, standardize, and productize their expertise without losing the custom value that clients pay for.

This mindset shift requires service companies to think differently: what if we build reusable platform components? What if we standardize our delivery approach? What if we create value once and deploy it multiple times across clients?

This thinking—moving from project work to platform enablement—requires service companies to operate differently. And that's where transformation becomes essential.

The MVP Imperative for Service Companies

Service companies historically build complete solutions. Clients say "I need X," you build X, deliver X, move to the next project. This linear model works when requirements are stable and timelines allow perfection.

But modern IT projects don't allow this luxury. Requirements are uncertain. Timelines are tight. Technologies are evolving. What clients initially think they need often isn't what they actually need.

This is where MVP (Minimum Viable Product) thinking becomes critical—even for service companies.

What MVP Means for Service Delivery

For service-based companies, MVP means:

Deliver value in increments, not everything at once. Instead of building the complete system, deliver the minimum that solves the core problem. Validate with users. Then iterate.

Learn what actually matters before over-engineering. Often what clients request isn't what they need. MVP deployment creates learning opportunities.

Demonstrate progress continuously, not at the end. Show working software every sprint. Clients see value accumulating. Projects stay aligned with expectations.

Avoid building wrong solutions. When you deliver everything at the end, you learn too late that requirements were wrong. MVP delivery creates early feedback loops.

System integration companies started applying MVP principles to client projects:

Example: Cloud Migration Initiative

Traditional approach: Analyze everything, plan the complete migration, execute over 12 months, deliver everything at the end.

MVP approach: Migrate one application first. Learn the migration patterns. Identify the real blockers. Demonstrate success quickly. Then scale the approach to remaining applications.

This MVP approach worked because:

The key insight: even in service delivery, you're building products—products for your client's use. Building them iteratively benefits everyone.

How to Apply MVP in Consulting

Here's what I learned works for service companies:

Start with the highest-value capability, not everything. Ask: what single thing, if working, would demonstrate the concept and deliver client value?

Deploy to production early—real production, not staging. MVP isn't for technical validation only. It's for user validation. Get real feedback from real users as quickly as possible.

Measure what matters, not metrics that feel impressive. User satisfaction. Performance. Business outcomes. Not just features delivered.

Iterate based on learning, not assumptions. Requirements evolve based on what you learn. Embrace this instead of fighting it.

Communicate MVP thinking to clients. Make them partners in the process. They benefit from early feedback loops too.

The transformation challenge: service companies built around waterfall processes struggle with this. It requires cultural change: accepting that "done" means "deployed and learning," not "perfect and complete."

Agile: Required for Service Company Survival

Service companies face a cruel irony: they operate in volatile, uncertain environments but historically use waterfall processes designed for predictable requirements.

Traditional service delivery:

  1. Client defines requirements
  2. Vendor estimates and commits
  3. Vendor builds according to requirements
  4. Vendor delivers
  5. Client accepts or rejects

This model assumes requirements don't change, estimates are accurate, and the world stays stable. None of this holds true anymore.

Why Agile is Non-Negotiable

In my experience, system integration companies discovered agile wasn't a luxury—it was a survival mechanism. Here's why:

Requirements are uncertain at project start. What clients think they need evolves as they see possibilities. Fixed-scope delivery creates conflict when requirements change mid-project.

Timelines are aggressive. You don't have 12 months to build, then discover issues. You need deployments every 2 weeks to demonstrate progress and adapt quickly.

Stakeholders need visibility. Clients pay for outcomes, not code. Monthly demos showing working features align expectations. Clients see progress continuously, not just at the end.

Failures become learning, not disasters. When something doesn't work, you learn and pivot quickly. Waterfall leaves you discovering problems months after they were introduced.

Competitive advantage. Clients choose vendors who can deliver visible progress rapidly. Companies still using waterfall lose deals to agile competitors.

How Organizations Transformed

The transformation wasn't just adopting scrum ceremonies. It was rethinking how service organizations deliver value:

Two-week sprints with deployed increments. Every sprint delivered working software to a staging environment. Every other sprint deployed to production.

Daily standups focused on blockers, not just status. What's preventing progress? How do we unblock immediately?

Retrospectives drove continuous improvement. What worked? What didn't? What will we do differently next sprint?

Product owners provided constant guidance, not documents to build from. Requirements emerged through collaboration, not specification documents.

Clients became part of the process, not recipients of deliverables. They attended demos. They provided feedback. They saw their product evolving.

The results: projects stayed aligned with evolving needs. Delivery cycles shortened from months to weeks. Client satisfaction increased because they saw continuous value. Team morale improved because they shipped working software regularly.

The challenge: this required unlearning waterfall habits. Teams wanted detailed specifications before starting. We had to shift to "start building and learn" instead of "plan completely then execute."

DevOps: The Delivery Speed Multiplier

Service companies sell expertise, but they deliver software. How you build, test, and deploy that software determines competitiveness.

Here's the reality I experienced: traditional IT service delivery operates like a manufacturing line:

This model worked when deployments were infrequent and requirements were stable. But modern requirements force frequent deployments. Manual processes don't scale.

Why DevOps Changes Everything

DevOps transforms service delivery by eliminating friction in the pipeline from code to production:

Continuous Integration ensures code compiles and tests pass automatically. Problems catch during development, not in production. Developers get immediate feedback when they break something.

Automated Testing runs on every commit. Manual testing doesn't scale when deploying every sprint. Test automation becomes mandatory.

Infrastructure as Code means environments are defined in code, version controlled, and deployable automatically. No more "it worked on my machine" or manual configuration errors.

Automated Deployment pipelines deploy to staging and production automatically. No manual steps. No human error. No scheduling delays.

Monitoring and Observability provide immediate feedback when deployments fail. Problems surface within minutes, not when clients report issues.

Service organizations implementing DevOps practices transformed their delivery capability:

Before DevOps: We spent 3 days on manual deployment for each release. Deployments happened monthly. High risk of production issues. Teams worked overtime during releases.

After DevOps: Automated deployments in 20 minutes. Releases every sprint. Lower production issues. Teams worked normal hours.

The business impact:

The Cultural Shift Required

DevOps isn't just tools—it's culture. For service companies, this means:

Breaking down silos between development, QA, and operations. They're now one team with shared responsibility.

Shared ownership of outcomes. If production has issues, the whole team owns fixing them, not just "operations."

Embracing automation over manual work. If a task repeats, automate it. Time is money in service delivery.

Continuous improvement mindset. Every incident improves the system. Post-mortems drive learning, not blame.

Speed and safety aren't opposing forces. Good DevOps practices make deployments faster AND safer.

The challenge for service companies: clients often don't understand why DevOps matters. You must explain the value: faster delivery, higher quality, lower risk—all of which benefit them.

Platform Engineering: The Service Company Evolution

Here's the most significant shift I observed: the evolution from project-based to platform-enabled delivery.

Traditional service companies: each client gets custom-built solutions. Revenue scales with projects. Efficiency comes from execution excellence, not reuse.

Modern service companies: build platforms that accelerate client delivery while creating reusable assets. Revenue scales better through efficiency and higher-value engagements.

Platform engineering represents this shift—service companies investing in platforms that make delivery faster and better for all clients.

What Platform Engineering Means for Service Companies

Instead of building everything from scratch for each client, you build:

Reusable platform components. Common authentication, logging, monitoring, deployment pipelines. Build once, use across clients.

Accelerator frameworks that bootstrap common project types. Mobile app framework. Microservices template. Data pipeline scaffold.

Best-practice implementations that embody learnings from prior projects. Security patterns. Scalability patterns. Integration patterns.

Self-service tooling that empowers developers to provision infrastructure, deploy applications, monitor systems without waiting for gatekeepers.

Shared knowledge platforms where project learnings become reusable assets for future projects.

For system integration companies, platform engineering enabled:

Faster project starts. New client engagement used platform components as starting point, not building from zero. This reduced time-to-value from months to weeks.

Higher quality delivery. Platform components were battle-tested across multiple clients. Bugs found in one project were fixed for everyone.

Consistent best practices. Security, scalability, observability built into platform. Projects automatically benefited without reinventing.

Ability to compete with product companies. We could deliver product-like experiences—continuous updates, modern UX, cloud-native architecture—at service company price points.

Operational leverage. Platform investment paid dividends across all clients, not just one project.

Building Your Platform

For service companies, here's how to approach platform engineering:

Start with common pain points. What do all projects need? Authentication? Database migrations? API versioning? Start there.

Extract from successful projects. Don't build platform components in the abstract. Extract working code from successful client implementations.

Build incrementally. You don't need a complete platform. One useful component that speeds up delivery is valuable. Add more over time.

Serve internal teams first. Platform exists to help your delivery teams. If they don't use it, it's not valuable. Developer experience matters.

Sell platform-enabled delivery to clients. Not "buy our platform." But "we deliver faster and better because we invest in reusable platforms." This justifies premium pricing.

Manage platform separately from projects. Assign resources specifically to platform engineering. Don't make it "20% time" project—it gets deprioritized.

The Business Model Evolution

Platform engineering shifts service company economics:

Traditional model: Revenue per project = hours × rate. Scale linearly by hiring.

Platform-enabled model: Platform investment pays dividends across all projects. Efficiency improves over time. You can compete on speed and capability, not just price.

Example: Building a microservices platform once enabled delivering cloud-native transformations faster than competitors who built from scratch each time. This efficiency became a competitive advantage.

The transformation challenge: this requires strategic thinking beyond delivering current projects. You're building for future productivity. ROI compounds over multiple projects.

Platform engineering for service companies is about productizing your expertise—creating reusable assets while maintaining custom delivery. It's balancing delivering unique value to each client with creating leverage through reusability.

A Real-World Transformation Story

Let me share specifics about how system integration companies transformed and why it mattered:

The Starting Point

Traditional system integration companies operated like this:

This model worked when clients had stable requirements and long project timelines. But market pressure increased:

Something had to change.

Early Experiments: DevOps First

We started with DevOps because the pain was immediate—deployment friction slowed everything.

Problem: Deployments took days. Manual steps introduced errors. Production issues appeared after deployment, requiring rollbacks.

Solution: Implemented CI/CD pipelines. Automated testing. Infrastructure as code. Automated rollback capabilities.

Results: Deployments went from days to hours. Production incidents decreased. Teams deployed more frequently with confidence.

Learning: Technical improvements enabled faster delivery. But processes still needed work.

The Agile Transition

Next, we adopted agile methodologies to speed up delivery cycles.

Problem: Projects took months with limited visibility. Requirements changed mid-project, creating conflict. Clients didn't see progress until the end.

Solution: Two-week sprints with deployed increments. Daily standups and retrospectives. Client demos every sprint.

Results: Delivery cycles shortened from months to weeks. Client satisfaction increased because they saw continuous progress. Requirements changes handled gracefully.

Learning: Process improvements unlocked capability. But we still needed strategic change.

The MVP Mindset

We learned to build MVPs instead of complete solutions upfront.

Problem: Building complete solutions before validating assumptions meant wasted effort. Clients often requested features they didn't actually need.

Solution: Deliver minimum viable capability quickly. Validate with real users. Iterate based on feedback.

Results: Projects delivered value sooner. Clients learned what actually mattered before over-engineering. Failures happened early and cheaply.

Example: Cloud migration projects started with one application, learned patterns, then scaled. This avoided months of planning for incorrect assumptions.

Learning: Building iteratively produces better outcomes than building completely upfront.

Platform Engineering Investment

Finally, we started building reusable platforms to accelerate all delivery.

Problem: Every project rebuilt similar components—authentication, logging, monitoring, deployment pipelines. Effort duplicated across projects without learning from prior work.

Solution: Build reusable platform components. Extract working code from successful projects. Standardize best practices across implementations.

Results: New projects started faster. Quality improved because platform components were battle-tested. We could deliver sophisticated solutions (cloud-native, microservices) faster than competitors.

Learning: Platform investment compounds across all projects. It provides competitive differentiation.

The Composite Transformation

Individually, DevOps, agile, MVP, and platform engineering each provide value. Together, they transform service delivery:

They compound. DevOps makes agile possible (fast cycles require fast deployment). Agile makes MVP practical (you deliver incrementally). Platform engineering makes it all sustainable (you build on proven components).

The result: These organizations could compete against larger consultancies by delivering faster and better through modern practices. Clients chose them because they demonstrated capability immediately, not just promised it.

The transformation challenge: this required cultural change. Teams needed to shift from "build completely" to "deploy incrementally," from "follow requirements" to "learn and adapt," from "custom everything" to "reuse and customize."

Why This Transformation Matters

Service-based IT companies face unique challenges:

The companies that survive and thrive aren't the ones preserving traditional practices—they're the ones transforming how they deliver.

The Competitiveness Factor

Clients choose vendors who can:

Service companies using waterfall, manual deployments, and custom-only approaches can't compete. They lose deals to companies with DevOps, agile, and platform capabilities.

The Talent Factor

Top engineers want to:

Service companies with traditional practices can't attract or retain talent. They lose people to product companies or modern consultancies. This creates a vicious cycle: can't attract talent, can't deliver modern solutions, can't win new clients.

The Sustainability Factor

The traditional service model doesn't scale well:

Companies investing in platform engineering, automation, and modern practices operate more efficiently. They can charge premium rates because they deliver faster and better. They can attract better talent because they offer modern experiences.

The Necessity Factor

Here's what I learned working with these organizations: transformation isn't strategic—it's survival.

If you're not delivering MVPs, competitors are. If you're not using agile, clients choose partners who do. If you're not practicing DevOps, deployment speed bottlenecks everything. If you're not building platforms, you're rebuilding the same components repeatedly.

Waiting to transform means falling further behind. The companies transforming now gain competitive advantages. Those waiting find themselves unable to catch up.

Best Practices for Service Company Transformation

Based on successful transformations I've witnessed, here's what works:

1. Start with Pain Points

Don't transform everything. Start with what hurts most:

Solve real problems teams face daily. Visible wins build momentum for broader transformation.

2. Transform Incrementally

Big-bang transformations fail. Too much change creates resistance. Too many new processes confuse teams.

Instead:

Let transformation compound over time rather than forcing everything at once.

3. Train and Support Teams

New practices require new skills. Teams need training on:

Provide hands-on support. Send teams to courses. Create internal communities. Invest in skills before expecting results.

4. Showcase Successes

When something works, share it broadly:

Visible success convinces skeptics and builds momentum for further transformation.

5. Manage Client Expectations

Clients used to waterfall may not understand agile delivery. Explain:

Make clients partners in transformation. They benefit from better outcomes.

6. Invest in Platform Engineering

Platform investment pays dividends across all projects, not just one:

This provides competitive differentiation that competitors can't match easily.

7. Foster Continuous Learning

Transformation isn't one-time. Technology evolves. Practices improve. Teams need continuous learning:

Organizations that keep learning stay competitive.

From Transactions to Strategic Partnerships: The Evolution of IT Service Organizations

Drawing from over twenty years of experience in the IT services industry, I've witnessed organizations waste millions on failed technology projects and ineffective service provider relationships. Today's service-dominated economy reveals a critical problem: broken collaborations between businesses and their technology providers result in massive financial losses, unrealized potential, and even catastrophic failures.

Consider these real-world extremes: Heathrow Terminal 5 succeeded because the client and technology provider created a unified mission focused on outcomes. Deepwater Horizon failed because the collaboration fractured under pressure—contractors worked in isolation, lacked shared context, and disaster followed.

The solution isn't to replace service companies with product companies. It's to evolve service companies into what I call Strategic IT Partners—organizations that move beyond transactional engagements to create genuine collaborative ecosystems.

The Four Guiding Principles for Modern IT Partnerships

When transforming service organizations toward becoming Strategic IT Partners, these four principles revolutionize service delivery:

1. Value-Driven Mission Over Transactional Work

Traditional approach: Service providers execute requirements as defined by the client. They deliver what's requested, bill hours, move to the next project. The focus is on completing work, not creating value.

Strategic IT Partner approach: Build value-driven partnerships that prioritize client outcomes. Yes, deliver what's requested—but also question whether what's requested actually solves the business problem. Clients often request features that don't address root causes.

This shift requires courage. When a client requests a complex custom integration, question why. Often they don't need custom work—they need to rethink their architecture. Saying "no" to billable hours that don't create value builds trust, not breaks it. Clients remember partners who protect them from wasted effort.

Real impact: Companies partnering on outcomes instead of tasks report 40% higher project success rates. When everyone's aligned on value delivery rather than task completion, projects naturally converge toward results that matter.

2. Strategic Work Over Just "More" Work

Traditional approach: More projects mean more revenue. Sell more services. Expand scope. Increase hours. The business model rewards work volume.

Strategic IT Partner approach: Focus on initiatives that drive meaningful business impact. Not every project equally affects outcomes. Some work transforms the business. Other work maintains status quo.

The insight here: know which work matters.

Both matter, but strategic work creates competitive advantage. Tactical work maintains operations. Strategic IT Partners help clients prioritize strategic initiatives that deliver outsized returns.

How this manifests: When clients request "more developers," Strategic IT Partners ask: "More developers working on what?" Sometimes the answer is process optimization, not headcount. Sometimes it's automation eliminating the need for manual work. Sometimes it's platform engineering creating leverage.

The shift from "more work" to "more impact" transforms the economics. Clients pay for outcomes, not hours.

3. Flow Over Headcount

Traditional approach: Scale by adding people. More developers, more consultants, more project managers. Capacity increases linearly with headcount.

Strategic IT Partner approach: Optimize value delivery flow instead of simply adding resources. Throughput matters more than headcount. Deploy faster. Reduce handoffs. Eliminate bottlenecks.

This principle connects directly to DevOps, Agile, and Platform Engineering discussed earlier. But the mindset shift matters most:

Flow thinking: How quickly does value reach the client? What slows delivery? Where are the bottlenecks?

Headcount thinking: Do we have enough people? Should we hire more?

In practice, organizations discovered that deployment bottlenecks slowed everything. They had plenty of developers. But they were blocked waiting for deployments. Adding more developers would have made bottlenecks worse.

Instead, we fixed deployment flow: automated pipelines, infrastructure as code, self-service environments. Throughput increased without increasing headcount. This is flow over headcount in action.

The economics: Flow optimization compounds. Every improvement to delivery speed improves all future deliveries. Headcount increases just add cost.

The transformation challenge: Service companies historically measure "utilization" (billable hours / available hours). Flow optimization reduces utilization of developers doing manual work (replaced by automation). This looks like worse economics, but it's actually better—same outcomes with less effort means more capacity for strategic work.

Strategic IT Partners measure time-to-value, not utilization. This changes everything.

4. Community Over Zero-Sum Approach

Traditional approach: Contracts define fixed scope, timeline, and price. Change requests cost extra. The client-vendor relationship becomes adversarial. Each side tries to optimize for themselves at the other's expense.

Strategic IT Partner approach: Create sustainable ecosystems where all participants thrive. Clients succeed. Service providers succeed. Developers grow. Vendors benefit. This isn't naive altruism—it's practical long-term thinking.

How this works in practice:

Zero-sum thinking: If the client pays less, I make less. If I deliver faster, I bill fewer hours. If they learn more, they need me less.

Community thinking: If the client succeeds, we get referrals and repeat business. If I teach them, they value my expertise more. If we create reusable platforms, all future projects go faster.

Platform engineering investments exemplified this. Yes, organizations invest in building reusable components. Yes, this helps all clients deliver faster. But it also helps the service provider:

This is symbiotic, not zero-sum.

Practical shift: Instead of "more hours = more revenue," think "better outcomes = stronger relationships = sustainable growth." This requires trusting that creating client value compounds into provider value over time.

And it works. Clients who see us as partners bring more business than clients who see us as vendors. The relationship extends beyond single projects into ongoing collaboration.

The Impact of Strategic IT Partnership Transformation

When service organizations transform from transactional vendors to Strategic IT Partners, the impact extends beyond individual projects:

For clients:

For service providers:

For industries:

The Practical Framework: Becoming a Strategic IT Partner

Here's how service organizations can practically transform toward becoming Strategic IT Partners:

Step 1: Align on Outcomes, Not Tasks

Before starting work, ask:

If clients can't articulate outcomes, help them discover them. Don't just execute requirements—understand purpose.

Step 2: Identify Strategic vs. Tactical Work

Ask about every project: is this strategic or tactical?

Don't reject tactical work—it's necessary. But prioritize strategic work that delivers outsized returns.

Step 3: Optimize Flow, Not Just Headcount

When clients request more people, investigate bottlenecks first:

Often, flow optimization creates capacity without adding headcount.

Step 4: Build Community, Not Contracts

Redesign relationships for mutual benefit:

Contracts become frameworks for collaboration, not constraints on value creation.

Step 5: Measure What Matters

Instead of billable hours and utilization, measure:

These metrics align behavior with outcomes, not just task completion.

The Future of Service-Based IT

Service companies face a choice: transform or become irrelevant.

The market has no patience for slow delivery, waterfall processes, or custom-only approaches. Clients demand:

The companies thriving are those delivering like product companies while maintaining service company flexibility.

What Success Looks Like

A successful service-based IT company operating with modern practices:

This isn't hypothetical—it's what organizations achieve through transformation.

The Transformation Mandate

The message for service-based IT companies is clear: transformation isn't optional.

The question isn't whether to transform. It's how quickly can you start.

Start with DevOps. Or agile. Or MVP thinking. Or platform engineering. Pick one. Execute thoroughly. Learn. Then add the next.

Incremental transformation beats perfect planning. Start today. Iterate based on learning. The companies transforming now define the future of service delivery.

Those waiting discover they're competing against companies that already moved. And by then, it's often too late.