One or two companies


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I am facing a dilemma:

Currently my mobile/web development start-up company is working on two non-profit projects, that may find an audience and therefore promote the company's name among mobile users of several platforms.

But to continue on after this altruistic job of my co-workers, my venture would need an investment to create products, that we potentially are going to sell in future.

Therefore we need to deliver products for customers, who are willing to outsource their mobile/web development.

But the two companies, one that makes its own products, and one that makes software for other's request should be completely different marketing wise.

For our products to be popular, we need to have an image of a company that is reliable and strong. To serve others - that we revolve around client's satisfaction, etc.

Should I have two different companies (and therefore - brands) - one for own software development (like Microsoft), and another for outsourcing (like Accenture), or these two paradigms can successfully live together in an image of one company?

Software Outsourcing Non Profit Website

asked Jan 22 '12 at 05:04
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Maxim V. Pavlov
217 points
Top digital marketing agency for SEO, content marketing, and PR: Demand Roll

1 Answer


1

It's very tough to be good at both business models because of resource management not marketing or brand perception. It's nearly impossible to split your staff's time effectively between product development and client projects. As a result, you'll end up maintaining separate management structures for each of the directions, which is essentially having 2 companies. The only advantage to such a corporate structure is the ability to use profits from one side to subsidize the other one.

If you really want to become a product company you should follow the typical path of using client projects to finance in-house product development and its promotion. This way as the revenues from your products grow you reduce the resource allocation to client work until in-house products are profitable enough to support company's growth. That's what 37signals did and many bootstrapping companies still do.

answered Jan 22 '12 at 05:30
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Dnbrv
1,963 points
  • In a sentence: "typical path of using client projects to finance in-house product development and its promotion", what do you mean, when you say "client projects"? How would I get those client projects? Are they not the same essentially, as to be an outsourcing providers for other companies? – Maxim V. Pavlov 8 years ago
  • "Client project" is any work you do for someone else. It can be outsourcing or consulting. You get clients by either being listed in vendor directories (inbound) or bidding on RFPs or proactively marketing your services (outbound). – Dnbrv 8 years ago
  • In reality - one company can successfully do both, product development and outsourcing for others. It is still a software development after all. The difference is only where you get an idea, and as a result - software requirements. The only thing that is different, from my point of view, is marketing. – Maxim V. Pavlov 8 years ago
  • I am not sure that I have understood your answer correctly, so I would like to clarify: You do confirm, that one company can do both. But since the product development is a final goal, I shouldn't advertise much of our software development outsourcing offers, right? – Maxim V. Pavlov 8 years ago
  • One company can't do both successfully because of resource allocation & management structure: you can develop your own products when you don't have full load from client projects, but once you start your own product development it's hard to put the same resources into client projects. "Resources" are everything from developer time to marketing to administration. – Dnbrv 8 years ago
  • Surely client projects are required only until the companies own products pays everyone's salaries. And until then, they get the priority as of human resources and management attention. My question was essentially: If twitter would suddenly need money not from investors, but from a market, would it harm their image if they were to go around asking for work? – Maxim V. Pavlov 8 years ago
  • You posted 2 comments at once. My previous response was to the one starting with "*In reality*". You can be both an outsourcing/consulting company & a product company at once, but you *can't be good at both* at once because it's too expensive. If Twitter were to go around looking for consulting work right now, it would be strange because they're a huge and relatively established company. If Twitter were to look for external projects in the early days (pre-investment), it would've been perfectly fine - that's one of the forms of bootstrapping. – Dnbrv 8 years ago
  • Ok, thank you very much for making your opinion clear to me. – Maxim V. Pavlov 8 years ago

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Software Outsourcing Non Profit Website