I just read an
article about IBM pushing service products. The idea is to deliver their products and services as a bundle. There was time during the dot com era when every product company wanted a service side for the high billing rates they could garner. Now every service company would like to be a product company or, at least, have the financial characteristics of it. When one looks at revenues per employee, product companies do very well. For example, Google's revenue per employee is $1.4 million, while for most Indian service vendors it is around $40k. American service companies have high revenue per employee and high SG&A. Productizing services helps keep the software customization costs down and customers get software assessment, design, implementation and servicing priced as a bundle. However, this approach calls for a great deal of discipline from the vendors. They must have a process for most activities and platforms to share assets and expertise on an enterprise-wide basis.
The picture depicted above plots revenue per employee and SG&A on a log scale.