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The 3 Types of Software Companies – Product

What’s the structure and operational model of a product company? What are the benefits and drawbacks of working in such a company? Find out more about the different company organisations and some pros and cons of each company type.

There are a few dozens of categories and definitions of software companies. The three types described here are based on who do we work for. Naturally, this defines how independent a company is. Independence is freedom. We usually perceive freedom as a good thing, but it could be as well detrimental for a software company. Let’s see why in the next posts.

Product and Solution Providers

The demand for new software is high. There are plenty of industries that can benefit from process automation. There are still workflows executed mainly manually and not as efficient as if it was done with software.

The first category of software companies is product-oriented. They develop products for particular business domains, like banking and insurance, for example. Another subtype is so-called integrators and solution providers. Their platforms don’t automate one process, but a few and integrate them into a massive system of systems.

The product-oriented companies are usually the largest – revenue, people, etc. – among our three categories here. We would expect them to have mature processes, stable working environment and culture. However, this could mean that they have been working the same way for many years, and often not the most efficient way. 


They have a strong organisation and a clear hierarchy. Usually, they develop a family of products and keep updating them for many years. Their user base grows with the time, which leads to some transformations. A smart product company would use the growth to invest in people and new technologies.

Product-oriented companies are said to be the most desirable ones. They are famous for high levels of security as well as proper budgeting (for training, for example). Working in a stable environment is beneficial for continuous learning and career development. Employees feel safe in such companies due to long-term roadmaps and relationships.

The product companies have more to lose than the outsourced ones. Their methodologies are usually more conservative and less risky. In other words – not so agile. Their long-term projects provide them with the opportunity to evolve their practices.

The Dark Side

In theory, there must be a neat hierarchy with clear roles and positions. Often, though, what’s present is inefficient communication. The wider and taller the hierarchy, the longer the loops, and the longer decision-making time is. Miscommunication is guaranteed. 

The job security in a large product-oriented company can make people lazy. There is always someone above you, who can make a decision. A large structure with many levels of management leads to blurry roles and responsibilities. All meetings turn into discussions rather than decision making. People tend to postpone emails or add too many CC (even worse BCC). No one is exactly sure who’s responsible for what. The friendly and strong, family-like company culture becomes tedious and unsatisfactory. There are continuous conflicts between teams and management roles. The common misunderstandings of the customer expectations bring the risk for the company.

And last but not least, the developers become more and more frustrated. It’s the vicious circle of money, so the biggest challenge for a product company is not to get spoiled. These companies benefit the most from a  process architecture to come in place.

Because of the stable user base and long-term plans, the work-life balance is the highest here. The feeling for certainty can cause significant troubles in this manner. The company can quickly stop considering risks. The first sign is over-planning. Over-planning leads to hectic sprints when the work-life balance score drops down. 

The second sign is loose and inadequate priorities. The third sign is making the lower levels fully accountable with no autonomy. 

Care for People

There must be strong leaders and committed management to overcome those.

If the company is smart, it will invest in new technologies and methodologies. It would invest in modern HR and talent development practices. It would invest in conquering new markets and continuously challenging their teams with cutting-edge technologies. Such a company would be among the most preferred ones to work for.