[gangstead]

> smaller consultancies that have awesome developers that build customer tooling on the side

I've worked at a couple consultancies and they were always chasing after that recurring product revenue. I grew to believe that it isn't possible under that business model.

When you are running a consultancy you are in the business of marking up developer hours: find a client to sign a contract for $150 / hour and hire a consultant who will do the job for $100k/year salary. Then convince them to work as many hours as possible for their fixed salary, plus the carrot of a bonus payout every once in a while if everyone bills lots of hours.

Having that developer spend any time working on the company's product causes all sort of problems. The most immediate is the loss of revenue. But also now this employee might see working on the product as cutting into their bonus since they are billing less hours. Everyone wants some of the upside if the side product generates revenue but how do you split it between people who worked directly on the product and people who worked on paying client jobs to generate the revenue so the others could work on the product? It ends up causing a rift.

The other thing I've seen while working at small and even medium sized consultancies is that they end up dependent on one large customer who calls all the shots and takes up all the available time, or all "extra" time not being billed is used working on sales for the next contract. Either way there doesn't end up being much capacity to work on cool tooling.

[mooreds]

> I've worked at a couple consultancies and they were always chasing after that recurring product revenue. I grew to believe that it isn't possible under that business model.

The only time I've seen this work (and I have seen it work multiple times) is with managed hosting.

So if you are an expert at developing web applications or solutions using <product X> you can offer a managed hosting solution to your clients where you host the web app or the <product X> solution. Not all of them will take you up on it, but some will. Those that do will pay you a monthly fee. This isn't free (you now have to carry a pager) but is recurring.

Building your own SaaS/other unrelated product? That's a rock I've seen several consulting ships crash into (to pick a metaphor). Here's one that some of my friends tried to build in the late 2000s that I wrote about: https://www.mooreds.com/wordpress/archives/506

[danjrslp]

I agree. Being good at running a consulting company does not translate to being good at running a product/SaaS/devtools company.

[softwaredoug]

And vice versa, i know a lot of product companies that have a really shitty profesional services arm that care more about shoveling more product down a customers throat than actually helping them from a neutral PoV.

[catherinecodes]

Right. I wonder what their cost structure was like. $10 million in revenue is enough to support a decent-sized team.

[gangstead]

Since they raised $61 million (source https://techcrunch.com/2024/02/05/cloud-native-container-man...) they probably had way more team than $10 million could support. Since they raised the VC money I guess that downsizing to a team that the business can sustain is not an option.

[nixgeek]

According to LinkedIn they were 50-200 employees which after excluding all the other costs for running a company, is definitely not enough to cover the fully-burdened payroll of even a 50 person organization that’s probably predominantly Engineering types, that assumption being if most people are US-based (or if they don’t do “location based” pay, and indexed off a more expensive location).