A good friend of mine, a former client of my consulting business, became involved with a productized service in the late 1990s. What the company had was a team of technically gifted people and a database back end. What it offered to the market (large companies) was a turnkey intranet complete with security, interface, policies and procedures.
The firm gave that so-called product a product name and priced it at $100,000 and up. Most installations were closer to $500,000 than $100,000, initially, and then tens of thousands of dollars annually, later on, for maintenance.
There was a trick involved; sleight of hand, smoke and mirrors. Each time they made a sale, they’d send in a team of engineers for what they called “installation.” What installation was, in fact, was taking their back-end database skills, some packaged code and data routines, and building a custom application.
Although there never really was a product, in the sense that we assume when we distinguish between product and service, to invent a nonexistent product for purposes of sales and marketing and–note this next one–valuation was, in fact, a stroke of genius; it was the key factor that turned an interesting engineering and development company into an opportunity for lucrative exit and financial payoff.
The company was bought by an acquirer for very good money, sometime around the turn of the century. Founders became rich. I think both acquired and acquirer are now out of business. And there never was a product.
Tim Berry is the founder and chairman of Palo Alto Software and Bplans.com. Follow him on Twitter @Timberry.
