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IT products and IT services companies: What is the difference?

IT products

Since the world of technology has so many branches, it is common the existence some misconceptions around it. One of the most frequent questions is what is the difference between an IT products company and an IT service company? The answer depends on several variables that we will explore later.

In this article, we will review the difference between these concepts and why they are so important. Additionally, we will dive into other definitions that take part in the tech world. You might find that this environment is not as confusing and overwhelming as it looks.

  1. What is an IT Product Company?
  2. Characteristics of an IT Product Company
  3. How about IT Service companies?
  4. Characteristics of IT service-based companies
  5. What is a cloud-based distribution model?
  6. Software as a Service (SaaS)
  7. Platform as a Service (PaaS)
  8. Infrastructure as a Service (IaaS)
  9. Would you want to know about our IT Services?

1. What is an IT Product Company?

Before we begin, we need to mention that the IT industry is composed of two major types of organizations: IT product companies and IT service companies. These two are vertical models and have their own characteristics and advantages. IT products have become the core of every business in the world, as they are able to store data and processes.

An IT product company is an organization aiming to offer tech products such as hardware and devices. But most importantly, they sell software solutions. It is software targeting different approaches, depending on what the public needs. In this regard, we could say that social media apps are also IT products.

Customers can use and personalize their accounts according to their tastes and interests. Another example of IT products is video games, so popular these days. Clients only pay for these IT products once and they own a license indefinitely. No need for monthly or yearly fees, unlike IT services.

2. Characteristics of an IT Product Company

We have enlisted some of the main characteristics that any IT Product Company has. These are some of them:

  • Data is the primary resource: because the goal is to have thousands and millions of users, their data is the most valuable asset. Although this is a controversy due to privacy issues around the world.
  • Customer experience is everything: unlike other products outside the IT world, the main thing here is not the product itself, but the user experience. This covers the entire process of signing up, browsing, using, or posting content. In fact, it is the purpose behind the design of every IT product.
  • A multicultural approach is a must: since the goal here is to get to millions of people around the world, products have to be open for accessibility beyond languages and cultures. 
  • Empathy and social values: this is key to building deeper and more meaningful connections to their users. This is about engaging not only emotions but feelings as well. 
  • Open to collaborations: the most successful companies in the world are willing to be collaborative with other organizations in order to improve their products. These are known as strategic alliances and they are very common.

3. How about IT service companies?

A service-based company provides cloud-based services, but also development, engineering, and implementation of certain services that might be useful for some users. Depending on the needs or interests of the public, these services might be numerous, having a broad range of types of services.

From streaming services, news services to ERPs for organizations, the possibilities are infinite. There is a wide variety of market necessities that are supplied by IT service companies around the globe.

The key difference is that IT service companies do not offer a product to sell, but service in exchange for a monthly fee or yearly fee. This model business is known as Software as a Service, (SaaS). 

The vast majority of IT services nowadays are using the cloud-based model. This revolutionary methodology does not require the clients to install any hardware asset to use the service. Within this model, the IT service provider gives access to the application or software, which is using the same source code for every copy of it.

4. Characteristics of IT service-based companies

Companies have to adopt a series of actions in order to provide well-built software as a service. We have enlisted for you some of the main characteristics:

  • Multitenant infrastructure: think about a streaming service, it does have a unique interface designed for every individual user. So as the rest of the software as services, they are built with a multitenant infrastructure that is the same for everyone. 
  • Clients have the responsibility to pay a fee: this is the core of the model-business, and one of the key differences with IT products. IT services companies offer their software in exchange for a fee paid monthly or once a year.
  • Privacy and protection of the data: like in every IT product or service, the data is always the more important asset to protect. Companies spend a lot of resources to establish policies that protect the privacy of users. Many legislations around the world obligate IT companies to safeguard all the information of their users. It is a big topic that has many risks of leaks and controversy around it.
  • Frequent updates: unlike with the product model, clients can expect constant updates from the developers to fix small errors or bugs. This is also very useful to keep renewed the software with the latest technological advances. This is also the reason why there are so many IT consulting services providers.
  • Customization: although the primary architecture is the same, users can customize their accounts or profiles within the software. In fact, this is necessary to ensure the good experience they have on the platform.
  • Multicultural accessibility: we observed this aspect in the latter IT business model. This implies that the software has to be available in many languages in order to be accessible to a wide group of users around the world.

5. What is a cloud-based distribution model?

As we explained before, the cloud-based model is the most used nowadays, representing the core of many industries because of the great benefits that it provides. It is a game-changer because, before the cloud, IT solutions were implemented in-site. 

A cloud-based distribution model is a paradigm that has changed forever the nature of IT technologies. Unlike in the old days, users do not need to install expensive hardware equipment to use IT services. They just have to login in with a username and a password. 

However, it is very important to highlight that the cloud is not a technology, it is a business model systematized with technology instead. Its primary approach is a pay-as-you-go, also known as on-demand, in which users pay a subscription for the use of it. This removes the need for complicated deployment procedures as well as minimizes expenses. 

IT consulting companies, with a long history in their markets, had to transition to using this business model. This is because of the many benefits that it offers for organizations, not only users.  

There are three ways of distributing products or services in the cloud, each of them in a form of a commercial license: Software-as-a-Service (SaaS), Platform-as-a-Service (PaaS), and Infrastructure-as-a-Service (IaaS). 

5.1 Upsides of a Cloud-Based distribution model

We have enlisted the main benefits of this revolutionary business model, these are:

  • Better workflow: a cloud-based system has its workflow improved by automated processes, which is great because it reduces the response time of every interaction.
  • Fewer errors or bugs: one of the main goals of this cloud-based solution is to minimize the number of errors. This is possible because of the constant updates by the developers.
  • Strong data security: since it is extremely important to keep data safe, cloud-based solutions have the latest advances in cybersecurity solutions, ensuring the well functioning of the system and a safer environment. This is also useful in case of any natural disasters that could affect the physical location of servers. 
  • Enhanced compliance: one of the disadvantages of having systems on-premises is the compliance factor, as it could be difficult to keep up with internal and external regulations. Instead, with cloud-based solutions, this responsibility relies on the IT service or product provider.

6. Software as a Service (SaaS)

IT services use this license. Users access the services with a subscription. Within this framework, the IT solutions company owns the platform and all of the resources are stored in its facilities.

Users do not have to install anything to use the service; they only login in with a username and a password. They must, however, pay a fee monthly or yearly to continue using the service.  

The popularity of SaaS exploded in the 90s when the internet was turning into the mainstream; and with that came new possibilities for businesses, like e-commerce. Before that, organizations were using software-as-services using computers and servers in-site, also known as on-premise software. 

The problem with on-premise software back then, is that it was insufficient to supply all the needs of bigger companies. Additionally, workflows and response times were not as fast to keep up with their production processes. In 1999, a popular IT software, made history as it became the first major company to launch a CRM platform completely on the cloud. 

This outsourced IT services provider paved the way for many kinds of companies, no matter the size, to trust in the great benefits of using cloud-based SaaS. It was a point of no return in the fast-growing TI world.

7. Platform as a Service (PaaS)

The PaaS model is in between Software-as-a-Service (SaaS) and Infrastructure-as-a-Service (IaaS). This framework allows users to have full access to the cloud environment, with all the tools necessary to design and create new software. 

Furthermore, PaaS providers offer a complete cloud-based workshop, in which users can test and deploy systems. And this is something most IDE (Integrated Development Environments) don’t include. The biggest benefit of this methodology is that developers can create high-level systems with fewer complications and fewer financial resources. 

However, the purpose of PaaS is not to replace any IT infrastructure used for software development. This is often a misconception around this IT business model. Users have to pay a monthly fee for access but some PaaS providers might not include certain functionalities. This will depend on the contract both parties agreed.

8. Infrastructure-as-a-Service (IaaS)

Last but not least, Infrastructure-as-a-Service is the most complete of all cloud-based business models. Here, IT providers offer not only storage resources but actual physical infrastructure if needed, such as hardware and equipment. 

Also, they provide access to high-level APIs that might result useful in the development of mobile apps and software. Some popular resources that developers might use within IaaS are virtual machines and VLANs (virtual local area locations). These resources are offered on-demand. 

Many organizations have found this methodology as the most effective solution because it allows them to fully implement new applications. It covers the entire process of designing, development, testing, and deployment within a safe environment with all the tools at hand. 

This IT solution removes the need of building expensive extra in-house infrastructure. For all of these reasons, this is the best alternative for small industries, such as startups, because it’s the all-in-one package of tech infrastructure. 

Let’s review some of the best benefits of Infrastructure-as-a-Service (IaaS):

  • Improvement of security:
  • It is scalability-friendly
  • There is better stability of the operations thanks to sophisticated tech resources.
  • IaaS providers have to comply with advanced standards of quality. 

9. Would you want to know about our IT services?

We are Connect Tech, a division of Connect Group and we offer an extensive variety of tech solutions to supply your organization’s needs. We are aiming to assist you through the entire process of fixing, developing, testing, or deployment of IT solutions. 

Cloud-based infrastructure services, cybersecurity solutions, hosting arrangements, web design, IT audits consulting, and Mobile applications developments. These are some of our tech services. But additionally, we offer a variety of marketing services like SEO optimization, social media advertising, and CRM management.

Would you like to contact Connect Tech to obtain more information about Cloud-based services and IT solutions? If you have any questions, call us on +97143316688. You can email us at, and you will talk to one of our representatives who will answer your questions.

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