Disclaimer: This article was written few years ago and may no longer be relevant as software engineering has changed a lot in the last few years. This is what may be more relevant now: Future of Software Engineering - Gaurav ChandakMost engineering students and working professionals at some point need to decide on whether they should join a product-based company or a service-based company. Many people consider FAANG their dream companies and do not look beyond it.
This article will help you understand the different types of companies. It will provide a framework on how to decide which one to apply/join.
I have covered the different types of product-based companies and service-based companies. I have also included examples, pros, and cons of each of them.
Product-Based Companies
Product-Based Companies are companies that own one or more digital products. Consumers (B2C) or businesses (B2B) can use these products to consume different services/products.
Examples: E-Commerce, SaaS, EdTech, FinTech, Aggregators, etc.
Big Tech (FAANG/FAMAG/GAFAM/FAANGMULA)
The term 'FAANG' stands for Facebook, Apple, Amazon, Netflix, and Google. It formally denotes five US tech companies that dominate their respective markets and have high growth stocks. FAMAG or GAFAM is also a similar term that includes Microsoft instead of Netflix. All these terms are informally used to denote 'Top Tech' companies to work for.
Considering the Indian job market for software engineers, FAANG informally denotes the high-paying giants in India. It includes Amazon, Google, Microsoft, Apple, Uber, Flipkart, Adobe, Directi, Tower Research, etc.
Top Product-Based Startups (Unicorns, Series B+)
Unicorns are companies that have a market valuation of more than 1 billion dollars. Indian startups have received a lot of funding in the past few years resulting in a lot of Unicorns (~50 till Aug 2021).
These companies are deep-pocketed and generally pay at par or more than top tech companies.
Some of the top unicorns to work for in India include Swiggy, Razorpay, Unacademy, Phonepe, Cred, Zeta, etc.
Early-Stage Startups (Bootstrapped, Pre-seed, Seed, Series A)
Early-Stage Startups include companies that have raised some amount of funding or are completely bootstrapped (no external funding).
These companies would generally have a very small engineering team (less than 20 engineers). Few companies in this category might have a lot of engineers as well with lower pay.
Most of the popular companies in this category would be portfolio companies of Y Combinator, Sequoia Surge, Blume Ventures, etc.
Service-Based Companies
Service-Based Companies are companies that provide engineering, design, and other related services to other businesses. A service-based company does not have a product of its own and is selling the time of its employees to its clients. Here, your impact to effort ratio won't be exponential and so the salary would generally be much lower than product-based companies. The growth would also be very less as you would be paid for your time and not impact.
Service-Based Startups (Dev Shops/Boutiques)
Service-Based Startups include startups that help businesses build their products or in some cases handle most of their engineering effort. These companies have a small engineering team. They generally pay a decent salary and provide good work. In some cases, these companies might get acquired by a bigger product-based startup as well.
These companies generally look for high-quality developers and also provide good training as well. Starting your career at one of these companies might be a good idea as you will get to learn a lot. Switching from here to a senior role at a product-based company might be difficult though.
Some popular service-based startups are BigBinary, GeekyAnts, Thinkify Labs.
Service-Based MNCs
Service-Based MNCs like Infosys, TCS, Wipro, Cognizant brought the IT boom in India and are the biggest employers for software engineering talent in India. They provide a brand outside the tech community if that's important to you.
These companies are the stepping stone for most techies in India. The pay is low but they are good places to start if you are not able to get into any of the above options. They provide good training as well and might be useful if you do not have a tech background.
They are unpopular for long bond periods and a 3-month notice period. Many employees are also kept on the bench or given support roles or are provided work that might limit their future growth.
Service-Based Mid-Sized Companies
Thoughtworks, Amdocs, Mindtree, etc are mid-sized service-based companies. These types of companies generally provide much better work and salaries compared to service-based MNCs. They provide good training and hire people with decent tech backgrounds. It might be a good fit if you're looking for decent work, pay, and brand.
If you want to make your career in consulting then these are the companies that you should target.
Non-Tech
There are certain big non-tech companies which are trying to make their services or products tech-enabled. Most of these companies coming from a traditional background might not be fully confident about investing in tech. It is better to avoid such companies as you would mostly get to work on legacy systems or work with very little impact and low pay.
That being said, certain non-tech companies have heavily invested in tech. Walmart and Disney are popular examples of companies that were already big in the non-tech world and have now become big players in the tech world. Many traditional media companies in India have become tech-first especially with the rise in OTT.
Which type of company to work for?
Why work at FAANG (Big Tech)?
Most engineering students and software engineers want to work at 'Top Tech' companies, popularly known as FAANG. The primary reasons are brand, status, and also the extremely high pay. The other important reason why you should want to work at FAANG compared to a service-based company is that you will get better quality of work and more ownership of the product that you work on.
You may want to work at FAANG instead of a product-based startup for a better brand, work-life balance, the scale of the product, good coding practices, opportunities to move abroad, etc.
Why work at Product-Based Startups?
FAANG companies are great companies to work for. But there is too much obsession with FAANG in India. Most engineers are ignoring promising startups because of this obsession. Unless we get out of this obsession, it will be very difficult to progress as a nation in terms of technological innovation.
You should work at a product-based startup instead of FAANG companies for the following reasons:
- it will help you learn the breadth of software engineering in a relatively short time
- you will have high ownership in the products that you work on
- you can become extremely wealthy if the company grows
- most unicorns pay at par or even more than the top tech companies.
- you will get to learn a lot more than software development
- direct interaction with founders and top management
FAANG might give you something to brag about (status) whereas a startup will help you become wealthy (stocks and learnings).
I have covered the factors that you should consider while deciding whether to join FAANG or product-based startups in the linked article..
Why work at Service-Based Startups?
If you are starting your career with very little technical background, you may want to join a Service-Based MNC. If given an opportunity, prefer a Service-Based Startup or Mid-Sized Company over their MNC counterparts.
If you want to become a consultant in the long term, a mid-sized service-based company might be the best choice for you.
If you want to specialize in a particular field, you may want to prefer a Service-Based Company over a Product-Based Startup. PB startups will generally help get breadth instead of depth.
