Dadgar: Professional services create a moral hazard against improving software usability
Armon Dadgar · 20VC: Why Founding Your First Company Is Like Learning Through A Thousand Paper Cuts, The 3 Core Phases to Product Adoption and Why Valuation Obsession Must Change In The Valley with Armon Dadgar, Founder & CTO @ Hashicorp · Aug 10, 2018 · at 10:33
Armon Dadgar, co-founder and CTO of HashiCorp, discusses why software startups should avoid heavy reliance on professional services revenue.
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“Professional services are dangerous for sort of two different reasons. I think one side, as you put it, is that, you know, have this margin issue, right, which is the margin you're going to generate on professional services is not great, and that business doesn't tend to be renewable in the same way software is. So I think from the very beginning, we didn't really want that to be our focus. The other side of it is I think it can lead to a misincentive from the product perspective, which is if I'm driving an enormous amount of services dollars dealing with Product issues, dealing with its sharp edges, dealing with sort of its lack of operability, then am I properly incentivized to fix those from a product perspective? Or is there this moral hazard that, you know, actually it's okay for the tool to be relatively inoperable because it generates services business for us?”
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