Software or Services?

2 paths divulged in the internet

Author

Jason Levin
December 15, 2024

Sup nerds,

Should software companies offer services?

When I quit services to build software 3 months ago, I was extremely against this. I didn’t need the cash so I figured consulting would be a distraction. And honestly, part of my hesitation was also an ego thing (I’m a software founder now!!!).

But most of it at the end of the day was really just a time management thing. I’m building the software for Memelord Technologies myself and my thought process was that services would take time away from the more scalable pursuit of building/marketing the software. How am I supposed to build features if I’m replying to clients all day?

But then during my trip to Miami, I read a blog post by Palantir founder Joe Lonsdale.

“For most of 20 years, the naive mainstream view of Palantir was that it was a ‘glorified consultancy’ – a services firm and not a real tech innovator building SaaS ‘products’ or ‘platforms’. To dismiss Palantir early on was short-sighted, given they’d hired some of Silicon Valley’s top tech talent, but it was based on a factual observation: unlike most software businesses, many of our engineers spent significant time working alongside our customers. We called this team ‘Forward Deployed Engineers’, and they obsessed over the intricacies of our customers’ daily work, business models, and pain points.”

Joe Lonsdale, 8vc

People called Palantir a "glorified consultancy".

But Joe explains how consulting helps you build closer connections to customers, learn what features are crucial, and build better software to scale to the whole world. Palantir is worth $167B. It’s one of the only 2 stocks I own (the other is Tesla). Lonsdale has co-founded 6 unicorns, so yeah, you could say I listened up.

And fortunately, I read Joe’s post at the exact right time.

Like I said, I was in Miami, and the next day I was hanging out with 1 of my software's customers (coincidentally Joe invested in them) and I got to see how they used my software all day. I saw the good, the bad, the ugly. Banger features, bugs, bloat, and the "a-ha" magic moments like when people see all the newest trending memes or all the cool meme marketing examples we provide. During that 2 hours, I learned more about my software’s value than the entire 2 weeks prior. Plus I had a ton of fun (the good thing about building meme software is your customers are naturally gonna be hilarious). I got so many ideas that on the way to dinner with my wife, I was drinking Celsius and shipping bug fixes and new features!

They wanted me to come on full-time.

I told them hell no, I’ve got software to build, but my team can consult.

So at that moment, I made a rule that my team would only consult on projects where a) we used our software and b) get to improve on it all day.

I turned that $6.9/month software customer into a bigger multi-thousand multi-month consulting client and we’ve been helping them run their brand account ever since. While running their account (posting, replying, engaging) takes time away from building new features, it works out because we’re in the software all day cooking up memes, finding new bugs, and thinking up new helpful features.

both paths????

So I did this for a few weeks and realized “Ok I do have time to do both and I trust my team and the extra cashflow is good so why not double down?”

“We ‘productized’ our services. Year over year, the labor and configuration required to establish value have decreased, while the scope of what Palantir can do has exploded. What’s been consistent throughout is that services have supported product revenue, not vice versa. This remains unintuitive for people who think a business must be one thing or the other. […] The best tech-services companies use technology to drive operating leverage in two ways: 1. Create a unique value proposition with faster, cheaper, and better service quality than legacy providers. 2. Improve unit economics by removing big chunks of labor from COGS; both altering the margin structure and making the business easier to scale relative to incumbent competitors.

Joe Lonsdale, 8vc

This led me to Cyber Monday.

I launched a cheaper standard meme delivery plan. We signed 30 clients in under 7 days (many of these clients coming from the software userbase). No calls, no social management, no ghostwriting, just good-old fashioned meme delivery for a fair price.

How are we able to do it at such a reasonable price ($420.69/month for 1 meme/day or $699/month for 3 memes/day)? Because we literally built the software to find viral meme templates and make memes!!! We have seized the memes of production!!! As Joe said, “When serving the world’s most complex organizations, a special operations ‘services’ mentality is what lets you build complete solutions that, in the end, are worth more to your customers than out-of-the-box products.” I tweeted I was building the Palantir of memes — and I wasn't joking!

Besides the cashflow, the added benefit is doing this hits both requirements of a) using my software and b) improving it all day. My team and I make memes in our software all day which means we NEED the freshest templates within minutes, we find bugs before our users do, and we’re brainstorming and building out new features all day to use.

For example, I built a special feature where we add each meme we make to our customers’ dashboards so they can edit words or move text around or images if they need to. Instead of just getting the JPEGs from us every morning, they have an editable file they can adjust to their liking and avoid back-and-forth convos. Boom. More efficient software (I may even offer this feature in a plan for agencies/freelancers in the future). Plus I’m building out more features I would’ve never thought of if I didn’t bring on some consulting clients!

So yeah my current thought process is:

Software companies should consult a) only if you get to use your software all day to improve it or b) you need the cash to eat or go build better software.

It won’t work for everyone (ex. a calendar app), but when you’re building a creative marketing software like Memelord Technologies, marketing software and marketing services can work together perfectly.

If you’re a software founder, how do you find what to consult on?

“In tech-enabled services, the natural starting place is to map the end-to-end ontology as it exists in the status quo: How does the work get done today? What objects, data, and actions are involved at each step? What set of states can each object be in? What set of relations can they have to one another?”

Joe Lonsdale

In Palantir-language, “ontology” means a map of every single data point in a company. But you don’t need to go that deep. Basically figure out where your software fits in their company’s day-to-day procedure and see how you can save them time by doing the work for them. What are your customers spending time using your software for and can you do it for them for a reasonable price?

For me, this meant delivering memes for customers so they didn’t have to spend the time doing it. If you built a Twitter scheduler like TweetHunter, can you build a cash-flowing ghostwriting agency? If you’re an accounting software like Fondo, can you build a cash-flowing accounting agency? (Yes actually, I invested in them). You can do both software and services. As I said last week, you can just do things.

Software or services?

Porque no los dos?

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Bangers only from me and my memelord mafia all made on Memelord Technologies

Thanks for reading nerds.

Create some cool shit this week.

Jason “The Memelord” Levin

1  And that is the story of how I almost ghostwrote for Diplo.