Product vs. Service: Understanding Business Models in the Age of IIoT
Why Selling to the Factory Floor Breaks the SaaS Playbook
Introduction
If you’ve worked in business, tech, or especially in industrial settings, you've likely heard the terms product, service, and solution used interchangeably, often without clear distinction. But in reality, each model represents a very different value proposition, delivery method, and business risk profile.
This distinction becomes even more critical in the world of Operational Technology (OT) and Industrial Internet of Things (IIoT), where offering a service isn’t as straightforward as spinning up a cloud dashboard. Sometimes, part of your solution must live inside a factory, deep inside an air-gapped or a security-conscious network. And that’s where things get interesting (and a bit challenging).
In this post, I’ll break down the three core business models: Product, Service, and Solution, from a business standpoint. Then, we’ll explore the real-world challenges that come with delivering services in industrial settings, especially when comparing fully cloud-based deployments versus on-premises or hybrid OT scenarios.
Products, Services, and Solutions: The Three Business Models
Product Business
A product business is the most traditional of the three. It focuses on building and selling tangible or digital assets that a customer purchases, owns, and operates. This could be anything from physical equipment to downloadable software.
Key Characteristics:
One-time sale or perpetual license.
Ownership is transferred to the buyer.
High scalability after initial R&D.
Support is typically limited to warranty terms or optional SLAs.
Industrial Examples:
PLCs (Programmable Logic Controllers)
SCADA software packages.
Industrial-grade sensors.
HMI panels.
Off-the-shelf apps and toolkits.
While the product model allows for straightforward transactions, it also limits a company’s influence on how the product is used, maintained, or secured, a growing concern in cybersecurity-sensitive environments.
Service Business
In contrast, a service business delivers value continuously or on-demand, often without transferring ownership of the tools or systems used. The focus is on access, outcomes, and support, rather than the asset itself.
Key Characteristics:
Delivered periodically or continuously (e.g., monthly subscription or usage-based).
No ownership change (the provider retains control).
Revenue is typically recurring (ARR).
High flexibility and responsiveness.
Often includes compliance, SLAs, and support.
Industrial Examples:
Remote equipment monitoring.
Predictive maintenance services.
Secure data collection and reporting.
Cloud-hosted analytics platforms.
The service model is especially attractive to customers looking to reduce capital expenditure (CapEx) or avoid managing complex infrastructure. However, it comes with an increased burden for the provider, especially around security, uptime, and liability.
Solutions Business
The solutions model blends the best (and most complex) aspects of both products and services. It’s outcome-focused, highly tailored, and often embedded deeply within the customer's operations.
Key Characteristics:
Combines products + services to solve specific business problems.
Highly customized and customer-specific.
Frequently includes both cloud and on-premises components.
Longer sales and deployment cycles.
Success is judged based on outcomes, not just delivery.
Industrial Examples:
Turnkey IIoT deployments with factory edge nodes.
Smart energy optimization systems for manufacturing plants.
Secure remote access systems combined with monitoring services.
Machine learning-based quality assurance integrated into the production line.
A solutions business typically means deep partnerships with customers and shared risk, especially when uptime, safety, and cybersecurity are on the line.
When the Cloud Isn't Enough: The OT/IIoT Service Challenge
In typical IT settings, deploying a service fully in the cloud is often the default. It’s scalable, easier to secure centrally, and gives the provider full control. But in the OT world, particularly with IIoT, the picture is different.
Industrial service providers often need to deploy part of the solution physically at the customer site, inside factories, machines, or network-segmented systems. This leads to several important implications:
1. Cybersecurity is Harder at the Edge
Cloud environments benefit from modern, centralized security practices and 24/7 monitoring.
Edge environments often include legacy systems, poor segmentation, and outdated firmware.
Patch management, remote access, and real-time visibility become much more difficult when infrastructure is inside the factory and possibly offline or air-gapped.
2. Who’s Liable for What?
When services are hosted in your cloud infrastructure:
You control updates, backups, access logs, and compliance.
You assume liability for breaches or outages (within SLA limits).
When part of the system is on-premises at the customer site:
Liability becomes murky.
Are they keeping it up to date?
What happens if their network firewall breaks the connection?
If a breach occurs, who’s responsible, you or the customer?
This shared responsibility model must be clearly defined, and ideally, contractualized.
3. Operational Complexity Kills Scalability
Cloud-only SaaS businesses scale easily, just onboard another tenant, spin up a container, and go. With OT/IIoT solutions:
Every deployment might require network coordination, IT/OT handshakes, and manual installation.
You might encounter 20 different versions of Windows/Linux, factory firewalls, or outdated switches, all in one customer site.
In short: the service model breaks down unless your solution is designed for variability, and your team is ready to handle boots-on-the-ground operations.
Conclusion: Navigating the Right Model in the Industrial World
In today’s interconnected industrial ecosystem, the line between a product and a service is blurrier than ever. Whether you're building hardware, cloud software, or embedded analytics, knowing which business model you're operating in is critical to:
Pricing and contract structuring.
Defining ownership and liability.
Meeting cybersecurity standards.
Delivering long-term value to your customers.
For IIoT and OT environments, the solutions business is often the only way forward, but it’s not the easiest path. It requires careful orchestration of cloud, edge, people, and processes.
And while the challenges are real, so is the opportunity. Companies that can master this hybrid model will lead the charge in transforming the industrial world into a smarter, more connected, and ultimately more resilient one.