This morning I woke up to a fascinating post by designer Tobias van Schneider called: The agency is dead. Long live the agency.
What he’s talking about is the phenomenon of design agencies being gobbled up or “acqui-hired” by product firms such as Facebook and Google. The latest of which is (or was) Toronto-based design agency Teehan+Lax. The partners have closed up shop and are in the process of moving to San Francisco to join Facebook Design.
But what he’s really talking about is the pull from services to products.
When you’re a services firm, you do work for outside clients and they pay you for that work. But there are only so many hours in the day, which is why the marginal cost of taking on new clients is relatively high – to scale up you generally need lots more people.
On the other hand, when you’re a software company creating products, the marginal cost of serving additional customers is almost nothing. Sure, there are some variable costs, but the impact to your cost structure is not nearly as significant as when you’re a services firm. That’s how a company like