How IT Companies Are Structured

1. Product Companies

In the IT industry, there are many different companies, and there are no clear boundaries. Large companies often do many different things, some of which are definitely IT and others definitely not IT. A company is considered an IT company if it gets most of its revenue from IT products. Or it simply owns several large, well-known IT products.

In the IT sphere, thousands of companies appear, grow, and die every year (let’s be honest). The founders’ goal is to make sure the company doesn’t die but grows large enough for its shares to become traded on the stock exchange. Why is that needed?

If a company has done an IPO (gone public), then founders may not need to sell shares (and pay large taxes) and can, for example, take out a loan secured by the shares while keeping the shares. Or they can pay employees part of their salary in cash and another part in shares.

You can reward top management with shares for excellent results. You can even buy out competitors with shares — a very profitable way to absorb dangerous but still small competitors. Getting paid in shares is also very beneficial for employees. First, it saves on taxes; second, you can become very wealthy.

2. Modern IT Products

IT companies grow quickly on investors’ money. Investors generally like it when companies grow quickly. “You don’t even have to make money — just grow” ©. “Get 100M users, and then we’ll figure out how to make money off them.”

As they say: “A person + technology will beat a person without technology,” and “A businessperson + investment will beat a businessperson without investment.” The main thing is growth. Very fast growth.

3. Modern Development

Companies need to grow quickly, products need to gain users quickly, and what about the team? The team must constantly add new features to the product.

Fifty years ago, when software development was just emerging, it was treated like construction. First came the requirements estimation stage, then the design stage, then development, testing, and only after that was the product delivered to clients. From the start of development to the first client could take 5 years. Now everything is different.

Modern development is a constant series of experiments. Large companies continually test new features. New product versions are released every month, every week, or even every day.

Facebook outdid everyone by releasing several dozen new “features” every day. Each such feature is shown to 1% of users; then users’ reactions to it are studied automatically. If users like the feature, it is then shown to 10%, and so on.

Of course, this approach to adding new features requires a completely different approach to software development than it used to.