A product agency builds and manages its own software products, while a project agency develops software on behalf of clients. The difference lies in ownership: with a product agency, the vendor owns the end product; with a project agency, you do. For companies looking for custom software development, that distinction determines which type of partnership suits them best.
In this article, we answer the most frequently asked questions about both models, so you can make an informed decision.
What does a product agency do differently from a project agency?
A product agency develops software that it brings to market itself, such as a SaaS platform or an app sold to multiple customers. A project agency develops software specifically for your organization, based on your wishes and requirements. You determine the functionality, you become the owner of the code, and you decide what happens with it going forward.
The approach differs in a number of concrete ways:
- Ownership: With a product agency, you use a license to their product. With a project agency, you own the source code yourself.
- Flexibility: A project agency fully tailors the software to your processes. A product agency makes limited adjustments to their product, because it also needs to work for other customers.
- Further development: With a product agency, the product roadmap depends on their strategy. With a project agency, you decide when and how the software is further developed.
- Dependency: If you choose a product agency, you are tied to their pricing model and continuity. If the company shuts down, you have a problem. With a project agency, you retain the code and can always continue with a different team.
For companies with unique processes or specific technical requirements, this difference is directly relevant to the feasibility of the project.
When should you choose a product agency?
A product agency is a good choice when your needs align with an existing software product and you have no need for deep customization. You then benefit from a ready-made solution that has already been tested, is maintained, and receives regular updates.
This model works well when:
- You have a standard process that fits within the product’s functionality
- You want to get started quickly without a long development time
- Your budget is limited and a subscription model suits your cash flow
- You don’t have an internal technical team to manage custom software
Think of accounting packages, CRM systems, or HR tools that work well enough for many businesses. However, as soon as your processes deviate from the standard, you quickly run into the limitations of the product.
When is a project agency the better choice?
A project agency is the better choice when you need software that precisely aligns with your specific processes, customer needs, or technical environment. Custom software development gives you full control over functionality, integrations, and scalability.
Choose a project agency when:
- Your processes are too specific for a standard solution
- You want to integrate with existing systems in a way that a product agency does not support
- You want to gain a competitive advantage with software that competitors cannot simply purchase
- You want the software to grow alongside your organization, without being dependent on a third party’s roadmap
- You operate in sectors such as fintech, blockchain, AI, or mobile applications, where standard solutions are rarely sufficient
A project agency requires more involvement upfront, but delivers a solution that is truly yours and better aligned with your goals in the long run.
What are the costs of a product agency versus a project agency?
A product agency typically works with a subscription model or licensing fees. You pay a fixed amount monthly or annually, regardless of whether you use all the features. A project agency charges based on hours or a fixed project price, which means higher initial costs but no ongoing licensing fees.
How to weigh the costs:
- Short term: A product agency is often cheaper to get started with. You don’t need a development budget and pay a relatively low monthly fee.
- Long term: Custom software has one-time development costs, but after that, maintenance costs are lower. You pay no license per user or per month.
- Hidden costs: With a product agency, costs can add up through extra modules, higher rates with more users, or customizations that fall outside the standard package.
- Scalability: As your organization grows, licensing costs with a product agency grow with it. With custom software, you scale technically without the cost per user increasing.
For many growing companies, custom software development is more cost-effective in the medium term, especially when the software is used intensively.
Which type of agency is best suited for custom software development?
For custom software development, you should always choose a project agency. Only a project agency builds software that is fully tailored to your requirements, becomes your property, and can be further developed without limitations. A product agency can offer customization as an add-on, but the core product remains theirs.
When choosing a software development partner for custom work, look for:
- Broad technical expertise, so they can choose the right technology for your situation
- Transparent communication and clear points of contact
- Flexibility to scale the team up or down as the project progresses
- Experience in your sector, such as fintech, AI, or mobile applications
- Cost-efficient ways of working without compromising on quality
A good software development partner thinks along with you, advises on technology choices, and ensures that the delivered software remains maintainable in the long term.
How 3Bird helps with custom software development
We at 3Bird are a project agency fully focused on custom software development. We work with a team of experienced developers and Dutch fractional CTOs who guide your project in your own language. This way, we combine international expertise with the quality standards and communication you are used to in the Netherlands.
What we concretely do for you:
- We build custom software based on your specific processes and technical requirements
- We support a wide range of technologies, including React, Angular, Flutter, Java, .NET, AWS, Azure, and more
- We flexibly scale the development team up or down, depending on the phase of your project
- We offer developers from €25 per hour, which is considerably more affordable than local rates
- We have more than 25 years of experience in the IT field and have been working with our dedicated team in Nepal since 2010
Whether you are a startup looking to build your first product, or an established company wanting to replace outdated software: we think along with you about the best approach. Get in touch via +(31)75-7993038 or send an email to contact@3bird.nl and we will discuss without obligation what we can do for you.