Whatever happened to Product Tech Companies?
Is it still worth looking into now? 🤔 🤔
Annyeong, Innovator 🤩🤩
Is your weekend going as planned? Everything all right and tight with ya? 😉😉
Good, good.
Now, scroll down 👇 to the good stuff. We’ve got a good one here.
As promised, let's dive into the curious case of product tech companies—especially why they seem to have taken a back seat, what caused the shift, and why African tech innovators might want to reconsider jumping into the product game.
Buckle up; we’re going on a wild ride through tech evolution, shifts, and opportunities! 🛤️
Remember When It Was All About Products? 🛠️
In the early days of tech, product tech companies were ‘the’ thing. Companies like Apple, Microsoft, and even Sony became household names for their physical products (iPhones, PlayStations, and Windows laptops, to mention a few).
It was a glorious time when every tech innovator dreamed 😍 of creating the next big gadget that would revolutionise the world.
But around the mid-2010s, a noticeable shift started to happen. The tech scene began gravitating towards something less tangible (when something can’t be touched) but highly scalable: Software as a Service (SaaS) and platform-based models.
This includes your regular fintech apps, social media platforms, ride-hailing & delivery platforms, freelancing platforms and so much more.
The Shift to SaaS: Easy Money, Big Impact 💸
In 2013, Adobe made a significant move that sent shockwaves across the product tech world—it switched from selling its popular software like Photoshop as standalone products to offering them via a subscription service called Adobe Creative Cloud1
At the time, many were skeptical, but it worked like a charm!
By 2022, Adobe had amassed more than 26 million subscribers, driving its annual revenue to a whopping $17 billion, thereabouts2
The reasons for this shift? It’s a no-brainer 😏
SaaS brings in a predictable, recurring revenue stream, unlike traditional product sales where companies depend on one-off purchases. In fact, by 2020, SaaS was growing by 18% per year, a faster rate than any other software delivery model3.
Techies can also scale with the model without the need for manufacturing or shipping physical products. You build it once, and people download it infinitely—perfect for the fast-paced world of tech.
Adding the lower cost that consumers have to pay to access these tools and services, in comparison to what it’d cost as a physical product, it’s no wonder why a lot of tech companies made the transition.
However, it has had (and it still has) its downsides too
For one, SaaS is highly competitive ❗❗
There’s always someone developing a cheaper, faster version of your product. And while it’s great for scalability, it demands constant updates and improvements—meaning you and your team will always have to be on your toes, or you risk losing your customers.
Take the case of Slack. It was once the go-to platform for team collaboration, it grew from 2 million daily active users in 2015 to over 12 million by 20204. But, it wasn’t long before Microsoft Teams entered the picture. Leveraging its existing customer base, Microsoft Teams surpassed Slack in daily active users, reaching 270 million by 2023 😮, creating a stiff competitive environment5.
Another example is Zoom.
During the pandemic, Zoom exploded from 10 million daily meeting participants in December 2019 to 300 million by April 20206. However, as demand grew, so did competition.
Tech giants like Google Meet and Microsoft Teams quickly upped their game, offering similar services. Zoom’s dominance started facing pressure 😔 from companies that could offer almost similar tools at a lower cost or as a package bundle.
To sum it up, all these happened because an SaaS model has a low entry barrier, allowing competitors to emerge rapidly. This fierce competition causes tech companies to be on the edge, making them to constantly innovate to stay relevant, requiring them to push out updates, introduce new features, and offer competitive pricing.
From the perspective of African tech innovators, who have an over-saturated market that operates at break-neck speed on one hand 🫲and an almost free market for tangible tech products on the other hand 🫱 , this presents both a challenge and an opportunity.
Did we forget to add…
As SaaS took off, so did artificial intelligence (AI) and data-driven solutions.
Companies like Tesla and Google started shifting focus from just physical products to leveraging AI in everything from self-driving cars to personalized search results. AI products are highly adaptable and so, this make it easy for integration across various industries—from healthcare to finance.
Take OpenAI, for example. ChatGPT, its star product, became a sensation when it launched in 2023, boasting over 100 million users within its first few months7
Thankfully, Africa tech innovators haven’t completely lost out of this race 😅😅
DataProphet (South Africa), is one example of this. They provide AI-powered manufacturing optimization tools that helps manufacturers to save up to 40% in production costs. It does this by predicting and preventing defects in the production process.
There are a host of others too, but you get the idea 🤝🤝
The Quiet Hustlers 🔊🛠️
Here’s the deal, hardware and product tech companies are still here, but they are mostly on the down-low. While the world has been focused on SaaS and AI tech companies, hardware tech companies haven’t gone extinct. They’ve just gone quieter.
African tech innovators are still making waves in the hardware space, but these companies aren’t as mainstream as most people would prefer.
To highlight this, we have Kenya’s BRCK in our sights.
Founded by Juliana Rotich, BRCK originally gained attention as a hardware company, known for creating rugged internet devices, designed for tough environments, especially in Africa8. Their rugged, portable routers have been game-changers for connecting underserved areas, so much so that they raised $3 million in venture funding9 to push this movement 💯
They’ve since evolved to become an integrated hardware and software company but hey, it’s still a good mention, right? 😉
Rensource Energy (Nigeria) is another quiet player that has been making big moves. They focus on solar-powered micro-utilities and renewable energy systems to address Africa’s energy crisis. These physical products are bringing reliable electricity to places where the grid is unreliable.
As of 2019, Rensource had raised $20 million to expand its operations10 😍😍
The Case for African Product Tech Companies: The Time is Now ⏰
So, what does all of this tell us?
Product tech companies aren’t dying—they’re evolving and the world’s obsession with SaaS and AI tech companies doesn’t mean there isn’t room for African tech innovators to thrive in the product space.
In fact, African markets present a unique opportunity for product-based innovation. Here’s why:
Untapped Markets: There are still huge gaps in infrastructure, energy, healthcare, and connectivity across Africa. These gaps can be addressed with physical products that are tailored to local needs.
Tech-Enabled Hardware: Combining tech with hardware solutions, like BRCK , is a space that has room for growth. With more than 40% of Sub-Saharan Africa’s population still without internet access, there’s a massive opportunity to create innovative products that tackle these problems.
Customer-Centric Focus: By creating products that focus on solving specific problems for African consumers and businesses, product tech companies can capture market share where SaaS or AI alone won’t cut it.
So, Dear Innovator, if you’re having a hide time selling your market in the SaaS era of tech, maayyyyyybe it’s time to look into physical tech products instead.
What do you think? 🤷🤷