Neither business model is automatically more resilient. Subscription software can make revenue more predictable between sales cycles if customers renew, while project-based IT services may feel spending slowdowns sooner when clients defer work. But subscriptions can shrink or lapse, and services tied to essential, ongoing operations may hold up better than discretionary projects. To compare companies, look past the “services” or “product” label and examine their revenue mix, renewals, bookings, backlog, client concentration, and how easily customers can postpone what they buy.
Why weak spending can affect IT services sooner
When a client tightens its budget, it can postpone a project or delay signing a new one. That can leave a services provider with less work to start or extend in the near term, especially when the work is discretionary or delivered under short contracts.
Gartner’s Invest Quarterly Sector Outlook: IT Services, 2Q24, published September 5, 2024, described cautious spending, delayed large deals, and reduced expenditures, particularly for discretionary work. Gartner also revised its services-market growth outlook down by 150 basis points. This is evidence of the spending pressures discussed in that historical outlook, not a forecast of current conditions.
Market growth and cautious buying can occur at the same time. In a March 2024 forecast, Gartner projected 9.7% growth in the worldwide IT services market in U.S. dollars for 2024, while also expecting enterprises to remain cautious about new project signings in the first half of that year. That figure was a forecast, not a reported result. Gartner’s March 2024 forecast illustrates why a growing market does not necessarily mean every provider can count on prompt project commitments.
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Services revenue is not all equally exposed
Project size and duration matter. Accenture’s FY2025 annual report said it continued to see demand for its services, but observed a slower pace and level of client spending, particularly for smaller, shorter-duration contracts. That is one company’s description, not a market-wide measurement, but it shows why services businesses should be compared by contract type rather than treated as a single category. Accenture FY2025 annual report
Managed services, support, and work that customers need to keep systems running may be less deferrable than optional transformation projects. That does not make them immune to cuts: customers can renegotiate scope, reduce usage, or change providers. The key question is what portion of a provider’s work clients can delay without operational, security, compliance, or revenue consequences.
How recurring product revenue helps—and where it can weaken
A software subscription can smooth the timing of revenue because the vendor does not need to win an entirely new project for every billing period. That buffer depends on customers continuing their subscriptions. Nonrenewals, lower usage or scope, delayed purchases, and weaker expansion can all pressure results.
Company filings show why “product company” is not a reliable substitute for examining revenue composition. Teradata reported FY2025 total revenue of $1.663 billion, down 5% from FY2024. Its recurring revenue was $1.445 billion, down 2%, while consulting services revenue was $201 million, down 19%. Teradata said the consulting decline was expected after lower order-booking activity in the second half of 2024 and into 2025. The figures show that a company with recurring software revenue can still have meaningful services exposure and that recurring revenue can decline. Teradata FY2025 Form 10-K
Vertex offers a different company example. Its FY2025 Form 10-K says the vast majority of revenue comes from recurring software subscriptions. Vertex reported year-end 2025 annual recurring revenue (ARR) of $671.0 million, up 11.3% year over year, and described ARR as an indicator of future subscription revenue. That result shows growth at Vertex in that reporting period; it does not establish that software companies generally outperform services companies during downturns. Vertex FY2025 Form 10-K
Product businesses can have mixed revenue models
A product company may sell subscriptions, perpetual licenses, hardware, consulting, implementation, or a combination. Its mix can change over time. For resilience analysis, separate those streams rather than assuming all revenue associated with a product is recurring or equally protected from weak client spending.
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How to compare two companies fairly
Use the same reporting periods and geographies where possible, and check how each company defines its metrics. A useful comparison starts with these operating indicators:
- Revenue durability: Separate subscriptions, maintenance, and managed services from project work, one-time implementation, perpetual licenses, and hardware.
- Renewal and expansion: Review retention, churn, renewal rates, and net expansion. Contracted recurring revenue still relies on customers renewing and may fall if they buy less.
- Near-term demand: Check order bookings, backlog, and pipeline conversion alongside revenue. Backlog is not the same as revenue already recognized, and it may be subject to timing or cancellation risk.
- Contract duration and deferrability: Consider how long signed work lasts and whether customers can postpone it without disrupting operations or meeting security, compliance, or revenue needs.
- Concentration and exposure: Examine dependence on a few customers, industries, or geographies. These can matter more than whether the company is described as a product vendor or a services provider.
- Pricing and scope: Look for discounting, renegotiations, reduced scope, and delivery-cost changes—not just headline revenue growth.
What the evidence can—and cannot—tell you
The available examples do not provide a controlled, matched historical comparison proving that product companies or IT services firms are always more resilient. They cover a 2024 market outlook and FY2025 results from individual companies, not a like-for-like test across both business models. Treat the evidence as support for the mechanisms to examine, not as a universal ranking.
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Outbyte Driver Updater FREEFix the driver behind crashes, sound loss and screen glitchesFind Drivers →Outbyte PC Repair FREEClear out junk files and repair common Windows errorsFree Scan →In practice, a company with a high share of renewable, mission-critical revenue may be better positioned than one dependent on discretionary new projects, whatever its label. But the conclusion depends on its actual renewal behavior, customer budgets, bookings, contract mix, and concentration—not on “services” or “product” alone.
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