When a technology company decides whether to run a services business internally or rely on partners, the decision has long-term implications for its valuation and capital efficiency. Internal services headcount grows linearly with customer adoption unless offloaded. That means as your customer base expands, so does the services burden: support, onboarding, training, implementation. All of these require human capital. While necessary for product success, these roles don't scale like software and don't command the same valuation multiples because they're tied to labor, not IP.
This is where a partner-delivered services model becomes strategic. By allowing partners to handle services delivery, often as their core business, you protect the product focus of your own company. Your internal headcount remains focused on high-multiple activities: R&D, product, and sales. Instead of growing your payroll to chase customer growth, partners take on the hiring, training, and delivery risk. You still benefit from product adoption, consumption growth, and ecosystem reinforcement, but without the drag of labor-based opex growth on your balance sheet.
Now consider how this affects valuation. Investors reward companies that maintain high gross margins and strong operating leverage. If your services and support headcount rise in proportion to your installed base, your opex profile starts to resemble a services company, even if you're fundamentally a software business. This dilutes your valuation multiple. But if partner-delivered services absorb that growth, you retain the high-margin, high-multiple profile. You separate growth from fixed cost expansion.
Oberon as a platform enables services companies to integrate their bench to their customers, but our virtual practice feature really shines at allowing technology vendor services teams see the detailed competencies and capacities of their downstream service network and can efficiently subcontract work to help drive more of this critical to customer success work onto the balance sheet of companies that are designed to perform in a services focused model and allows the technology vendor to maximize their investment in product development and IP acquisition, which has a higher return on invested capital over time.
Defining Product Focus Ratio (PFR)
The Product Focus Ratio (PFR) is a structural efficiency metric that compares product-generating headcount — engineering, product management, design — against the rest of the organization’s non-sales operational load. That includes services, support, customer success, implementation, finance, HR, IT, and other corporate overhead. These roles are essential, but they scale linearly with revenue and do not compound in the way product investment does.
Sales is intentionally excluded from the denominator. While not IP-generating, sales is a leveraged function. It converts investment into top-line growth and margin expansion and does not behave like other operational roles.
In simple terms:
PFR = Product + Engineering + R&D Headcount divided by All Other Non-Sales, Non-Product Headcount
A high PFR means more of your operating expense is dedicated to building durable enterprise value — IP, platforms, and product differentiation. A low PFR means you're consuming headcount to deliver growth and maintain revenue, rather than expanding the asset value of the business.
Let’s break this down with a basic example:
- Assume Company A has 100 customers.
- For every 20 new customers, they need 1 services or support FTE.
- They currently have 25 engineers and 5 services staff. Their PFR is 25 divided by 5, or 5.0.
- As the company grows to 300 customers, they now need 15 services/support FTEs.
- If engineering only grows to 30 people, the new PFR is 30 divided by 15, or 2.0. That’s a 60% drop in product focus.
This shift means a larger share of the team is doing work that investors typically value at 1x revenue instead of the 10 to 20x revenue multiple reserved for product-led growth.
Now consider a partner-leveraged model:
- The company grows to 300 customers, but the additional 10 services roles are handled by partners.
- Internal services headcount remains at 5 or even drops to 3.
- With 30 engineers and 3 internal services people, the new PFR is 30 divided by 3, or 10.0 — an improvement, even as the customer base tripled.
This tells a powerful story to investors. You're scaling product usage without scaling cost. That supports higher EBITDA margins and valuation multiples because internal cost doesn’t rise in step with revenue.
Valuation impact:
- A company with 85% gross margins and high product focus might get a 15x revenue multiple.
- If that company shifts to a services-heavy model and margins drop to 65 percent, the multiple can compress to 6x or lower.
- On a 50 million ARR base, that’s the difference between a 750 million valuation and a 300 million one.
PFR as a Valuation Efficiency Signal
If you break a tech company’s valuation into two parts:
- Revenue Stream Value — how much profit it generates
- IP Asset Value — how durable, defensible, and scalable the company is
Then PFR is a proxy for how efficiently you're turning opex into IP value instead of delivery cost.
High PFR means your dollars are going toward compounding assets like software, platforms, and defensible IP. Low PFR means more of your dollars are going toward roles that depreciate over time and do not increase long-term value.
Investors see this clearly in capital allocation models. Two companies with the same growth and ARR can trade at very different multiples based on structure alone:
Same revenue, same growth rate — completely different outcomes, purely based on how each company spends.
The Product Focus Ratio is more than a headcount stat. It is a leading indicator of how efficiently you're converting cost into enterprise value. It reflects your ability to scale intelligently, compound IP, and preserve your margin structure as you grow.
Partner-delivered services don’t just reduce cost. They protect your valuation multiple by keeping your internal team focused on what scales — product. That's the difference between looking like a SaaS company and being valued like one, or looking like a services shop with code on the side.
