The Digitalist Team
February 8, 2022

Product Owner - Internal or External?

Today, the work done by product owners (POs) in various IT development fields has become a completely common practice and even necessary. But what is it actually that a PO does? To put it simply to make sure that the under development software is continuously reaches milestones along the way to success while catering to the needs and desires to the customers. But let us elaborate a bit more on this. 

Why is Product Owner necessary

A Product Owner, represents the product's stakeholders and the voice of the customer. In addition a PO is responsible for delivering good business results while being accountable for maximizing the value that the development team delivers during each sprint. The product owner defines the product in terms of customer-centric outcomes, adds them to the product backlog, and prioritizes them based on importance and dependencies.

The PO also focuses on the business side of product development and spends most of his time consulting with stakeholders and the team. This role is crucial and requires a deep understanding of both sides: the business and the developers in the scrum team. Therefore, a good product owner can communicate what the business needs, ask why they need it (because there may be better ways to achieve that), and convey the message to all stakeholders, including the developers using technical language, if required.1 

Figure 1.: Product Owner Job Roles and Responsibilities

Okay, the PO is necessary, but can the customer provide this expertise in-house? Sometimes. They may assign someone for this task who has domain knowledge that would take a long time to build on the supplier side (if possible, at all). But is a customer-side PO clearly better than a supplier-side one? Let us take a closer look at this topic.

Benefits of a customer-side PO

1. Being close to sponsors and stakeholders

Within most organizations, people are likely to know each other. An internal PO knows whom to contact, what questions to ask, and how to get answers. And the speed with which information is obtained can make a significant difference.

2. Domain knowledge

An internal expert knows his company’s culture, its market, and the competitive landscape. He knows who their competitors are and what they offer. This knowledge enables him to make informed decisions.

3. A stronger mandate for the development team

As a representative of the customer, an internal PO can gain immediate trust to make decisions both on the supplier side and on his business side.

4. Better insight into the real value of the features

With a wealth of internal information at his fingertips, he can judge which features are important for the users more easily than a PO delegated by the supplier.

Benefits of a supplier-side PO

1. Professional use of product management tools 

A supplier-side PO is specialized in producing valuable software products in close partnership with the development team. To achieve this goal, he uses proven toolkits, methodologies, and frameworks and is constantly training himself in this field. Using best practices is part of his daily work.

2. Better collaboration with the development team

A supplier-side PO knows the team members well. They work together. As a result, he has a deeper insight into the project progress. The supplier-side PO and the team use the same "language", so the communication between them is straightforward. (More effective communication is a similar benefit on the other side between a customer-side PO and the stakeholders.)

3. Experience in software development

This is the most important thing: a supplier-side PO knows the pitfalls that need to be watched out for during a software development project. He knows how to prioritize tasks right at the beginning of the project to achieve the expected results at the end. He can find hidden expectations that the customer has not described in the specification (if there is such a document) because the customer considers them "self-evident". 

4. Greater accountability

The development team can easily hold him accountable if the number of tasks is insufficient or tasks are not properly specified. As the funder of the project, holding him accountable is evident for the customer, too. 

5. Availability

The product owner has several tasks: among others, he writes user stories, plans the content of sprints and releases, and constantly prioritizes backlogs. In the meantime, he must be available to stakeholders and especially the development team to answer questions that arise during the day-to-day work – it is a full-time job. In contrast, a customer-side PO usually holds another, often senior, position in the organization. This often means the customer-side PO is unavailable to the team, resulting in slower development speeds, missed deadlines, and, in the worst case, less business value.

Which one to choose? 

As you can see, both setups have their advantages and disadvantages. Typically, a benefit on one side is a disadvantage on the other. The key question is whether the customer has the free capacity and experience essential for successful product development.

We recommend a supplier-side product owner if you are short on time and ability: you cannot delegate anyone to the task full time, or you would focus more on higher-level tasks, e.g., creating a strategy. For certain customers, it is important that they spend as little time working with a software team as possible. The supplier-side PO is also the right choice if you have no experience managing a software project professionally and want to keep the number of rewritten functions to a minimum. 

Having POs on both sides can also work so that you gain the benefits of both. Of course, as always, the coin has two sides in this case as well: much more attention needs to be paid to synchronize between the two POs. In this setup, the supplier-side PO is more focused on operational tasks, while the customer-side PO focuses more on product strategy.

If you want to discuss this topic in more detail, get in touch with us.


1" Scrum (software development)." Wikipedia, Wikimedia Foundation, 10 January 2022, https://en.wikipedia.org/wiki/Scrum_(software_development)#Product_owner

Balazs Lanchidi
by
Balázs Lánchídi
Product Owner, Agile coach

February 8, 2022

Product Owner - Internal or External?

Today, the work done by product owners (POs) in various IT development fields has become a completely common practice and even necessary. But what is it actually that a PO does? To put it simply to make sure that the under development software is continuously reaches milestones along the way to success while catering to the needs and desires to the customers. But let us elaborate a bit more on this. 

Why is Product Owner necessary

A Product Owner, represents the product's stakeholders and the voice of the customer. In addition a PO is responsible for delivering good business results while being accountable for maximizing the value that the development team delivers during each sprint. The product owner defines the product in terms of customer-centric outcomes, adds them to the product backlog, and prioritizes them based on importance and dependencies.

The PO also focuses on the business side of product development and spends most of his time consulting with stakeholders and the team. This role is crucial and requires a deep understanding of both sides: the business and the developers in the scrum team. Therefore, a good product owner can communicate what the business needs, ask why they need it (because there may be better ways to achieve that), and convey the message to all stakeholders, including the developers using technical language, if required.1 

Figure 1.: Product Owner Job Roles and Responsibilities

Okay, the PO is necessary, but can the customer provide this expertise in-house? Sometimes. They may assign someone for this task who has domain knowledge that would take a long time to build on the supplier side (if possible, at all). But is a customer-side PO clearly better than a supplier-side one? Let us take a closer look at this topic.

Benefits of a customer-side PO

1. Being close to sponsors and stakeholders

Within most organizations, people are likely to know each other. An internal PO knows whom to contact, what questions to ask, and how to get answers. And the speed with which information is obtained can make a significant difference.

2. Domain knowledge

An internal expert knows his company’s culture, its market, and the competitive landscape. He knows who their competitors are and what they offer. This knowledge enables him to make informed decisions.

3. A stronger mandate for the development team

As a representative of the customer, an internal PO can gain immediate trust to make decisions both on the supplier side and on his business side.

4. Better insight into the real value of the features

With a wealth of internal information at his fingertips, he can judge which features are important for the users more easily than a PO delegated by the supplier.

Benefits of a supplier-side PO

1. Professional use of product management tools 

A supplier-side PO is specialized in producing valuable software products in close partnership with the development team. To achieve this goal, he uses proven toolkits, methodologies, and frameworks and is constantly training himself in this field. Using best practices is part of his daily work.

2. Better collaboration with the development team

A supplier-side PO knows the team members well. They work together. As a result, he has a deeper insight into the project progress. The supplier-side PO and the team use the same "language", so the communication between them is straightforward. (More effective communication is a similar benefit on the other side between a customer-side PO and the stakeholders.)

3. Experience in software development

This is the most important thing: a supplier-side PO knows the pitfalls that need to be watched out for during a software development project. He knows how to prioritize tasks right at the beginning of the project to achieve the expected results at the end. He can find hidden expectations that the customer has not described in the specification (if there is such a document) because the customer considers them "self-evident". 

4. Greater accountability

The development team can easily hold him accountable if the number of tasks is insufficient or tasks are not properly specified. As the funder of the project, holding him accountable is evident for the customer, too. 

5. Availability

The product owner has several tasks: among others, he writes user stories, plans the content of sprints and releases, and constantly prioritizes backlogs. In the meantime, he must be available to stakeholders and especially the development team to answer questions that arise during the day-to-day work – it is a full-time job. In contrast, a customer-side PO usually holds another, often senior, position in the organization. This often means the customer-side PO is unavailable to the team, resulting in slower development speeds, missed deadlines, and, in the worst case, less business value.

Which one to choose? 

As you can see, both setups have their advantages and disadvantages. Typically, a benefit on one side is a disadvantage on the other. The key question is whether the customer has the free capacity and experience essential for successful product development.

We recommend a supplier-side product owner if you are short on time and ability: you cannot delegate anyone to the task full time, or you would focus more on higher-level tasks, e.g., creating a strategy. For certain customers, it is important that they spend as little time working with a software team as possible. The supplier-side PO is also the right choice if you have no experience managing a software project professionally and want to keep the number of rewritten functions to a minimum. 

Having POs on both sides can also work so that you gain the benefits of both. Of course, as always, the coin has two sides in this case as well: much more attention needs to be paid to synchronize between the two POs. In this setup, the supplier-side PO is more focused on operational tasks, while the customer-side PO focuses more on product strategy.

If you want to discuss this topic in more detail, get in touch with us.


1" Scrum (software development)." Wikipedia, Wikimedia Foundation, 10 January 2022, https://en.wikipedia.org/wiki/Scrum_(software_development)#Product_owner

Balazs Lanchidi
Balázs Lánchídi
Product Owner, Agile coach

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