What is a software product? Everything you need to know (definition, tips, benefits)

17 min read
February 20, 2024

$2.5 trillion – that’s how much the software product market will be worth by 2028.

So, developing a software product sounds like a slam dunk, right?

But, to get it right, you need to master the basics first.

So, what exactly is a software product? And how do you develop a successful one?

In this article, we’ll answer these questions (and more) to help you do just that.

Let’s dive in!

What is a software product?

A software product is any software that’s sold and marketed to customers.

It’s more than just a working piece of software – a software product also has to meet the needs of its users.

Of course, you still need to do everything you usually do when developing software, from requirements gathering to deployment and maintenance.


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But, you also need:

  • Marketing
  • Branding
  • Product planning and strategy
  • Customer support
  • Market research

Just writing code that works isn’t enough – you need to build a product that can be successful in the market.

Benefits of developing a software product

Now, let’s talk about some of the main benefits of developing a software product.

Global reach

Bill Gates once said: “The Internet is becoming the town square for the global village of tomorrow.”

But, it’s more than just the town square – it’s also the world’s biggest market.

And with a software product, you have it at your fingertips.

Just think about these numbers for a second – In 2024, the number of internet users reached 5.35 billion i.e. 66.2% of the global population.

Internet users 2024

And that number will only grow in the coming years.

If you build a software product, you can reach a huge number of users in any corner of the world.

Of course, your product will target a much smaller user segment than every internet user.

But, this also means you can target lucrative and competitive markets, no matter where you’re from.

And that’s why developing a software product is a good idea.

Continuous revenue flow

One major benefit of developing a software product is that it can generate continuous income for your business.

And that’s especially true if you build a software-as-a-service (SaaS) product.

The stats prove it, too.

According to McKinsey, companies that adopt a subscription model like SaaS, on average grow their revenue 5 times faster than companies that don’t.

Here’s how it works:

Software-as-a-service (SaaS)

But, adopting a SaaS model is just one way your software product can continuously generate revenue.

You can also do it with:

  • In-app purchases
  • Advertising
  • Affiliate marketing
  • Data monetization

It’s a good idea to have diverse income streams to avoid dependency on a single income source.

And it’s the best way to make the most out of your software product.

Scalability and flexibility

Scalability and flexibility are key qualities of modern software products – and they offer direct business benefits, too.

But, what exactly is scalability?

Scalability is the ability of a software product to handle increased loads without compromising performance.

This means that your product can handle a large increase in users without sacrificing quality, which is great for business growth.

And if you’re using cloud-based solutions, it won’t even cost you that much.

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Most cloud computing providers operate on a pay-as-you-go model, so you pay only for the resources you actually use.

Also, since software products can scale quickly, you’ll be able to respond quickly to any changes and opportunities in your target market.

On top of being scalable, software products are flexible, too.

For example, if your initial idea isn’t validated, you can easily pivot to another if you’re developing a software product.

This flexibility will help you manage risks like market volatility and technological advances.

Also, it ensures your product is viable in the long-term and can easily evolve over time.

And that’s why software products are a good investment.

Types of software products

Here’s a brief overview of the types of software products you can build:

  • System software – system software manages the hardware and core systems of a computer. Examples of system software are operating systems, device drivers and firmware
  • Application software – the most common type of software product, from simple mobile apps to web browsers, application software is designed to help users perform specific tasks
  • Enterprise software – software products designed to fulfill the needs of organizations, enterprise software includes CRM systems like Salesforce and ERP systems like SAP
  • Cloud software – software products hosted on remote servers and accessed through the internet, like Google Workspace and AWS
  • Database software – database software refers to software products used to create and manipulate structured data, like Oracle Database 
  • Software development tools – software products used to develop, debug, and maintain other software applications, from integrated development environments (IDEs) like Android Studio to frameworks like Django
  • Embedded software – software embedded in hardware devices like smart TVs and industrial machinery, used to control device functions and features
  • Security software – software products designed to protect data and systems from malicious attacks, like antiviruses

Now, let’s move on to the tools you’ll need to build your software product.

Software product development tools

Some of the top tools you should use to develop your software product are:

  • Android Studiothe official IDE for Android, Android Studio is the best all-in-one tool if you’re developing an Android app
  • AppiumAppium is an open–source testing automation platform you can use if you’re developing a mobile app 
  • BitbucketBitbucket is a cloud-based version control system with a built-in CI/CD pipeline, geared towards business use
  • Figmaa collaborative design tool, Figma is widely used for user interface (UI) and user experience (UX) design
  • JiraJira is one of the most popular project management tools and it’s especially useful if you use Agile development methodologies
  • Node.js A Javascript-based cross-platform runtime environment, Node.js is a good choice to build your software product’s back-end
  • ReactA JavaScript library used to build UIs, React is one of the most popular front-end development tools
  • Selenium Selenium is a popular open-source web testing automation framework you can use to automate your product’s testing
  • ShakeShake is an innovative bug and crash reporting tool with real-time crash reporting, so you can immediately fix any issues with your product
  • XcodeApple’s official IDE used to build iOS, macOS, tvOS, and watchOS apps, you’ll be using it if you want to build a native app on an Apple platform

Of course, the tools you end up using will depend on your product’s platform and its specific requirements.

But, making the right choice will help you build a better software product.

Top tips for developing a successful software product 

Finally, we’ll discuss some top tips you should follow to build a successful software product.

Start with product discovery

If you want to build a successful software product, it needs to meet your users’ needs. 

And that’s where product discovery comes in.

Product discovery is the process of researching your market and validating your product idea before developing it.

And since having no market need is one of the top reasons why startups fail, validating your idea first is essential.

Why startups fail

So, what should you do during discovery? And how do you make sure you’re doing it right?

During discovery, you will do:

This will help you get a product-market fit and build a product that actually resonates with your users.

While we’re on the subject, here’s what Resonate’s founder, Davor Culjak, has to say about achieving product-market fit.

You will also build a relationship with your users, which will be useful down the line.

But, to do it right, you need a dedicated product discovery team.

Your team should have between 4 and 7 people and include the product trio.

The product trio

They will guide your product discovery process from start to finish.

Also, make sure your team is cross-functional i.e. that they bring diverse perspectives to the table.

Cross-functional collaboration is key to successful product discovery and will help you build a well-rounded software product.

And that’s exactly what you should be aiming for.

Why starting with product discovery is important

  • Gets you to a product-market fit – starting with product discovery will ensure your product actually meets the needs of your users and market
  • Reduces risk of failure – validating your idea during discovery will reduce the risk of your product failing in the market
  • Builds a strong foundation for development – doing product discovery builds a strong foundation for successful software product development

Create a software requirements specification

Creating a software requirements specification (SRS) document is essential if you want to build a successful software product.

Think of it like a recipe – your SRS should list all the ingredients you need to develop your product.

But, what does an SRS look like? And what should it cover?

Here’s what a typical SRS table of contents looks like:

SRS table of contents

Of course, every software product’s SRS is unique and yours might look slightly different.

But, it should cover 2 important things – your product’s functional and non-functional requirements.

The functional requirements cover what your product does and the non-functional requirements cover how it does it.

Here’s an in-depth breakdown of both:

Functional vs non-functional requirements

In simple terms, functional requirements focus on your product’s features and functionalities while non-functional requirements focus on performance and security metrics.

But, why is writing an SRS so important?

There’s a very simple reason – it helps keep your whole software product development team on the same page.

And that’s the key to successful development.

Why creating an SRS is important

  • Helps you avoid scope creep – a detailed SRS will help you keep your product’s development on schedule and within budget
  • Aligns your whole team – having an SRS will keep your whole team on the same page when they’re building your product
  • Makes future maintenance easier – your SRS details your product’s architecture and the technologies used to build it, which makes future maintenance easier and more efficient

Choose the right tech stack

If you want them to build a successful software product, your engineering team needs to have the right tools for the job.

That’s why choosing the right tech stack is so important.

But, what is a tech stack, anyway? And how do you make the right choice?

A tech stack is the set of technologies you use to develop your software product – think of it like your team’s toolkit.

Here’s what a typical web app tech stack looks like:

Web app tech stack

So, how do you choose the right tech stack?

First, you need to consider your product’s platform.

You’ll have a much different tech stack if you’re building:

  • A mobile app
  • A web app
  • A desktop app
  • An Internet of Things (IoT) product

But, there are a bunch of other factors that will influence your choice, like:

  • Your team’s expertise
  • The project scope
  • Your product’s requirements
  • The cost
  • Security features

And the most important factor is your team’s expertise.

If you pick tools and technologies they’re familiar with, they’ll be able to get your product to market faster.

And that can mean the difference between success and failure.

Why choosing the right tech stack is important

  • Speeds up development – choosing the right tech stack which your team is familiar with will help you develop your product faster
  • Can reduce costs – using open-source tools and frameworks in your stack will help you cut down on development costs
  • Impacts future growth and scalability – building your product with the right tech stack will help it grow and scale more easily in the future

Use Agile methodologies

If you want to build a quality software product, you need to use Agile methodologies during development.

Using them can speed up development, lower costs, and help you be flexible during development.

But, which methodologies can you use? And what should your Agile team look like?

There are a number of Agile methodologies out there, such as:

  • Scrum
  • Kanban
  • Extreme Programming (XP)
  • Crystal

Of course, you should pick the one that best suits your team and your product’s requirements.

But, the best fit for most projects is Scrum – 81% of Agile teams use Scrum or a Scrum hybrid.

And there’s a good reason for that – here’s what DECODE co-founder and CEO, Marko Strizic, had to say about Scrum:

In a nutshell, Scrum divides the software product development cycle into smaller (2-4 week) iterations called sprints.


Each of these sprints is a mini development cycle, covering everything from planning to testing.

This iterative approach is why Scrum is so popular and effective.

But, what should your Agile team look like?

A typical Agile team will include:

  • Software engineers
  • Designers
  • Product managers
  • QA engineers

Notice how the team is cross-functional – that’s by design.

Like we mentioned earlier, cross-functional collaboration is the best way to build a successful, well-rounded software product.

And Agile methodologies make that much easier.

Why using Agile methodologies is important

  • Improves collaboration – Agile methodologies are collaborative by design and will help your team work better together
  • Makes development more efficient – with Agile methodologies, your team will be more efficient and develop your product faster
  • Improves product quality – testing and quality assurance (QA) are key to Agile development, so adopting it will help you build a better product

Build an MVP for your software product

Building an MVP is the best way to make sure your software product can actually succeed in the market.

An MVP is a no-frills version of your product with only its core features included.

MVP development

An MVP is the ultimate idea validation tool that will show you if your product idea is viable or not.

So, how do you build an MVP?

It’s not just about cobbling code together and calling it a day – you actually need to build a usable software product.

Here’s how you should approach MVP development:

MVP development approach

The first step in MVP development is feature prioritization i.e. deciding which features your MVP will have.

There are a number of feature prioritization frameworks you should use, like:

  • Kano
  • Value vs. effort
  • RICE (Reach/Impact/Confidence/Effort)
  • MoSCoW (Must have/Should have/Could have/Won’t have)

Once you’ve done that, you can start developing your product – you can read our detailed software product development guide to learn more.

Then comes the crucial step – getting feedback on your MVP.

Your users will give you a lot of valuable feedback you can use to improve your product to better meet their needs.

And that’s why building an MVP is so important.

Why building an MVP for your software product is important

  • Reduces risk – An MVP will validate your idea before you spend too much time and money on a product that doesn’t meet market needs
  • Gets your product to market faster – with an MVP, you can get to market faster which is key in competitive markets
  • Reduces development time and costs – since you’re only building its core features, you’ll develop your product much faster and save money on development costs

Thoroughly test your product before launch

Thoroughly testing your software product before launch is an absolute must.

Just think about this statistic for a second – poor software quality costs U.S. companies at least $2.41 trillion every year.

That’s a staggering (and avoidable!) waste of money and resources.

Strict quality assurance (QA) and testing protocols will help you avoid becoming a part of that statistic.

And you’ll get other benefits from testing, too:

Benefits of software testing

So, how can you make sure you’re doing it right?

First, you need an in-depth testing strategy.

This will help your QA team plan tests and work more efficiently.

Also, make sure you start testing early.

Catching and fixing bugs early in your software product’s development cycle is much cheaper:

The cost of finding bugs

Finally, make sure your team uses a number of different testing methods like:

  • Performance testing
  • Integration testing
  • Load testing
  • Stress testing
  • Unit testing

Using these will ensure your product’s launch will go off without a hitch.

And that’s exactly what you want.

Why thoroughly testing your software product is important

  • Improves UX – thorough testing will minimize performance issues and give your users a better experience using your software product
  • Reduces security risks – if you rigorously test your product, you’ll be able to address vulnerabilities and security risks before it costs you
  • Builds user trust and confidence – your users are more likely to use and trust your product if it works well from the start

Iterate on user feedback

Iterating on user feedback and improving your software product based on that feedback is key to its long-term success.

That’s because users want companies to adapt to their changing needs and preferences65% of them, to be precise.

So, what’s the best way to iterate on user feedback?

There’s a simple answer – creating a feedback loop.

Customer feedback loop

Having a feedback loop in place will help your team systematically collect and analyze user feedback.

But, you can take your iteration to the next level by adopting continuous product discovery.

Teresa Torres, author of Discovery Habits, defined it like this:

“At a minimum, weekly touchpoints with customers by the team building the product, where they’re conducting small research activities in pursuit of a desired product outcome.”

Continuous discovery is the best way to stay on top of your users’ evolving needs and ensure any new features and updates are exactly what they want.

And that’s the recipe for success.

Why iterating on user feedback is important

  • Increases your competitive advantage – iterating on user feedback will help you better meet your users’ needs and stay ahead of your competitors
  • Improves retention rates – if you listen to your users’ feedback, they will be more likely to keep using your product
  • Builds strong relationships with users – consistently iterating on their feedback will help you build strong, long-term relationships with your users

What is a software product: FAQs

A software product is any software that’s sold and marketed to customers.

And it’s more than just a working piece of software – it also has to meet the needs of its users.

You can build:

  • System software
  • Application software
  • Enterprise software
  • Cloud software
  • Database software
  • Software development tools
  • Embedded software
  • Security software

The top benefits of building a software product are:

  • Scalability and flexibility
  • Continuous revenue flow
  • Global reach

They are:

  • Start with product discovery
  • Create a software requirement specification
  • Choose the right tech stack
  • Use Agile methodologies
  • Build an MVP
  • Thoroughly test your product before launch
  • Iterate on user feedback

Need help developing your software product?

Do you have a great software product idea but don’t know where to start?

Don’t worry, we can help you make it a reality.

We can help you build and grow your product from start to finish.

If you want to know more, feel free to get in touch with us and check out how we work.

Written by

Ante Baus


Ante is a true expert. Another graduate from the Faculty of Electrical Engineering and Computing, he’s been a DECODEr from the very beginning. Ante is an experienced software engineer with an admirably wide knowledge of tech. But his superpower lies in iOS development, having gained valuable experience on projects in the fintech and telco industries. Ante is a man of many hobbies, but his top three are fishing, hunting, and again, fishing. He is also the state champ in curling, and represents Croatia on the national team. Impressive, right?

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