The Role of Software in Products
"Software is the magic that turns data into useful action, bridging the gap between technology and the user experience."
Introduction:
Have you ever wondered how your favorite applications or the tools you use at work actually function?
Behind every seamless experience lies complex software, guiding every action. Software isn't just about lines of code—it’s about shaping our daily interactions, driving innovation, and building entire industries.
In today’s tech-driven world, understanding software’s role is crucial for product managers to make informed decisions.
But what exactly is software, and how do different delivery models like SaaS and on-premise solutions impact users and businesses? Let’s dive into these essential concepts.
Defining Software
Software is everywhere, but have you ever stopped to think about what it really is? Whether you're using a smartphone, computer, or even a smart fridge, there's software running behind the scenes, making everything work smoothly. Software is more than just a bunch of code—it’s the engine that powers modern technology, enabling devices to perform the tasks we rely on every day.
What is Software?
Let’s start with the basics: software is a set of instructions or programs that tell a computer what to do. Think of it like a detailed recipe. Just as a recipe gives you step-by-step instructions to cook a meal, software gives a computer detailed commands that tell it how to perform specific tasks. Whether it's sending an email, processing data, or displaying a video, the computer needs software to understand and complete these actions.
The beauty of software is that it takes the raw potential of hardware—things like your laptop or smartphone—and turns it into a tool that can accomplish a wide variety of tasks. Without software, these devices would just sit there, unable to do anything useful. In many ways, software is the "soul" of modern technology, breathing life into the machines we use every day.
Types of Software
Now, there are two major types of software that you’ll encounter in most products: system software and application software. They serve different purposes but work hand in hand to deliver the seamless experience we often take for granted.
System software is like the foundation of a building. It includes operating systems (like Windows, macOS, or Linux) and essential utilities that manage your computer’s resources. Think of it as the layer of software that interacts directly with the hardware, ensuring everything runs smoothly. The system software controls things like memory allocation, file storage, and the operation of the processor. Without it, your computer wouldn't even know how to start up.
On the other hand, application software is more like the furniture and décor inside the building. These are the programs we interact with on a daily basis, like Microsoft Word, Photoshop, or even video games. Application software allows us to perform specific tasks, whether it’s writing a document, editing a photo, or playing the latest online game. It’s what makes computers truly useful to people.
Product managers, especially in the tech industry, need to be deeply familiar with both types of software. Understanding how system software underpins everything, and how application software meets user needs, is key to building products that not only work but delight users.
Software in Modern Products
Today, software isn’t just a feature—it’s the heart of modern products. From smartphones to cars, software is what turns basic hardware into smart, connected devices that solve real-world problems. Think about the apps you use every day, whether it’s for work or entertainment. Behind every tap and swipe is a carefully crafted piece of software that makes it all possible.
In the automotive industry, for instance, cars are no longer just mechanical machines; they’re filled with software. Advanced driver-assistance systems (ADAS), GPS navigation, and even climate control systems rely on software to function. These features elevate the car from a basic mode of transportation to an intelligent, responsive vehicle.
In the world of consumer electronics, software powers everything from smart TVs to wearables like fitness trackers. These devices gather data and respond to user input, offering personalized experiences thanks to the software running inside them. For product managers, understanding the role of software in enabling these interactions is critical to designing products that users love.
Software also allows products to evolve over time. Unlike hardware, which has fixed capabilities once it’s built, software can be updated, improved, and expanded. This is why your phone, for example, can get better over time with regular software updates, adding new features or fixing bugs. It’s what keeps products fresh and competitive in a fast-changing market.
The Product Manager's Perspective
As a product manager, it’s crucial to not only understand what software does but also to appreciate the broader impact it has on your product. Software defines the user experience, determines the product’s flexibility, and influences how well it meets customer needs. This understanding allows product managers to make informed decisions about features, timelines, and resources.
Whether you’re developing a new mobile app or managing a piece of enterprise software, knowing how software integrates with hardware, interacts with users, and evolves over time will help you create products that are both functional and enjoyable. This knowledge also positions you to work effectively with cross-functional teams, including developers and UX designers, ensuring that the product vision comes to life in a way that’s technically feasible and user-friendly.
Understanding SaaS (Software as a Service)
Have you ever noticed how easy it is to access software online without downloading or installing anything? That's because of SaaS, or Software as a Service, a model that has reshaped how we think about software. SaaS makes software accessible from anywhere, offering flexibility, scalability, and cost-effectiveness that appeal to both businesses and consumers. But what exactly is SaaS, and why has it become such a powerful tool in product management?
What is SaaS?
SaaS, or Software as a Service, is a software delivery model that allows users to access applications over the internet, without needing to install or maintain the software locally. Think of it as renting software instead of owning it. Instead of purchasing and installing a program on your computer, you simply log in through a web browser, and the software is available for you to use, no matter where you are or what device you're using.
The rise of cloud-based services has made SaaS one of the most popular ways to deliver software today. All you need is an internet connection, and the software can be accessed from virtually any device. SaaS has removed many of the traditional hurdles like installation processes, version compatibility issues, and storage limitations, making it easier for businesses to deploy software quickly and efficiently.
Product managers appreciate SaaS for its ability to make software more accessible and user-friendly. By eliminating the need for complex installations and large upfront investments, SaaS lowers the barrier to entry for customers. This allows product managers to deliver their products faster and to a broader audience with fewer technical complications.
SaaS Subscription Models
SaaS typically operates on a subscription model, where users pay a recurring fee—monthly or annually—to access the software. This model brings a number of advantages for both users and businesses.
From a user’s perspective, it’s more cost-effective than purchasing software outright. Instead of paying a large sum upfront, users spread the cost over time with manageable payments. This also reduces the risk of investing in a software product that might not fully meet their needs. Another key benefit is that users always have access to the latest version of the software since updates happen automatically, without the need for manual downloads or installations.
From a business standpoint, the subscription model creates a steady, predictable revenue stream. This is often more sustainable than the one-time sales model traditionally associated with software. It also encourages ongoing customer engagement and loyalty, as users tend to stick with services they are already subscribed to. SaaS products are often designed to scale easily, allowing businesses to upgrade customers to higher subscription tiers or offer add-on services as their needs evolve.
For product managers, understanding the dynamics of these subscription models is crucial. Deciding on pricing strategies, understanding customer churn, and ensuring consistent value delivery are key responsibilities. Balancing affordability with feature sets is critical to retaining customers over the long term.
Benefits of SaaS
The benefits of SaaS go far beyond just ease of access. One of the biggest advantages is scalability. SaaS allows businesses to easily scale their software usage as needed. For example, if a company experiences rapid growth, it can easily increase its usage of the service without needing to buy new hardware or reconfigure its IT systems.
Another advantage is automatic updates. Since the software is managed centrally by the provider, updates happen in the background without any disruption to the user. This means users always have access to the latest features and security enhancements without having to lift a finger. From a product management perspective, this simplifies the process of rolling out new features or fixes, ensuring all users are on the same version of the product.
SaaS also reduces the IT burden for businesses. Instead of managing servers, maintaining software, and handling backups, businesses can rely on the SaaS provider to take care of those tasks. This frees up internal resources to focus on more strategic initiatives, rather than day-to-day software management.
For product managers, these benefits create both opportunities and challenges. While SaaS provides a more flexible way to deliver software, it also raises the bar for customer expectations. Users expect your SaaS product to work flawlessly, with minimal downtime, and to deliver regular improvements. Meeting these expectations requires careful planning, close coordination with technical teams, and an ongoing focus on user feedback and satisfaction.
SaaS in Everyday Life
SaaS has become so common that many of us use it without even realizing it. Whether it’s collaborative tools for work, streaming services for entertainment, or cloud-based storage, SaaS products are integrated into our daily routines. The flexibility of being able to access software from any location, at any time, makes SaaS an appealing choice for both individuals and organizations.
For businesses, SaaS products make it easier to adapt to changing work environments. Remote work, for example, has been greatly facilitated by SaaS tools that allow teams to collaborate seamlessly, regardless of where they’re located. This shift in how we use software has fundamentally changed the way businesses operate, making it easier for teams to stay connected and productive.
As a product manager working with SaaS, it’s important to think about how your users interact with your product on a day-to-day basis. SaaS products need to be intuitive, reliable, and scalable. Customer needs evolve quickly, and SaaS products that can adapt to these changing needs will thrive. Regular updates, responsive customer support, and continuous improvement are key to keeping users happy and engaged over the long term.
SaaS has truly transformed the software landscape. By offering flexibility, reducing upfront costs, and simplifying updates, it provides a user-friendly approach to software delivery that aligns with modern business and consumer needs. For product managers, mastering the SaaS model can unlock new opportunities for innovation, growth, and long-term customer relationships.
On-Premise Solutions
In a world where cloud-based solutions like SaaS dominate, you might wonder why some businesses still opt for on-premise solutions. The answer lies in the balance between control, customization, and security. On-premise software solutions, while requiring more resources upfront, offer unique advantages that are important in certain contexts. So, what exactly are on-premise solutions, and when should they be considered over SaaS?
What are On-Premise Solutions?
On-premise solutions refer to software that is installed and run on a company’s own infrastructure—typically their servers, data centers, or internal networks. Unlike SaaS, which is accessed over the internet, on-premise software remains fully within the organization’s control. It’s purchased as a one-time license or through periodic maintenance fees, and the business is responsible for managing it, from installation to updates, backups, and security.
Think of it this way: with SaaS, you’re renting the software; with on-premise, you own it. The software is physically stored on your company’s equipment, giving you greater authority over how it’s used and maintained.
While SaaS is growing rapidly, on-premise software still plays a critical role in industries where control over data, customization, or security is paramount. For product managers, understanding when and why to recommend on-premise solutions to customers can help ensure that you’re delivering a product that aligns with the specific needs of the business.
The Pros and Cons of On-Premise Solutions
One of the primary benefits of on-premise solutions is the control they offer. Since the software runs on the company’s own infrastructure, the business has complete autonomy over how it’s deployed, managed, and maintained. This can be especially important for businesses that have strict data privacy or security requirements, such as those in finance, healthcare, or government sectors.
For example, a company that deals with sensitive financial data may prefer an on-premise solution to ensure that their data remains within their physical location, protected by their internal security measures. By contrast, with SaaS, the software and data are hosted in the cloud, which might introduce concerns about data being stored on third-party servers or the risk of unauthorized access.
On-premise solutions are also highly customizable. Since the company owns the software, they can modify it to suit their exact needs, whether that involves integrating it with other internal systems, adding custom features, or configuring it in unique ways. This flexibility can be crucial for businesses that need software that aligns perfectly with their processes or requirements.
However, there are significant challenges with on-premise solutions. First and foremost, they require a substantial upfront investment. Companies need to purchase hardware, servers, and storage systems to host the software, in addition to buying the software licenses themselves. This initial cost can be a barrier for smaller businesses or startups that may not have the budget for such investments.
Additionally, maintaining on-premise software requires dedicated IT staff. Companies need people who can install updates, monitor system performance, apply patches, and handle any technical issues that arise. Unlike SaaS, where updates and maintenance are handled by the provider, on-premise software places these responsibilities squarely on the business’s shoulders.
Finally, scalability can be a challenge. As the company grows, they may need to upgrade their hardware or expand their infrastructure to support more users, which can become expensive and time-consuming.
When to Choose On-Premise Solutions Over SaaS
Choosing between on-premise and SaaS solutions depends on a company’s specific needs, priorities, and resources. While SaaS is an excellent choice for many businesses, there are certain cases where on-premise is the better option.
First, data control and security are often the deciding factors. If a company handles highly sensitive data or operates in a regulated industry, the control offered by on-premise software can be a significant advantage. Businesses may want to ensure that their data never leaves their own servers and is protected by their own security protocols. In this case, on-premise solutions offer the peace of mind that no third party has access to their information.
Second, customization is another reason to go with on-premise software. SaaS products are typically designed to serve a wide range of users, which can limit the level of customization available. On-premise software, on the other hand, can be tailored precisely to the organization’s needs. Companies with unique workflows, legacy systems, or highly specific requirements may benefit from the ability to modify the software in-house.
Lastly, long-term cost can be a factor, though this is a bit more nuanced. While on-premise solutions require a large upfront investment, they may be more cost-effective in the long run, especially for businesses that plan to use the software for many years. Since SaaS requires ongoing subscription payments, businesses that don’t require frequent updates or new features may find that owning the software outright becomes cheaper over time.
As a product manager, it’s essential to be able to assess when on-premise is a better fit for a client’s needs. This requires asking the right questions: Does the client prioritize control over their infrastructure? Are they operating in a highly regulated industry? Do they need a high level of customization? Understanding these factors will help you recommend the right solution, whether it’s SaaS or on-premise.
The Future of On-Premise Solutions
While cloud-based solutions continue to dominate the market, on-premise software isn’t going away anytime soon. In fact, many businesses are adopting a hybrid approach, where they use a combination of SaaS and on-premise software to meet their needs. For example, a company might use SaaS for everyday tasks but rely on on-premise solutions for more critical operations that require enhanced control or customization.
As technology continues to evolve, on-premise solutions are also becoming more sophisticated. New tools and advancements in virtualization and automation are helping businesses manage their on-premise infrastructure more efficiently. In addition, many companies are looking for ways to integrate their on-premise software with cloud-based services, creating a seamless environment that offers the best of both worlds.
For product managers, it’s important to stay informed about these trends and the evolving needs of businesses. While SaaS will likely remain a dominant force, understanding the strengths and weaknesses of on-premise solutions will allow you to provide more comprehensive guidance to your clients and deliver software that meets their unique challenges.
Disadvantages of SaaS and Cloud Solutions
SaaS and cloud-based solutions have undoubtedly revolutionized the way businesses operate, offering convenience, scalability, and reduced overhead. But despite these advantages, there are critical disadvantages that businesses—and product managers—must carefully consider. While SaaS may seem like the go-to option for most companies, it’s important to understand the challenges, especially when it comes to issues like data ownership, data loss, privacy, and security.
Data Ownership
One of the most significant concerns with SaaS is the question of data ownership. When companies use cloud-based software, they don’t always have full control over their own data. In many SaaS agreements, the provider, not the user, retains ownership of the data stored on their servers. This can lead to several issues, particularly when businesses want to access, export, or use that data in a way that might not align with the provider’s policies.
Imagine you’re a company storing sensitive customer information on a cloud-based CRM platform. While the platform allows you to access the data, the terms of service might prevent you from transferring that data freely or using it outside the confines of the software. Essentially, you’re at the mercy of the provider when it comes to how you can handle your own information.
For product managers, this is a key consideration when advising clients. Data ownership can have long-term implications on a company’s ability to switch providers, migrate data, or maintain autonomy over critical business information. If a client is highly concerned with data sovereignty, SaaS may not be the best fit.
Data Loss and Service Disruption
Another challenge with SaaS is the risk of data loss or losing access to crucial tools if the subscription isn’t maintained. In a cloud-based model, the software provider controls the infrastructure and, in some cases, the data itself. If a business falls behind on payments, loses access to the service, or if the provider experiences technical issues, they can be cut off from their own data, leading to severe disruptions in business operations.
This is a risk that can’t be overlooked. For example, imagine a small company relying on a cloud-based accounting platform. If they encounter financial difficulties and cannot pay for the service, they risk losing access to years of financial records, potentially crippling their ability to operate. Similarly, if the SaaS provider goes out of business or experiences a major outage, users might be left stranded without access to critical tools or data.
For product managers, it’s crucial to make clients aware of these potential risks. Encouraging clients to have contingency plans, such as regular data backups or exploring hybrid solutions, can mitigate the negative effects of SaaS service interruptions.
Privacy and Security
The third major disadvantage of SaaS is related to privacy and security. By relying on third-party cloud providers, companies are essentially trusting external vendors with their sensitive information. This can be problematic, especially for businesses handling confidential data, such as customer records, financial transactions, or intellectual property.
When you use a SaaS solution, your data is transmitted and stored over the internet, meaning it can be vulnerable to security breaches, hacking, or unauthorized access. Although SaaS providers typically invest heavily in security protocols, no system is immune to breaches. Additionally, there’s the risk of legal liabilities—if a provider mishandles data or fails to meet privacy regulations (such as GDPR or CCPA), your company might bear the consequences, including legal penalties or reputational damage.
This is where a product manager’s knowledge becomes invaluable. Understanding the security measures of SaaS providers, knowing which certifications and compliance standards are met, and evaluating the potential risks of third-party access are all crucial when advising clients. For industries like healthcare, finance, or government, the stakes are even higher, making the choice between SaaS and on-premise solutions a critical decision.
Balancing the Risks with Benefits
While these disadvantages of SaaS and cloud solutions are real, it’s important to recognize that they don’t necessarily outweigh the benefits. For many businesses, the convenience, scalability, and lower upfront costs of SaaS are too valuable to ignore. However, understanding the potential downsides allows companies to make more informed decisions and plan accordingly.
A well-prepared product manager will always help clients navigate these risks by discussing alternative solutions or backup strategies. For example, companies could adopt a hybrid approach, combining SaaS for less sensitive operations with on-premise software for critical tasks. Or, clients can implement frequent backups and disaster recovery plans to ensure their data remains accessible, even in the event of a service disruption.
Ultimately, the role of the product manager is to guide clients toward the solution that best fits their specific needs—whether that’s SaaS, on-premise, or a combination of the two. By weighing the pros and cons, understanding the unique demands of each business, and ensuring that privacy, security, and ownership concerns are addressed, product managers can help companies make confident, informed choices.
Key Characteristics of Software Products
Software products differ from traditional physical products in many ways. Their nature allows for more dynamic development and flexibility, but with that comes the need for continuous updates, user-centric design, and agile responsiveness to feedback. Understanding the key characteristics of software products is essential for product managers to successfully guide development and ensure long-term product success.
Rapid Development and Iteration
One of the most defining characteristics of software products is their ability to be developed and iterated quickly. Unlike physical products, where manufacturing can take months or even years, software can be built, deployed, and updated in much shorter cycles. This gives businesses an incredible advantage—software can be released as a minimum viable product (MVP) to gather feedback from real users and then improved iteratively based on that feedback.
Consider this: when developing a physical product, like a piece of hardware, once it's shipped to customers, making changes becomes incredibly difficult and costly. However, with software, even after a product goes live, it can be updated frequently. Developers can respond to bugs, performance issues, or user feature requests in real-time, improving the product in ongoing, incremental releases.
For product managers, this ability to iterate quickly offers a huge advantage but also comes with a challenge—maintaining a continuous development cycle while balancing new features, bug fixes, and user feedback. It also means that product managers need to have a clear understanding of how to collect and prioritize user feedback, ensuring that each iteration adds meaningful value to the product and aligns with long-term goals.
Regular Updates and Maintenance
With great flexibility comes great responsibility, especially in terms of updates and maintenance. Unlike a one-time purchase physical product, software requires constant care to remain functional, secure, and efficient. Security patches, performance improvements, and new features all need to be regularly introduced to meet evolving user expectations and protect against emerging vulnerabilities.
Security is one of the most critical aspects here. As new threats emerge, software needs to be regularly updated to close vulnerabilities and ensure that sensitive data is protected. A software product that isn’t maintained becomes a liability for both the provider and its users. Therefore, product managers must ensure that development teams have robust maintenance schedules and the resources to handle continuous improvement efforts.
Maintenance also extends to performance. Over time, software can become bloated or slow as new features are added. Regular optimization is key to maintaining a seamless user experience, especially when dealing with large user bases or resource-heavy applications. Failure to address performance issues promptly can result in user frustration, loss of trust, and eventually product abandonment.
As a product manager, recognizing the need for proactive maintenance and ensuring a roadmap that includes both new features and essential updates is critical for the long-term success of a product. A well-maintained product not only retains its user base but also enhances customer loyalty and satisfaction.
Prioritizing User Experience and Accessibility
The final key characteristic of software products is their emphasis on user experience (UX) and accessibility. In the world of software, user experience can make or break a product. While functionality is critical, it’s often the ease with which users can navigate a product that determines its success. A well-designed product that focuses on intuitive interfaces, minimal learning curves, and seamless interactions can outperform competitors with more complex but feature-rich offerings.
Take, for example, a software product designed for project management. If the tool is packed with features but users struggle to find what they need or feel overwhelmed by the interface, they’re unlikely to stick with it. In contrast, a product that prioritizes a smooth, intuitive experience—even with fewer features—can foster higher user satisfaction and retention.
In addition to user experience, accessibility is becoming increasingly important in software development. Product managers must ensure that software is designed with diverse users in mind, including those with disabilities. This includes considering features like screen reader compatibility, keyboard navigation, and color contrast adjustments for users with visual impairments.
Prioritizing accessibility isn’t just about meeting legal requirements or ticking boxes—it’s about providing an inclusive product that is usable by as many people as possible. In today’s global and connected market, a product that excludes certain user groups limits its own growth potential. A focus on accessibility also aligns with ethical values, promoting equal access to technology and digital solutions.
For product managers, this means working closely with design and development teams to advocate for user-first approaches. Regular user testing, feedback loops, and a commitment to addressing accessibility needs ensure that software products remain competitive and serve a broad audience.
Flexibility and Scalability
One of the most compelling advantages of software products is their ability to scale and adapt to the needs of growing businesses. Unlike physical products, which may require new materials, manufacturing processes, or logistical changes to scale up, software can handle increasing demand with the right infrastructure in place.
Cloud-based solutions and microservices architecture are prime examples of how modern software products can grow rapidly while maintaining performance and stability. Product managers need to anticipate this growth by ensuring the product’s architecture is flexible enough to handle future demands. Whether the product needs to accommodate more users, handle larger data sets, or integrate with additional platforms, scalability is a key consideration in long-term product planning.
Conclusion:
Software is the driving force behind most modern products, from the applications we use on our phones to complex enterprise solutions.
As a product manager, understanding the role of software—whether it’s through SaaS or on-premise models—is key to making informed decisions that affect the product’s success.
Each model offers unique benefits and challenges, and the right choice depends on the product’s goals and user needs. In a world where technology is constantly evolving, staying informed on these aspects ensures that products remain competitive and continue to deliver value over time.
This article is part of the Becoming a Product Manager Guide.