What is software? A guide to its uses and types

Published on 08/10/2021 by Laura Burgess and Quirine Storm van Leeuwen

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There can be a lot of confusion about the term software as to whether it’s a program, an application, or a system. As we deal with software every day here at Software Advice, we are happy to clear up any confusion on the topic. In this article, we answer the following questions: what is software is and what are the types?

Software is important for business— from client management to inventory tracking—as it automates tasks that can help companies run more efficiently. Understanding its purpose, therefore, is crucial for small and medium-sized enterprises (SMEs).

What is software?

Software is a collective term for:

  • computer programs
  • applications
  • operating systems

Software is a set of programs containing data and instructions that perform both operations and tasks, telling a computer how to work. Computers, smartphones, and tablets use software, but so do many consumer products. When software is integrated into a device or appliance, such as in a calculator, television, car, or washing machine, it is called embedded software.

Hardware is the physical components of the computer, such as the monitor, keyboard, or mouse, as well as the invisible elements such as the motherboard and hard disk. In contrast, software is the digital portion that relies on hardware and is needed to run other programs, such as a photo editor or an accounting program on a computer system.

Companies use software to optimise or automate tasks with the aim of saving money and time.

Types of software

Software can more or less be divided into two categories: system software and application software. System software controls the basic functionality of a device or computer whilst application software is typically user downloaded programs that are installed on the computer. 

System software

System software manages a computer and its operating system.  The software is divided into the categories system management software, system support software, and programming software.

A system management program is the Operating System of a computer, often abbreviated as OS. Well-known operating systems are Microsoft Windows, Linux Mint, and Mac OS.

OS communicates with hardware and provides basic functionality for devices such as your computer desktop, mobile phone, or tablet. OS also enables you to manage files and folders, and install programs. When software developers create applications, they must design them for a specific operating system. 

System support tools support the operation and management of the operating system and other downloaded applications. This includes anti-virus programs and software to convert, compress or recover files.

Programming software is the program used to develop the software itself, for both custom software and standard software.

Programming languages such as Python, Java, or C++ are examples. So are programming tools such as IDE (Integrated Development Environment) software. These tools help programmers to edit the code and detect errors in the code.

Application software

Application software is software designed to help users perform various tasks on the computer, tablet, or smartphone. Application software can be divided into personal, office, and business software. In addition to standard application software, there is also customised and specialised software.

Private software is intended for private use by consumers. Examples include games, gaming, shopping apps, and other private services.

Office software includes the basic programs that every office uses such as word processing programs, calculation programs like Excel or Google Sheets, email programs like Outlook, and presentation software like PowerPoint.

Business software includes programs that many companies use to run their enterprise. Examples include project management tools, customer relationship management (CRM) programs, ERP systems, or accounting systems.

How is software developed?

Now that you have a clearer idea about what software is and what types of software there are, it is useful to know how it is developed. Programming is another name for software development and this is done by a software developer.

When developing software, a programming language is used. This is a language in the form of code that can later be converted into a program. It is used to write computer programs. Python is one of the most popular programming languages, followed by C, Java, C++, and Visual Basic.

App development software is used to create custom solutions for an organisation’s technology and information infrastructure. Usually, app development software is geared towards various common programming languages and platforms.

How do open source and closed source software differ?

Open source code software can be accessed publicly and adapted to the needs of the user. Developers and system administrators can tailor the software by copying, modifying, or deleting parts of the code. It is useful if you can’t find a one-size-fits-all solution to cover the many needs of your business. 

Closed source software means that users are unable to make any changes to the code because it is encrypted and sets as private. You can use it as a basic program with standard functionalities, but trying to edit or delete parts of the coding could lead to legal repercussions for users. 

There is also what is referred to as no code and low code software. No code software offers the possibility to develop software applications without the need for complex codes. Low code software is a software development method that focuses on the visual design of applications. This is done with minimum coding. 

What is Software as a Service (SaaS)?

You can buy the license for a software product, or you can ‘rent’ the software. In the latter case, this is known as Software-as-a-Service. This is a model where a software application is not owned by you but is offered as an online service. The user pays the provider a fixed monthly fee or pays per use. The SaaS provider takes care of installation, maintenance, and management.

On-premise means installed software. In this case, you have complete control over the system because the software is installed on your own servers and computers. The hardware and licenses are the property of your own company or organisation. 

In addition to SaaS and On-premise, there is also cloud computing. Where SaaS focuses specifically on making software available, cloud computing is concerned not only with software but also with making infrastructure and hardware available online.

Whichever form of software you choose, you will either have to pay a one-off fee or spend money to subscribe unless you use free software.

Free software can sometimes provide the right support for your organisation but usually comes with limited functionality. There is a lot of free eCommerce software on the market, for example, which is useful for webshop owners who are starting out. As the shop grows, however, the free version will need to expand with more advanced features. This comes at an additional cost.

Want to know more? Check out Software Advice!

This article may refer to products, programs or services that are not available in your country, or that may be restricted under the laws or regulations of your country. We suggest that you consult the software provider directly for information regarding product availability and compliance with local laws.

About the authors

Content Analyst at Capterra, researching and giving insight on tech trends to help SMEs. Graduate of Bath Spa University, UK. Based in Barcelona after years of living in Australia.

Content Analyst at Capterra, researching and giving insight on tech trends to help SMEs. Graduate of Bath Spa University, UK. Based in Barcelona after years of living in Australia.


As a Content Analyst at Capterra, Quirine highlights the technological possibilities for improvement in SMEs. She focuses on digitization, software and technological trends.

As a Content Analyst at Capterra, Quirine highlights the technological possibilities for improvement in SMEs. She focuses on digitization, software and technological trends.