There are two kinds of software products

1. Generic products: These are stand-alone systems that are produced by a development organization and sold on the open market to any customer who is able to buy them. Examples of this type of product include software for PCs such as databases, word processors, drawing packages, and project-management tools. It also includes so-called vertical applications designed for some specific purpose such as library information systems, accounting systems, or systems for maintaining dental records.

2. Customized (or bespoke) products: These are systems that are commissioned by a particular customer. A software contractor develops the software especially for that customer. Examples of this type of software include control systems for electronic devices, systems written to support a particular business process, and air traffic control systems.

An important difference between these types of software is that, in generic products, the organization that develops the software controls the software specification. For custom products, the specification is usually developed and controlled by the organization that is buying the software. The software developers must work to that specification.