Before you learn how software companies work, it helps to know what the industry actually is: who builds software, who pays for it, and how money travels from a customer's problem to an engineer's salary.
Almost everything else in this track follows from that money. The stand-ups, the tickets, the documents, the code reviews — each one exists to reduce the chance of spending a lot of money building the wrong thing, or building the right thing badly.
Learning Objectives
After this lesson, you will be able to:
Describe what the software industry is, and name its major segments
Explain the main ways software companies make money, and how that shapes daily work
Tell apart the players: vendors, clients, system integrators, ISVs and staffing firms
Recognise the delivery-model vocabulary (onshore, offshore, nearshore) when you hear it
The software industry is the global set of companies that design, build, sell, run and support computer programs and digital services. It runs from a two-person mobile app studio through to firms employing hundreds of thousands of people. It also includes something people often forget: the very large number of companies that do not think of themselves as tech companies at all, but employ substantial software teams anyway. Banks, hospitals, airlines, insurers and retailers all write and maintain a great deal of software.
Your Reflection
Saves automatically
What’s one thing you learned? What’s still confusing?
That last group matters to you as a beginner. It is where a large share of the jobs are, and it is the part of the industry that job adverts describe least clearly.
Most companies you will meet fall into one of these. The boundaries blur, and large firms often sit in several at once.
Segment
What they build
Examples
Enterprise software
Systems businesses run on: finance, HR, supply chain, customer records
SAP, Salesforce, Oracle, Workday
Consumer software
Apps ordinary people use daily
Instagram, Spotify, WhatsApp
SaaS
Software rented by subscription and delivered over the internet
Zoom, Slack, Shopify, Notion
IT services and consulting
Teams hired to build or maintain software for other companies
TCS, Infosys, Accenture, Cognizant
Cloud and infrastructure
The computing capacity everything else runs on
AWS, Microsoft Azure, Google Cloud
Embedded and systems
Software living inside physical devices: cars, routers, medical equipment
Bosch, Qualcomm, Siemens
Domain specialists
Software built for one regulated field, often called "X-tech"
Stripe (fintech), Epic (healthtech)
AI and data
Models, ML platforms, analytics and the tooling around them
OpenAI, Anthropic, Databricks, Snowflake
What Do You Think?
A hospital employs 200 software engineers to build and maintain its patient records system, which it never sells to anyone. Is the hospital part of the software industry?
There are six common models. Companies usually run more than one.
A licence is a one-time purchase of the right to use software. It is the classic model and still common in large enterprise deals.
A subscription, usually called SaaS, charges a recurring fee per user or per unit of usage. This is the dominant modern model, largely because predictable recurring revenue is easier to plan around and more attractive to investors than one-off sales.
Services, or billable hours, means clients pay for people's time. An IT services firm charges a client some rate for each consultant, pays that consultant a salary, and keeps the difference. That difference is the firm's margin, and it explains a great deal about how services companies behave.
Transactions and usage take a small cut of activity: a percentage of each payment, each ride, or each API call.
Advertising and freemium give the product away and earn from ads or paid upgrades.
Support and maintenance contracts charge an annual fee to keep existing software patched and running. A surprisingly large share of all industry work is maintenance rather than new building, and that share rarely appears in job adverts.
What each revenue model actually measures you on
The business model predicts the working culture more reliably than the company's size or its industry does.
These terms appear constantly in job adverts and in conversation, usually without explanation.
Vendors, also called product companies, build software and sell it.
Clients buy it. Often they are large organisations with substantial IT departments of their own.
System integrators, or SIs, connect several products together for a client — wiring a finance system to a customer-records system to a custom internal portal, for example.
Independent software vendors, or ISVs, build products that sit on top of someone else's platform. An app sold inside Salesforce or a plugin sold inside Shopify is an ISV product.
Staffing and contracting firms supply individual contractors to fill gaps on a client's team. Much of the contracting vocabulary you will meet, including terms like onsite and offshore, comes from this corner of the industry.
Regulators and standards bodies set rules that teams must build within. GDPR, HIPAA, PCI-DSS, SOC 2 and ISO 27001 are the ones you will hear named most often. They are not optional, and in regulated domains they shape the architecture as much as any technical decision does.
When work is split across countries, these four words describe how.
Term
Meaning
Onshore
The work happens in the client's own country
Offshore
The work happens in a lower-cost country
Nearshore
The work happens in a nearby country, usually chosen for overlapping working hours
Hybrid or distributed
Teams spread across several locations, which is now the common case
The practical consequence is time zones. A team split across a large time difference has a short window each day when everyone is awake at once, and a great deal of process exists to make that window count. Written handovers, detailed tickets and recorded decisions are not bureaucracy in that setting; they are what makes the arrangement work at all.
The software industry includes far more than companies that sell software. A large share of the work sits inside banks, hospitals, airlines and retailers building systems for their own use.
Six revenue models cover most of it: licences, subscriptions, billable services, transaction fees, advertising, and support contracts.
The revenue model predicts the working culture. Billable-hours businesses measure utilisation; product businesses measure what shipped.
Vendor, client, system integrator, ISV and staffing firm are five distinct positions in the ecosystem, and job adverts assume you know which is which.
Onshore, offshore and nearshore are about geography and time zones, and time zones are why written communication carries so much weight.
Quick Check1 / 3
An IT services firm charges a client $80 per hour for a consultant it pays $30 per hour. What is the $50 difference called, and why does it make timesheets important?
Next: The Software Industry — the split between product companies and services companies, what each is like from the inside, and how teams are organised within them.