Software Platform vs Software Application – What is the Difference

Most software companies don’t think about whether they are creating an app or platform when they start out, but the decision can affect revenue growth and valuation. Deciding what you are building is a key strategic decision.

If building an app, the goal is to be a completely encompassing solution and possibly have integration API’s to enable data exchange with other complimentary solutions, such as a CRM or accounting system. If building a platform, you are providing technology for your partners to extend your core functionality. As a platform solution, the focus is building a robust tool set for partners to build on, while being mindful to not compete with your partners solutions built on your platform.

As an application software vendor, you may have partners that build integrations, but it’s likely the partner apps are not reliant on your application and they may also build integrations to your competitors. A platform has partners that have solutions that are reliant on your platform for the delivery of their solution. Salesforce, Microsoft or Facebook are platforms that software companies build solutions on.

We believe a platform is more difficult and costly to build, but will have greater revenue growth and longer term value. The solution provided to prospects and clients will be more comprehensive as partners extend functionality to address client and prospect requirements, which will ultimately expand your addressable market. It is difficult for a single vendor to build a solution that meets all prospects needs, which is why the largest most successful software vendors build platforms. Software products built on a platform will create demand for the platform as your partners sell their solutions and open new markets.

Why build an app? Software applications are less costly to build and faster to get to market. If the target market is relatively small, there may not be enough potential to attract partners to build on a platform. The app may also be more conducive to integration to other applications such as a CRM or accounting system.