The notion of functional products changes the existing relationship between manufacturing companies. The integration of hardware, software and services in functional products calls for close collaboration with companies having complementary skills. When employees from different companies are involved, strategic resources such as knowledge are shared. From an engineering design perspective, knowledge sharing supported by software systems are useful, though it seems like functional product development insists on integrating multifunctional skills and this is likely to affect the design of software systems. The objective in this paper is to explore knowledge sharing challenges between manufacturing companies, striving to create close functional product collaboration, and hence understand aspects in the design of software systems. In this paper the focus is on Knowledge Based Engineering (KBE) systems, these are considered to be internal engineering specific tools, while collaboration and need for knowledge sharing calls for coupled KBE systems between partners. In this context, knowledge sharing challenges within the extended enterprise are recognised to issues about who to trust and what and how to share. This affects how tightly coupled KBE systems can be. In general, this paper contributes to the ongoing discussion concerning collaboration issues in concurrent engineering design, but especially to the overall understanding of what new demands on KBE systems that are motivated by functional product collaboration.