Functional products are understood as a combination of hardware, software and services. Based on interviews with employees in manufacturing firms the notion of functional product development is described. The purpose has been to explore the differences between a service perspective and a core product perspective and highlight changes in the management of product development processes that are motivated by the notion of functional products. Exploring the differences between the two perspectives has identified a gap of how the product is viewed at the business level and technical development levels. The integration of services into the hardware development process in the form of a customised product or product life cycle has been highlighted. Internal and external communication about needs has been identified as useful.