The words software update and software upgrade are often confused to be one and the same.  The difference needs understanding.  Updates are also know as patches.  Updates often means small changes / corrections / bug fixing done to software.   Updates just gets added on to the existing software.  No new installation will be required.  Updates come totally free of cost.

On the other hand upgrades are major changes, new functions etc added to a software. Updates requires new installation and generally comes with a cost.   Upgrades can also be a number of patches bundled together.  Upgrades are also know as releases.

It becomes critical to understand the update / upgrade policy attached to a software at the time of procurement decision.