Why Do We Call Software, Software?

The word "software" has actually been in use for decades before the invention of the computer - it was actually coined in 1851 in the cotton and wool mills of North West England to describe clothing and cloth which had a superior finish - it was quite literally soft wear.
The modern source of the term, "software", dates back to 1960 and was used to describe the programs which were run on a computer, itself termed "hardware".
Hardware was a term borrowed from the tools, plant and machinery vendors who referred to their goods as "hardware", as in the hardware store - a popular term used widely in society those perhaps less today. In the pre-computer era, hardware was more likely to be used to refer to a hammer or circular saw than an electronic gadget.
The first use of hardware as it applies to computers and peripherals is thought to have originated from the NASA rocket development teams who designed, built and tested the rockets and systems which would one day take men to the moon. Software was used a natural distinguishing term to separate the essential differences between the tangible, physical electronics and the programs and applications designed to operate upon them.
The term "software engineer" was instituted at NASA as well, and this designation spread throughout the military and scientific community in North America and from there to the rest of the world. The term software was also used to impose a feeling of inferiority upon programmers - it was not a badge of honor or respect when it was initially used. At this time in the fast but very new development of the computer, the hardware was considered to be much more important and far more valuable than the programs which would run on them.
Companies such as IBM built themselves into huge conglomerates based solely on the value they saw in the hardware they were manufacturing. It took a visionary geek, who had dropped out of Harvard. to see the error in this way of thinking, and he along with some of his close friends managed the deal of the millennium - his name is Bill Gates.
Microsoft was founded as a software house and the big break for the company came when IBM negotiated to use Microsoft's Disk Operating System (DOS) on its machines. During the meeting which sealed the deal, Gates asked if his company could retain ownership of the software, and IBM readily agreed - they saw no value in it, indeed, at this time you couldn't even obtain a patent for software of any description (the US Supreme Court did not rule that software could be patented until 1981).
Microsoft went on to market DOS worldwide, including to IBM clone manufacturers who undercut "Big Blue" with cheaper, but equally well performing machines. Possessing ownership of the operating system gave Microsoft a worldwide advantage over any other software application developer because to run well on a machine powered by DOS; if the application software would not run well with DOS, it didn't sell.
Today, Microsoft is larger than IBM - software has triumphed over hardware.