Smart manufacturing system will be able to quickly adapt to new and changing requirements, implying that software and hardware components of the manufacturing system need to be easily recomposed. In addition, provision of software applications and components is trending toward distributed, heterogeneous, and cloud-based. However, engineers who need to compose a software system will have difficulty finding and using software components with the right functionality and compatibility without a standard to describe these software components. This paper identifies the need for a reference functional ontology to provide a common way to describe a software component functionality. Such an ontology would lead towards the needed standard to describe the software components. The objective of this paper is to discuss high-level requirements for such a functional ontology and provide an initial use case to illustrate how the functional ontology may enable composability analysis.