embedded software and tools market update & outlook

The Embedded Software and Tools Market:A Market Update and Outlook

Embedded Software and Tools PracticeSteve Balacco, Director Embedded and Tools

Recording Available

These slides are from a webcast presented on 12/08/09These slides are from a webcast presented on 12/08/09.

A full audio recording is available for download at:

http://www.vdcresearch.com/market_research/embedded_software/freeresearch.aspx#Webcast

VDC Research

Complimentary insights & marketing data on the embedded software and tools market available at:

www vdcresearch comwww.vdcresearch.com

Today’s Speakers

• Steve Balacco, Director – Embedded Software and Tools Practice

9 plus years experience covering the embedded software and tools market

Managing a team focused on major aspects of the embedded software and tools market

Involved in all syndicated research and proprietary engagements

Prior to joining VDC, Steve worked for over 30 years in the information technology sector developing software, in sales and sales managements, and business development

Eastern Nazarene College BSBA

3 – 2009 VDC Research Group, Inc.

Agenda

About VDC and Our Research

Market Definition & Segmentation

Market Estimates and Forecasts

Industry Consolidation and Opportunities to Grow Market Sharey pp

Topics of Interest

Future Market Outlook

2010 Service Year Overview2010 Service Year Overview


VDC Research, Embedded Software and Tools Practice

• VDC Research was founded in 1971.

Continuous, profitable operation since.Continuous, profitable operation since.

Staff of about 30 located in Boston, Chicago, Los Angeles.

Focus on a number of different technology areas including: Embedded Software & Tools, Embedded Hardware & Systems, Mobile & Wireless, Industrial Automation, AutoID &Transaction Automation, Power Management, a number of niche IT markets

• Over 14 years covering the embedded software and tools market

• Driven by extensive and constant primary research

Supply side – Operating system, software development tools, and multi-core components and tools suppliers (00s of telephone interviews annually)

Demand side – Electronic Systems Manufacturers (000s of web surveys and telephone interviews annually)

• Syndicated & custom engagements with clients in the embedded software and tools market

• Practice Team Members

St B l Di t Steve Balacco, Director

Chris Rommel, Analyst

Jared Weiner, Analyst

• Practice Blog – On Target: Embedded Systems


http://blog.vdcresearch.com/embedded_sw/

S f VDC’ R h

Market Definition and Segmentation

Geographic Regions

Scope of VDC’s Research

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Industry Segments

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Market Estimates and Forecasts2009 i f t d t b d d t d th f t d t t i 2010

Current VDC ForecastEmbedded Software & Tools Market Current & Projected Market, 2006-2010

(US$ in Millions)

2009 is forecasted to be a down year; moderated growth forecasted to return in 2010

2006-2010 CAGR: ~5% 2006 2007 2008 2009 2010

Market Size $1,960 $2,214 $2,334 $2,234 $2,416

(US$ in Millions)(Excludes Symbian Ltd. revenues for 2006, 2007, and 2008)

• The worldwide recession negatively impacted the market starting in Q408 and is has continued through 2009.

I d i S i l i l d i 2009 ll h

Growth % 13% 5% -4% 8%

Impact was uneven across product categories – Static analysis tools expected to grow in 2009, all others contracted;

All regions contracted – EMEA slightly more than The Americas and Asia Pacific

Certain verticals are expected to be impacted more than others – automotive, consumer electronics, and retail contracted the most medical de ice market is e pected to sho a lo single digit increasecontracted the most; medical device market is expected to show a low single digit increase.

• VDC currently projects that the embedded software and tools market should grow again from 2009 to 2010, however, the return to pre-recession rates will be at a slower pace of growth.


• The the macroeconomic recession has impacted embedded systems manufacturers and accelerated changes within the supply-side competitive landscape.

Impact to Embedded Systems ManufacturersC i l ki t th th tCompanies looking to weather the storm

Company Cost Reduction Measures Past 6 Months(Percent of Respondents)

Expected Company Cost Reduction Measures Next 6 Months(Percent of Respondents)( p )

42.0%

35.5%Promotion/salaryincrease freeze

Hiring freeze 28.2%

25.1%Promotion/salaryincrease freeze

Hiring freeze

( p )

32.4%

32.9%

Non-labor relatedbudget cuts

Staff layoffs

increase freeze

21.2%

24.1%

Staff layoffs

Non-labor relatedbudget cuts

increase freeze

22.3%

13.5%

None of the above

Across the boardsalary decrease

26.7%

8.3%

None of the above

Across the boardsalary decrease

9.8%

0% 10% 20% 30% 40% 50%

Don't know

Note: Percentages sum to greater than 100% due to multiple responses.

20.7%

0% 5% 10% 15% 20% 25% 30% 35%

Don't know


Impact to Software Solution ProvidersO i ti d i d t t t d ith l

• Project starts -

Organizations are under increased pressure to cut costs – do more with less

Scaled back

Budgets reduced

Delayed

Canceled Canceled

• Financial implications

Reduced upfront project license/subscriptions fees

Reduced maintenance & support feesReduced maintenance & support fees

Potential impact to product shipments that effect royalty stream

• Increased focus on ROI for product investments and methodologies as project budgets decrease

Software component investments being scrutinized

• What products are critical to project success?

• Will engineer productivity improve?

• Can quality be improved?


• What impact will this have on schedule?

Embedded Industry ConsolidationH i ht th titi l d b ff t d?

• Intel acquires Wind River Systems and Rapidmind

How might the competitive landscape be affected?

It is clear that Intel viewed enhanced software and services offerings as critical to competing for next generation embedded designs – Linux and multi-core support

This acquisition has the potential to dramatically alter the competitive landscape, as well as the overall level of adoption of commercial Linux in the embedded space

P t th k t ti i t ith th t it t it li t i t• Presents other market participants with the opportunity to capitalize on any uncertainty or reevaluation around Intel/Wind support for non-Intel architectures

OS and Tools Vendors• If other semiconductor suppliers become less willing to share roadmaps with WRS

S i d t P id Semiconductor Providers• Non-Intel suppliers look to expand strategic partnerships with other operating systems and tools

suppliers• If a combined HW/SW offering emerges to significantly enhance system performance and application

development, then other processor IP or silicon vendors may need to consider their own acquisitions h d i t l ft d t l d l t ff tor enhanced internal software and tool development efforts.

OEMs• OEMs will ultimately dictate the behavior of and level of continued cooperating between the various

stakeholders.• With many development projects requiring years of development and life-cycle support the true


With many development projects requiring years of development and life-cycle support, the true magnitude of the impact on the competitive landscape will not be known for some time to come.

Embedded Industry ConsolidationHow might the competitive landscape be affected?

• Mentor Graphics Acquires Embedded AlleyA th t diti l RTOS ff i h i b t th i i t OS d Li / A d id

How might the competitive landscape be affected?

Another traditional RTOS company offering choice between their proprietary OS and Linux / Android development and services

Companies such as Wind River, LynuxWorks, SYSGO AG, Enea Renewed focus on the embedded software market Focus on expanding non-mobile embedded projects using Linux and Android Opportunity for the company to recapture lost customers who migrated from Nucleus to Linux and attract new

device designs

• Cavium acquires MontaVista Software - Linux yet again at the core of another acquisition Allows Cavium to diversify cash flow and recognize revenue at design win timeframe not just as Allows Cavium to diversify cash flow and recognize revenue at design win timeframe – not just as

semiconductor product shipment Guarantees future access to a commercial carrier grade distribution of Carrier Grade Linux (CGL)

• Critical to Cavium's strategic plans to grow their business in the networking space Acquisition continues to validate current and future investment in the software enablement strategies by

semicond ctor s pplierssemiconductor suppliers

11 – 2009 VDC Research Group

How can Firms Take Market Share in the Current Environment?

• Consolidation creates an opportunity for second tier RTOS and OS players to shift market share

Unprecedented opportunities for suppliers to capture market share

share

Expand relationships within the semiconductor industry

Identify and pursue non-Intel-based silicon business opportunities

Linux opportunities based on “silicon neutrality”pp y

• By aggressively defending their core, and seeking out new ways to support existing and new customers

More integrated functionality

Migration/porting support

• By taking cost out for their customers

Deliver greater value from investments in software components

L ft d l t t d i d ti it Lower software development costs and increase productivity

• By listening to customers’ technical requirements – and creating roadmaps that balance now-term ROI and potential for longer-term sustained competitive differentiation


Multi-core Impact on Product DevelopmentM lti G i i G d d G di E t ti

• Multi-core processor adoption is finally demonstrating year-over-year growth, with 2009

Multi-core ~ Gaining Ground and Grounding Expectations

Processing Architectures

(Percent of Respondents)results showing usage of multi-core processors up ~4%

• Expected use of single processors continues to forecast substantial decreases in favor of multi-core and multiprocessor architectures.

30.0%

219%

61.2%Single processor

( p )

p

• Knowledge and experiences with the various technical and commercial challenges associated with migrating to these new architectures has finally moderated adoption expectations.18.5%

32.1%

21.9%

8.6%Multi-core andmultiprocessor

Multiprocessor Current Project

Expected in TwoYears

• VDC expects that the growing use of multi-core processors will increasingly influence the adoption of embedded software solutions that hold the promise of easing the migration to new complex hardware.

13.6%

5.8%

6.5%

1.3%Don't know

Multi-core

• With many of the commercial embedded operating systems now incorporating some level of multiprocessing support, much of the enduring revenue opportunity will rest with vendors’ ability to market and deliver differentiated tools that are

0% 10% 20% 30% 40% 50% 60% 70%

Note: Percentages sum to over 100% due to multiple responses.


more optimized for multithreaded application development.

Complexity Impacting Target Operating Systems O S OS U Ad iOpen Source OS Use Advancing

Type of Operating System(s) Used on Target Embedded System on Previous Project, Current Project, and

21.9%36.2%

23 0%

46.9%No formal OS used

y j , j ,Expected to be Used on Next Project

(Percent of Respondents)• Respondents continue to indicate an increasing

use of formal operating systems for new designs as their evolving requirements necessitate change.

• Although it is clear that chip or board supplied

15.3%

31.0%

16 4%

22.4%

30.2%

14.8%

20.6%

23.0%

Commercially supplied/open source

In-house developed OS

Commercially licensed OS• Although it is clear that chip- or board- supplied

operating systems will continue to satisfy a number embedded projects, the percentage of engineers using them is expected to remain below 10%.

26.4%

26.0%

9.7%

16.0%

16.4%

5.8%

16.0%

Chip/board vendor supplied OS

Publicly obtained open source OS

y pp pOS • Similarly, the investments represented by and the

differentiated and specialized functionality capable through in-house operating systems are expected to continue to drive use by about 20% of the respondents going forward.

14.9%

6.6%

3.4%2.1%

0% 10% 20% 30% 40% 50%

Don't know/not yet decided

p pp

Previous ProjectN t P t t 100% d t lti l

• Publicly obtained- and commercially supplied-open source operating systems are expected to garner the highest percentage increases in use.


Current ProjectNext Project


Outsourcing to Third-Party Service ProvidersO t i l dd f t iOutsourcing non-value add – focus on core competencies

Engineering Tasks Outsourced(Percent of Respondents)

Percent of Engineering Task Effort being Outsourced(Mean of Respondents)

9.3%

11.6%

13.9%

Firmw aredevelopment/test

Board level engineeringtest

Softw are app/middlew aredevelop/test

(Percent of Respondents)

64.8%

70.9%

73.6%

Board level engineeringtest

Operating systemdevelop/test

Mechanical engineering

(Mean of Respondents)

6.4%

6.8%

8.1%

8.3%

3 1%%IC/SoC design/verif ication

Operating systemdevelop/test

Prototype development

Systemintegration/test/verif ication

Mechanical engineering

45 9%

56.7%

59.8%

62.9%

System

Firmw are develop/test

Prototype development

IC/SoC design/verif ication

test

5.2%

3.5%

5.0%

5.6%

3.1%%

Requirementst/ if i ti

Algorithm engineering

System architectureengineering

Project mgmt/planning

IC/SoC design/verif ication

36.7%

38.9%

40.6%

45.9%

Project mgmt/planning

Algorithm engineering

Softw areapplication/middlew are

yintegration/test/verif ication

52.6%

8.9%

0% 10% 20% 30% 40% 50% 60%

No outsourcing

Don't know

mgmt/specification

N t P t t 100% d t lti l

26.3%

35.5%

0% 10% 20% 30% 40% 50% 60% 70% 80%

Requirementsmgmt/specification

System architectureengineering



Outsourcing to Third-Party Service ProvidersOEM h t f t h l t l t?OEM shortage of technology talent?

Primary Geographic Sub-Region to which Engineering Tasks are being Outsourced Expected Change in the Amount of Outsourcing for a g

(Top Three in Rank Order)

Operating System development/test

•North America 40.1%40%

50%

p g gTypical Project at Respondents' Companies

(Percent of Respondents)

•India/Pakistan/Bangladesh

•Western Continental Europe (excluding Scandinavia)

Firmware development/test

•India/Pakistan/Bangladesh 4.0%8.9%

21.3%

9.4%16.3%

10%

20%

30%

40%


•North America

•Western Continental Europe (excluding Scandinavia)

Software application/middleware development/test

0%Significantlydecrease

Decreasesomewhat

Stay thesame

Increasesomewhat

Significantlyincrease

Don't know

pp p


•North America

•East Asia (excluding Japan, S. Korea, Oceania, India, Pakistan, Bangladesh)


Future Market OutlookE i t i t h ti d th h t 2009 b t i i

• It has been an economic roller coaster since September/October 2008

Economic uncertainty has continued throughout 2009 – but improving

• Situation fueled by unprecedented global macroeconomic conditions

• OEM Engineer expectations improving – from the engineers’ perspectives

Layoffs slowing

New hires

Salaries reinstated

• VDC continues to engage in discussions with a broad spectrum of companies to understand market conditions and how companies are responding and here’s what we’re hearing:market conditions and how companies are responding and here s what we re hearing:

Product evaluations increasing

Project starts returning

Product investments being made

• VDC is forecasting market growth of ~8% between 2009 to 2010

We expect growth to be uneven between

• The different product categories (Test tools and OSs to grow the fastest)


• Regions (Asia Pacific to grow the fastest)

• Vertical markets (Medical and industrial control to grow the fastest – automotive rebounds)

How VDC coverage will help clients stay on top of these markets in 2010

The 2010 Embedded Software and Tools Intelligence Serviceg

• Track 1: Embedded Software Engineering Market Technologies 4 technology volumes

T k 2 E b dd d S t E i i S D t• Track 2: Embedded System Engineering Survey Data 6 volumes

• Track 3: Embedded Systems Market Statistics 7 vertical market stat volumes 7 vertical market stat volumes


Primary Research and Market Model Highlights

Embedded Software and Tools: 2010 Market Intelligence Service

Target Communities Target Sample Sizes

Phone Interviews Suppliers of run-time software and tools N~75

Web/Email Surveys Embedded Systems engineers and engineering managers N>500

Embedded Software and Tools: 2010 Market Intelligence Service

Web/Email Surveys Embedded Systems engineers and engineering managers N 500

Study Publication Date Supplier Share Actual Market Size Forecast Market Size

Service Year 2010 2009 2009 2010-2012


Other Research in the Works & Under Consideration

• Software Engineering Tools – Project Requirements, Preferences, and Engineer Perceptions (December 2009 Release) Based on VDC’s 2009 Embedded Engineer Survey Series of statistically-driven report and modules

• Provide insight into in the embedded developer communities’ current use of and perceptions on the use of various products within development projects.

15 diff t t l t i 15 different tool categories• Bug/issue tracking, project management, requirements management, source/change/configuration

management, standard- and proprietary-based modeling tools, test automation tools, others 10 Key Questions

• Tool criticality to success of the project; Impact tools had on quality; productivity, productivity, and schedule; ROI; ease/difficulty of use; likeliness to use on future project; and othersschedule; ROI; ease/difficulty of use; likeliness to use on future project; and others.

• Application Lifecycle Management (ALM) – February 2010 timeframe Multi-volume proposal – how many and which ones depends on community interest Topics under consideration include but are not limited to:

• Project management• Requirements managementRequirements management• Source change/configuration management• Software and system modeling tools• Test automation tools• Bug/issue tracking tools• Others?


Q&A Session

Thank You for Attending this VDC Webinar

For more information about VDC Research coverage of the global markets for embedded software and tools – including the Embedded Software and Tools: 2010 Market Intelligence Service please contact:Tools: 2010 Market Intelligence Service – please contact:

Steve BalaccoDirector, Embedded Software and Tools Practiceb l @ d h | 508 653 9000 t [email protected] | 508-653-9000 ext.124

Cyril BernardAccount Executiveb d@ d h | 508 653 9000 t [email protected] | 508-653-9000 ext.142

Chris RezendesExecutive Vice Presidentj @ d h | 508 653 9000 t 120


[email protected] | 508-653-9000 ext.120

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