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During this webcast, originally presented on 12/8/2009, Steve Balacco, Director of VDC Research’s Embedded Software & Tools practice discusses the challenges facing embedded device & systems manufacturers and their embedded solutions providers and offer his thoughts on how they will have to adjust given current the current economic climate.
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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
4 – 2009 VDC Research Group, Inc.
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
5 – 2009 VDC Research Group, Inc.
http://blog.vdcresearch.com/embedded_sw/
S f VDC’ R h
Market Definition and Segmentation
Geographic Regions
Scope of VDC’s Research
g p g
on
Industry Segments
ospa
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utom
atio
n
Oth
ers
/Offi
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utom
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Embedded/RTOS & Mobile OSs
Software and System Modeling Tools
Dat
acom
Elec
tron
ics
al A
utom
atio
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utom
otiv
eM
edic
al
Mili
tary
/Aer
oR
etai
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usin
ess
Mob
ile p
hone
s
Technologies Automated Test and Verification Tools
Virtual System Prototyping/ Simulation Tools for Software Development &
Tele
com
/DC
onsu
mer
In
dust
riTools for Software Development &
Verification
6 – 2009 VDC Research Group, Inc.
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.
7 – 2009 VDC Research Group, Inc.
• 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
8 – 2009 VDC Research Group, Inc.
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?
9 – 2009 VDC Research Group, Inc.
• 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
10 – 2009 VDC Research Group, Inc.
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
12 – 2009 VDC Research Group, Inc.
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.
13 – 2009 VDC Research Group, Inc.
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.
14 – 2009 VDC Research Group, Inc.
Current ProjectNext Project
Note: Percentages sum to over 100% due to multiple responses.
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
15 – 2009 VDC Research Group, Inc.
Note: Percentages sum to over 100% due to multiple responses.
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%
•India/Pakistan/Bangladesh
•North America
•Western Continental Europe (excluding Scandinavia)
Software application/middleware development/test
0%Significantlydecrease
Decreasesomewhat
Stay thesame
Increasesomewhat
Significantlyincrease
Don't know
pp p
•India/Pakistan/Bangladesh
•North America
•East Asia (excluding Japan, S. Korea, Oceania, India, Pakistan, Bangladesh)
16 – 2009 VDC Research Group, Inc.
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)
17 – 2009 VDC Research Group, Inc.
• 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
18 – 2009 VDC Research Group, Inc.
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
19 – 2009 VDC Research Group, Inc.
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?
20 – 2009 VDC Research Group, Inc.
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
21 – 2009 VDC Research Group, Inc.
[email protected] | 508-653-9000 ext.120