Venture Development Corporation Releases New Metrics Estimating the Total Size of the Embedded Software Development Market

Venture Development Corporation (VDC) recently released its report on the Total Market for Embedded Software Development (TMESD). While previously published reports have sized the opportunity for commercial embedded operating systems, tools, and other software; this new report also includes other costs associated with embedded software design and test and offers subscribers new data on the total size of the embedded development market.

VDC believes this information will allow vendors to gain additional insight into the total market opportunity, and the relationship among the costs associated with embedded software development. “In addition to understanding spending on commercial software and other products, spending on development labor is also an important piece of the picture,” says Stephen Balacco, Director of VDC’s Embedded Software Practice. “This development can be viewed as the size of the additional revenue opportunity for software vendors.

By offering tools that increase developer efficiency, improve time-to-market, and decrease labor related costs solution suppliers can potentially capture the value of the engineering effort that the software they provide replaces.” As labor is a significant portion of the TMESD, VDC sees differences in global labor rates and outsourcing as a key to understanding how TMESD will change over time. According to Balacco, “The value associated with software development is also significantly affected by the trend toward low-cost, off-shore development. Assuming that the employment of lower cost engineering labor is able to save overall project labor costs, the
increased use of outsourced development to lower-wage regions will serve to inhibit the growth of TMESD.”

VDC believes that embedded software vendors can gain a better understanding of their marketpotential by looking at development spend in at a broader level. In addition to sizing total expenditures on embedded software development, the TMESD report also investigates other key trends in key embedded software industries and estimates the size of the TMESD by region and vertical market.

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Linux Adoption in the Embedded Market Presents Challenges to Commercial Suppliers

Recently published research by Venture Development Corporation (VDC) indicates increasing adoption of Linux in embedded system development projects. However, suppliers of branded commercial embedded Linux solutions will continue to be challenged in differentiating their Linux solutions from what is publicly available and demonstrating real value in order to maintain a premium for their products and support.

According to Stephen Balacco, Director of VDC’s Embedded Software Practice, “While some OEMs have chosen to use a commercial Linux solution, more are using and/or expect to use a publicly available Linux solution in future project development. It is this trend that will continue to put pressure on commercial Linux suppliers to provide value above and beyond the growing sophistication of publicly available Linux solutions.”

Linux developers can make use of a wide range of publicly existing device drivers, design systems using the latest communication protocols, supplement existing platforms with technology leveraged from the enterprise Linux domain, and enjoy royalty-free production licensing. As internal development teams gain more Linux experience, the threat from OEMs migrating to a “roll-your-own” (RYO) open-source solution is expected to increase faster than adoption of commercial Linux solutions, especially among larger OEMs who can afford to fund the up-front engineering and maintenance and support of an internal Linux solution. Similarly, smaller OEMs with limited budgets look to open-source Linux as a more sophisticated RYO solution with support from the open source community.

From VDC’s perspective, commercial Linux suppliers will need to continue to focus on product development and integration challenges by moving up the value chain from just supplying a Linux OS distribution to offering increased efficiency to the development process by providing high-quality development tools, middleware, Linux platforms and application level solutions, and other resources that support Linux-based engineering. According to Balacco, “In this way, OEMs can focus on their core competencies, the competition, and profitability in bringing new products to market faster, within development budgets.”

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