The main growth drivers for embedded software in the next five years will be mobile telecommunications, military applications (programmes such as e-Textiles of the U.S. Department of Defence in the light of the fight against terrorism) and providing more intelligence and connectivity to consumer devices. New areas are opening up like autonomous robots with embedded programming for personal use, such as the robot pets from Sony.

Geographically, the embedded software market is dominated by North America, accounting for 53 per cent of the worldwide shipments in 2001, followed by Europe (25 per cent) and the Asia-Pacific region (17 per cent). In the next five years, North America will still maintain its dominance but the Asia-Pacific market will be growing fast and may equal the European share.

There are a whole host of embedded software vendors but the global leader by far is the Alameda, California based Wind River Systems. Microsoft, with a share of 8.9 per cent, is the second largest vendor. Although embedded systems still do not form a big chunk of revenues for MS, they are the fastest growing revenue segment. The company sees a lot of potential, especially in the connected devices market and has created the Embedded and Appliance Platform Group for better understanding of the embedded market. The Mathworks has the third largest share at 8.8 per cent mainly due to its domination of the dynamic system designs tools market. The year 2001 was not happy for embedded software vendors since their clients, the original equipment manufacturers (OEMs), particularly in the telecom industry, faced an uncertain business environment leading them to minimise and delay purchases.

The last few years have also seen a big churning of the embedded operating system (EOS) market. Earlier, the EOS market was limited to a handful of real time operating system vendors and OEMs preferred their own proprietary EOSs. This is now changing to preference for commercial EOSs as a result of increasing complexity of embedded applications demanding more powerful, lower cost hardware and connectivity. In 1998, proprietary EOSs made up over 50 per cent of shipments. This dropped to 40 per cent in 2000 and will continue to go down. There is also an increased demand for integrated solutions with broad hardware support from a single source.

In 2001, run-time royalties accounted for the largest share (43 per cent ) of EOS vendor revenues. But there is increasing pressure now from OEMs for royalty-free business models from EOS vendors. The rapid pace of hardware technology change (advent of system-on-chip, DSPs and field programmable gate arrays), increasing complexity of applications and dwindling time-to-market have brought in a host of new challengers in the EOS market from Linux vendors. In 2001, Linux ranked third behind proprietary and VxWorks on a list of the most supported EOSs. However, according to Ajit Edlabadkar, Country Manager for India of Wind River Systems, the threat from Linux is fading out due to too high R & D costs and longer time to market for the embedded software developer.

Another big challenge has been mounted by handheld EOSs from Microsoft and Palm, what with embedded systems no longer confined to the real time arena. Microsoft has established relationships with a number of silicon vendors by creating the Windows Embedded Strategic Silicon Alliance and focussed on building broad global partner support through their Windows Embedded Partner programme. Similarly, Palm has formed the Platform Solutions Group, a wholly owned subsidiary for developing and licensing the Palm OS platform.

In 2001, the worldwide shipments of EOS, bundled products and related services were worth $663.8 million. This is expected to rise to $1,575 million by 2006. The lead EOS vendor in 2001 was Wind River Systems with a market share of 30.3 per cent, followed by Microsoft with 18.7 per cent and Palm a distant third with 5 per cent share. In 2001, Green Hills Software made a major move into the EOS space, positioning itself as a total embedded solutions provider. It gained a share of 3 per cent in the EOS market. Last year the U.S. Department of Defence awarded the $200 billion F-35 Joint Strike Fighter contract to Lockheed Martin and in this project Green Hills has been selected to provide the EOS and software development tools for avionics software to operate on airborne PowerPC processors.The sub-contracting of embedded software development to Indian software companies has been prevalent for more than a decade now. However, a new trend noticed in the last five years is the setting up of subsidiaries in India for this purpose by multinational OEMs such as Delphi, LG, Samsung, GE and Philip in the automobile, mobile telecommunications, consumer appliances and medical equipment sectors. Ajit Edlabadkar estimates that the number of embedded software developers in the country must have crossed 1,000 by now and is rising fast. It is a new high growth area for the Indian software industry.