In a soon to be published EMF white paper, cadres of comparable design outcomes were developed between developers that used MBD tools and those that didn’t. Cadres were established worldwide, for North America, for Asia, and for Europe.

In addition, specific analyses were conducted for MBD and non-MBD cadres for Telecom/Datacom, Medical, Automotive Transportation and Industrial Automation application markets.

Total Cost of Development calculations were conducted using:

• Number of software and hardware engineers per project
• Time from design start to product shipment
• Percent of designs cancelled and the number of months elapsed before cancellation
• Percent of designs completed behind schedule and number of months behind

The following table summarizes EMF’s findings. For comparison, the cost per developer man month was chosen to be $10,000. Clearly, this dollar value is high for Asian developers. However this value was chosen for internal geographic analysis only – to establish whether MBD provided an advantage or not. These values are not to be used to compare, for example,  Asian costs with European costs.

Looking at worldwide developments (that is interrogating the entire database irrespective of geographic considerations), the following table summarizes the EMF findings.

It is interesting to note that in every analysis, regardless of the cadres used (i.e., each vertical or geographic comparative breakout), MBD projects used fewer developers. When analyzing cost overruns (i.e., the number of developer months lost to cancellation or late completion) to total project developer months, the percent of cost overruns to total project developer months was less for MBD in every analysis.

EMF suggests that this data shows that the advantages in using simulation-modeling as a design methodology are real and that these practices will be adopted for reasons not only related to design outcomes, but for financial ROI reasons as well.

Each year EMF conducts a thorough and detailed survey of embedded developers. Using the EMF Dashboard – a web based tool that permits vendors and developers to correlate information between any responses to any question, EMF presents selected insights from its analysis of the 2010 data. The Dashboard enables vendors to look at the responses of their customers (and potential customers) as well as to their competitor’s customers. This provides invaluable insights for strategic and sales planning. Developers can see what their fellow developers are considering in their selection criteria

Product opportunity windows are fleeting and time-to-market issues dominate design considerations. The two factors that invariably make the difference between success and failure are first, the knowledge that comes with an accurate insight into the internal and external forces which drive product markets and second, an insight into the concerns, desires and thought processes of those customers who make the decision to purchase a particular product or deal with a particular vendor.

The following data, taken from the 2010 EMF Embedded Developer Survey, addresses many issues of which embedded vendors and developers should be aware. The data presented here represents embedded industry averages across many application verticals, many vendors, many OSes, etc. Subscribers to the 2010 EMF Market Intelligence Program have access to their custom Executive Dashboard with which they can create unlimited cross tabs to further examine the data presented here.

 Criteria Most and Least Important to Developers in Selecting an OS

Developers were asked to indicate which criteria were most important to their decision in selecting an OS. The top (most important) responses and the bottom (least important) responses are presented in the following tables.

There was an interesting reordering of priorities in 2010 with cost remaining the principal factor. Realtime performance fell (no surprise here) and safety certifiable and virtualization remained as a small part of the collective consciousness of embedded developers.

Dolores and I made our annual trip to the Left Coast to attend the annual Embedded Systems Conference last week. It was the best ESC West in many years – more booths; larger booths; good floor traffic; interesting announcements and new to embedded players.

I’m not sure how Rich Nass does it – but the keynote speaker was again excellent. This time Michio Kaku, the co-founder of string theory and TV science presenter was the speaker and was charming, funny (but Seinfeld can breathe easy), informative and delightful. We joined the mass exodus to avoid the obligatory hour dedicated for the Microsoft Embedded Group (aka MS Purgatory – otherwise known as We B Arrogant). Granted that Microsoft contributes a lot of $$ to these very important events – for which I am grateful – but give me a friggin break MS, Windows 7 is not the promised land for the embedded world.

This was the year that the chip companies made confessions of love to many OS companies. Freescale made announcements with such stalwarts as Green Hills, while Intel teamed with LynuxWorks for an ill chosen medical product. ARM was very impressive as was Microchip, while Xilinx ran away with the FPGA application announcements. Xilinx for the 7^th consecutive year (by EMF survey data) was the most used FPGA in the embedded space (and had the best ROI).

Green Hills also made a networking arrangement with Cavium (who recently acquired MontaVista and MV Linux) which caused us to ask if Dan O’Dowd (who has publicly claimed that anyone who used Linux was brain dead – or worse) had to be drugged or restrained to cut a deal with a Linux company. We checked the stock market for Prozac manufacturers to see if consumption was up in Santa Barbara. All chuckles aside – it was an excellent deal for Green Hills.

It surprised and impressed us that Green Hills made behind the scenes moves that portend for significant growth and positioning against Wind River by hiring two individuals that bring another dimension to the competitive marketplace that will be to their advantage. Although I’m not obliged to keep such under wraps, I do respect the Green Hills folks and will keep these details to ourselves – other than to mention that they are the first of the usual suspects to clearly see the light.

Also impressive was the traffic through the VersaLogic and Synopsys booths. Although Kontron had the large booth, VL garnered significant leads. Also the large Express Logic booth had standing room only for their presentations – recognition of how ThreadX continues to grow. Micrium, though having a smaller booth had significant traffic as well. This shows that the smaller OS companies are making progress against the larger incumbents.

We were also impressed with our discussions with MontaVista. They had requested some specific questions be placed in the 2010 EMF Survey of Embedded Developers – questions that we didn’t clearly understand, but as we had the room for them we included such. They explained to us how these questions allowed them to quantify actual BOM costs for open source Linux and how this enhanced their market strategy. As they are the only commercial Linux company to provide a mid-development migration path for RYO Linux developers to roll into their MV6 product, we were delighted to learn how they used our data to arrive at their findings (we learn a lot from our subscribers).

A year ago Glenn Perry was handed the reins of Mentor’s group from Neil Henderson. Glenn at that time laid out what we thought was an overly ambitious agenda – we were wrong. Although much of our discussions were for internal consumption only, we can tell you that they have made impressive gains and are on the verge of major gains.

It is becoming clear that discretionary DoD funding levels are falling and OS companies have been running to the medical devices industry to compensate. As most companies are in love with their products and feel that they have the cure for the imaginary disease that they feel will cure and enhance the medical devices marketplace. Having built a number of medical device companies (taken two public) and having successfully filed a very large number of 510k applications, I found it interesting that no one wanted to listen to what we feel are the needs of medical device manufacturers and where the sales process differs from different verticals (most want to believe that medical and defense verticals have the same requirements).

It is interesting to have discussions with companies (they know who they are and I won’t embarrass them) to learn how many hundreds-of-thousands of $$ they have wasted being off message on who they were targeting and what they were offering. For such brilliant folks, they forgot the basics of market intelligence.

IBM Rational was in attendance and on-target and impressive as always. Artisan didn’t show with their MDD offering which was probably a good idea on their part. General Dorriot – the head of the original funding group of Digital Equipment Company – once wrote “bad ideas like dead horses should be buried with a minimum of ceremony”. Atego, the renamed Artisan group that includes Aonix, was represented by Gary Cato – a wonderful and incredibly patient and competent guy who made the rounds with spirit. As in the play Death of a Salesman, Gary is finding limited success notwithstanding that he’s firing at targets with limited ammunition. He has my vote as the most unsung hero at the show.

For those of our readers that are in or interested in the medical devices arena, EMF has produced a market brief, Critical Issues Confronting Medical Device Manufacturers – EMF Guide for Medical Device Developers

http://www.embeddedforecast.com/emf-briefs.php

Fanaticism consists in redoubling your efforts when you have forgotten your aim – George Santiago

Tough economic times create strange bedfellows. Does one need to purchase a technology, with its attendant costs and complications, when a lease or partner relationship would suffice? Do complimentary technologies and markets provide a return greater than the sum of the parts – or is the result characterized as “subtraction by addition?”

 EMF believes that embedded consolidation through acquisition will be the norm over the next few years as roll backs in DoD discretionary funding impact the larger purchasers.

 Let’s look to four recent acquisitions with an eye on compatibility, growth potential and whether there is a measurable outcome. Is this a trend, a lifeline or a passing strategic initiative – you decide.

 These include:

• IBM Rational buys Telelogic
• Intel buys Wind River Systems
• Cavium acquires MontaVista
• Artisan acquires Aonix

IBM Rational buys Telelogic

Recently IBM Rational added Telelogic to their comprehensive product lines and markets. We reported it as the Great Train Robbery of 2007. For around $800 million, IBM became the most capable and effective organization in the embedded industry, bringing with it the ability to link IT and embedded technologies under the rubric they call “smart devices”.

• Telelogic (along with the I-Logix acquisition) products have particular strength in software and systems development (in particular Rhapsody), requirements management (DOORS), and enterprise architecture. Their reputation in automotive, telecom/datacom and aerospace and defense systems development is outstanding
• IBM Rational brings IT development strengths to the partnership in addition to Rational Development Suite, DoDAF and MoDAF architecture capabilities as well as an impressive and unique communication infrastructure for cooperative development and management (JAZZ)
• This combination of capabilities gave IBM the ability to integrate many embedded tools within their Model Driven Development (MDD) thereby expanding the marketplace for other embedded vendors.
• IBM Rational acquired some of the best systems engineering talent in the industry – and a senior VP that is revolutionizing the embedded industry by organizing around markets rather than products.

How has this worked out for IBM? In 2009, which was admittedly an economically troubling year, Telelogic revenue contributions nearly tripled. EMF calls this acquisition multiplication by addition.

Intel buys Wind River Systems

Did either of them think through their respective channel strategies? Will Freescale users convert to Intel – or will there be a sales pushback?

So what’s in it for Intel and why did Wind River bail out so easily? Let’s look at the facts:

• Intel doesn’t need the additional $300 million on their balance sheet
• Wind River has been losing market share for some time now and their “subscription model” (which they have abandoned) cost them dearly in the mil/aero marketplace and allowed Green Hills and LynuxWorks to significantly underbid them
• Rob Davidson, Wind River’s VP of A&D, has publicly stated (at an Intel sponsored event no less) “let me make it clear that Wind River is a Freescale company” since 85% of Wind River’s military sales are Freescale-based
• Intel, notwithstanding their successes, is facing considerable competition from ARM and FPGA vendors – particularly Xilinx
• The Mil/Aero market and the primes that spend the most on embedded technologies and sub-systems are decidedly moving to a “software centric” purchasing model

Truth be told – both Intel and Wind River are missing the emergence of an embedded market that will soon overshadow the rest of the marketplace. It involves several components – none of which are within the new Intel’s capabilities.

• Systems development – with C and C++ developers working simultaneously on the same development
• Unique problems associated with systems-within-systems developments and long term support of such
• The new era of “Smart Devices” – the merging of IT database capabilities securely communicating with intelligent embedded devices

So, how will this work out? From Intel’s point they have really nothing to lose. They bought Wind River at a somewhat generous revenue multiple, but will get that back in a few years, even if Wind River continues to lose market share. Wind River’s legacy revenues in telecom and mil/aero will continue to fill Intel’s coffers.

There is a chance that Intel will be able to cut into Freescale markets and pick up new chip revenues. However they have a terrible record when it comes to successful acquisitions. Wind River’s global distribution agreement with Kontron for VxWorks and Wind River Linux is an example of why Intel will make back their investment.

EMF rates this “neutral”. Whereas mission critical applications are a fraction of broader embedded sales, the lack of a competent systems capability will be a drag on future expansion opportunities.

Cavium acquires MontaVista

Here we have a chip company acquiring an established Linux market leader. MontaVista is a major driving force in the embedded Linux marketplace.

Fifty percent of the current Linux marketplace is for in-house, or what EMF calls Roll Your Own (RYO) Linux – as distinct from commercial Linux offerings. EMF research has shown, year-over-year, that commercial Linux products produce a superior ROI to RYO Linux. The commercial Linux market opportunity would be enhanced if commercial Linux products were able to rescue RYO developments that are failing or reach a stand-still position. MontaVista is the first commercial Linux provider to provide such a solution.

By having Cavium’s resources behind them, MontaVista is in a commanding position to maintain their advantage over Blue Cat and Wind River Linux initiatives.

EMF believes that this acquisition is an excellent one for the following reasons:

• Acquisition gives Cavium multiple revenue account opportunities. One by winning the processor design, two by selling SW and services during the design phase, and three by generating revenue in software and services even if they lose the design
• Cavium’s 140-2 security certification makes MontaVista the only embedded OS vendor that has this important security capability
• The investment of a public company like Cavium in MontaVista adds stability to the embedded Linux market.
• Cavium has a history of delivering solutions that work with other company’s processors.
• MontaVista should be able to invest in more multi-core and virtualization technologies. While this benefits Cavium, it also benefits all of their semi partners with multi-core processors. Another potential win-win.

Embedded Darwin Awards

One of my favorite readings is from the book The Darwin Awards which reports on those whose carelessness and ignorance contributed to their early demise thereby removing them from the genetic pool. Quoting from the 2008 edition:

“The Darwin Awards celebrates those who have dived headfirst into the shallow end of the gene pool. From offering a beer to a bear to self-testing a Taser to jumping off a drawbridge on a bike, The Darwin Awards Next Evolution honors these macabre and entertaining feats of hapless misjudgment”

The following example might have earned at least an “Honorable Mention” if the book carried embedded technologies as a subtopic. 

Artisan acquires Aonix

This to EMF is one of the stranger acquisitions of recent memory. Take one struggling company attempting to climb out of the shadow of IBM Rational’s MDD capabilities acquiring a company that has been in free-fall for the past four years in order to gain a marginal Real-time Java capability. Some may remember that 5 years ago RT Java was forecast to displace C++ for military applications in order to permit software to inter-operate across different hardware systems. Fast forward to today and C++ is more entrenched than is Java. So buying Aonix to gain access to a Java capability (that is competing directly with IBM) that is readily available for licensing is like searching for a wife at a brothel – too expensive (it’s cheaper to rent) and history suggests that it won’t provide a long term benefit.

Someone should have asked Artisan if they knew the difference between Santa Claus and the need for RT Java (the answer is that there really is a Santa Claus) before they made the acquisition.

To add to their pain is the re-branding of the combined companies to be called Atego (this makes sense to change the Aonix name – but the Artisan name as well?). This is the 3^rd acquisition in the past year and a half for the management bought-out Artisan enterprise.

So why did this happen – and to whose benefit is the establishment of Atego?

EMF might accept the argument that a vastly superior management team could make a difference by integrating the companies – yet the Aonix component remains under the control of the management team that ignored market realities and caused Aonix’ decline.

The Artisan folks are not stupid people – misguided perhaps. EMF suspects that the investment bankers at risk for each of the enterprises came together to attempt to minimize risk.

If so, perhaps these bankers might have followed Warren Buffett’s admonition “When management with a reputation for brilliance tackles a business with a reputation for poor fundamental economics, it’s the reputation of the business that remains intact.”

We are not sure that Buffett would characterize Artisan’s management as brilliant.

File under “assured mutual destruction.”

When will the next shoe fall? 

The Aerospace and Defense Industries of the United States are poised to undergo one of the most significant changes since the end of the Cold War, perhaps the most significant since World War II.  These impacts will reach down into the value chain, in some cases devastating naive second and third tier vendors as major primes shift financial challenges to their vendors.

These third tier vendors constitute the embedded marketplace.

One might expect that in a market contraction, companies would seek to outsource more seeking lower costs.  We think this will happen for some defense firms, but we believe that many will resist it.  The largest contractors have been formed by merger and acquisition activity.   In many cases, large fixed costs have been merged on corporate balance sheets and are being depreciated.  Outsourcing might require significant write downs for post-merger balance sheets.

EMF expects to see a necessary consolidation of vendor offerings as falling revenues will be stabilized by acquisitions – acquisitions that might be found at bargain prices.

EMF considers the usual suspects in its published research.

The embedded marketplace is facing a financial tsunami that will have severe consequences for the largest consumers of embedded technology – the Tier 1 contractors. This in turn will significantly impact the lower tiers and cause a major upheaval for Tier 3 vendors – the embedded suppliers.

Steve Roemerman, CEO of Lone Star Aerospace a highly respected technology consultant to military and government agencies has written “The Aerospace and Defense Industries of the United States are poised to undergo one of the most significant changes since the end of the Cold War, perhaps the most significant since World War II. We believe observers who expect small changes are mistaken, fostering a false and dangerous sense of security across much of the industry and government”. 

This forecast and view is also strongly held by Ken Krieg, former deputy undersecretary for defense acquisition, and in publications from Booze Allen.

So you might be asking “Why haven’t we heard of this, Jerry and why are other analysts forecasting a very good year for 2010?” Being long in the tooth and having been here before when CompactPCI was being touted as the VME slayer and industry hopefuls along with participating analysts were forecasting a $2 billion merchant computer board marketplace (which EMF called a $zero billion market). Why were we correct and others in error? Because markets behave in predictable manners – even when disruptive technologies disturb the playing field. 96% of CompactPCI offerings were controlled by 3 companies – this represented a classic commodity market and there was little room for growth. It took 24 VME vendors to account for 75% of the VME market, by comparison – which made it a dynamic and growing market. VME is still around and holding market share. CompactPCI is now a custom product (not a COTS product) and is being abandoned by PICMG for PCIExpress.

The outcome was predictable. Today the Board marketplace is dominated by Kontron, GE, Curtis Wright and RadiSys. Gone are Motorola Computer Group, Force Computers and a litany of others.

The embedded world is characterized by a growing and vital marketplace that is forcing certain segments into commoditization while creating huge opportunities for those that take the time and invest the effort into understanding their market dynamics.

I love the following story – because for me it holds more than a kernel of truth.
 

Its late fall and the Indians on a remote reservation in South Dakota asked their new chief if the coming winter was going to be cold or mild. Since he was a chief in a modern society, he had never been taught the old secrets. When he looked at the sky, he couldn’t tell what the winter was going to be like. Nevertheless, to be on the safe side, he told his tribe that the winter was indeed going to be cold and that the members of the village should collect firewood to be prepared.

But, being a practical leader, after several days, he got an idea. He went to the phone booth, called the National Weather Service and asked,’ Is the coming winter going to be cold?’ ‘It looks like this winter is going to be quite cold,’ the meteorologist at the weather service responded. So the chief went back to his people and told them to collect even more firewood in order to be prepared.

A week later, he called the National Weather Service again. ‘Does it still look like it is going to be a very cold winter?’ When told it would be severe he sent his people to pick even more firewood.

Two weeks later, the chief called the National Weather Service again. ‘Are you absolutely sure that the winter is going to be very cold?’ ‘Absolutely, ‘ the man replied. ‘It’s looking more and more like it is going to be one of the coldest winters we’ve ever seen..’ ‘How can you be so sure?’ the chief asked.

The weatherman replied…

 ‘The Indians are collecting firewood like crazy’ 

So how much does our industry influence itself? Is the embedded industry too small to understand its dependencies?

Continued in Part II

Forecasting involves two distinct activities;

• Measuring the pulse of embedded developers to understand what they are doing, what success they are having, what are their deepest concerns and how do the use of different technologies (e.g., comparative RTOSes, development tools, communication middleware, testing processes, etc.) affect design outcomes (ROI, time to market, percent of designs completed ahead or behind schedule – or cancelled). Also it is helpful to compare final design outcomes to pre-design expectations.
• Following purchasing trends, funding sources and levels, and whether purchasers are bringing developments and tools in-house or by purchasing.

It is important for embedded vendors to use available data and information and to be able to cross-correlate findings to search out relationships that help define market directions as well as to provide sales support materials to better pursue qualified leads.

EMF published research has used developer-based user surveys and collaborative industry/government based usage and funding insights to forecast market segments that are growing and those that are contracting (at least in the short term). Given these insights there are steps that vendors can take to minimize risk while maintaining a positive positioning.

These include:

• A serious analysis of your competitive position is essential to not only getting qualified leads but also to having a competitive sales support program with which to follow up these leads. Customers are buying your competitor’s products. Do you know why? Do you know how best and affordably to find this information (talking to a few customers won’t get you there)? Can you prove that your products help your customers get to market faster?

• You really need to know what your customers really need – how do you find out? In our surveys we discover what issues are most troubling to them and what would motivate them to move towards you (or away from you).

• If your products and those of your competitors exceed the needs of current and prospective customers (notwithstanding how truly cool your products may be) mitigating factors will affect their purchasing decision – even if your product isn’t as cool as those of your competitors.

• Be able to demonstrate your value (they won’t do it for you). Be able to provide factual information – ROI if you can.

• Promote yourself. Is your marketing targeting the right customers and do they have compelling information to state your case? Be proactive – your competitors might have access to information that makes their case – and you wouldn’t know about it.

Be exceedingly careful as you look to expand your marketplace – either offensively or defensively. Vendors realizing the impending shortfall in mil/aero are looking to alternative markets without understanding the dynamics and true needs of those markets. Medical, for example, has been targeted by some of the larger mil/aero vendors stressing their DO 178-B and Common Criteria certifications. For the most part this is laughable given that the highest frequency response for monitoring a non-attended patient is 100 HZ.

We are seeing companies that have been successful in EDA (e.g., Synopsys) and IT communication systems (e.g., IBM) bringing their proven technologies to enhance systems development and deployment – which in turn change development paradigms by offering OEMs and systems integrators better long term solutions.

Smaller vendors need to be able to show their value and the ability to integrate their solutions with these more advanced solutions. IBM Rational’s Rhapsody is an example of a very powerful model driven development (MDD) tool that allows for competitor’s requirements management, RTOS, static and dynamic analysis technologies to be comfortably integrated.

Be careful where you get your information – and before you pay for it make sure you understand where it came from and how it was obtained.

Warren Buffett offers the following timely advice: “For some reason people take their cues from price action rather than from values. Price is what you pay. Value is what you get.”

Experience is not what happens to you; it is what you do with what happens to you – Aldous Huxley

This paper is intended to create a guideline to enhancing your sales and marketing capabilities. You can follow as many of the suggestions as you wish – I wanted to provoke your thinking.

EMF recognizes that businesses today are confronted by unparalleled rates of change that create tremendous challenges. Companies need to differentiate products, react to on-going market shifts, efficiently streamline support of deployed products and exploit globalization. The stories we present are true, the guidelines are proven and the theme is to stimulate you to rethink your strategy in a rapidly changing marketplace.

Since I was a young man I have always had the entrepreneurial desire. Setting out without a guide can be a tortuous experience. It’s bad enough knowing what you don’t know. In my case it was worse – I didn’t know what I didn’t know. Through trial and error I built five companies (4 medical, 1 computer). The first were near or actual disasters – but through good fortune I found several mentors who taught me the fundaments of customer-based selling and market driven strategies. My success included taking two companies public – I wouldn’t have reached that goal if I not for the good graces of my mentors.

I sold out the last of my businesses in the late 80’s, took a detour in academics and returned to the embedded playing field as an industry analyst in the mid 90’s. Although markets have changed over the past 20 years since I was on the product selling side of the industry, I believe that the strategies that were passed on to me have merit in today’s highly competitive and rapidly changing embedded marketplace.

My transformation as a tekkie to a businessman didn’t come from seminars and course work – it came from my guides posing significant questions to me that forced me to rethink my markets, products and corporate values. I’d like to share them with you. I took to these questions not unlike a Zen beginner confronting his koans. The answers to these questions took a lot of reflection on my part, and a rethinking of how business is done and might be done better. Looking back – it’s laughable that I had the temerity to advertise that our products outperformed those of Hewlett Packard (medical). They did but who was going to believe it? HP did me a favor by taking on our product line and selling it with theirs.

Let’s begin with what I feel was the most important thought and the questions that ensued:

Axiom #1: The Study of Your Competition is Critical to Your Success

Whether or not you consider your competitor’s products to be inferior to yours, they are competitors because customers are buying them.

Do you know what customers like about your competitor’s products? Dislike?

There will always be customers that favor your competition due to factors beyond your control. Perhaps they have been using them for so long that it is comfortable to resist change. Or perhaps they haven’t received the support that they desire or need. Do you know what embedded customers feel are the most troubling issues that confront them and what are the factors that would most influence them to change to you – or leave you for another vendor? Here we are speaking to the broad marketplace – not just your customers. If you’re not, why aren’t you?

Today’s embedded marketplace is not only highly competitive, but the factors that affect a purchasing decision are changing as well. Our underlying economic conditions are causing the large (mil/aero) and smaller customers (systems integrators and OEMs) to hold back on purchases until they see a market direction and their bottom line improves. Will you be ready and have a sales advantage to move quickly when market opportunities arise? What strategies have you in place to respond to opportunity – or are you going to be a follower?

Are your competitor’s products better than yours; cheaper than yours? Is your marketing strategy able to anticipate and handle objections?

Xerox copiers were the most expensive in the industry. Their sales force used an interesting strategy to overcome the issue. They referred to the now popular “total cost of ownership” theme. What was the cost of machine downtime? How much valuable time of senior people did it take to train the new users when the Xerox machine was intuitive and easy to use?

These are the questions you need to ask yourself

• Do you have access to data/information that shows that your product gets to market faster and/or that final designs are closer to pre-design expectations? Can you quantify a better return on investment with your product as compared with your competitors?
• Are you able to express value in measurable terms? Can you back up your claims with proof that a potential customer will respect and believe?
• How do you anticipate the strengths and weaknesses of your market position? What are your options?
• What is your VALUE proposition? Sell value – not product

Axiom #2: The generation of sales leads is the lifeblood of a company

• How do you currently generate sales leads? By media advertising? By having a booth at a conference? By cold calling?
• How do you qualify leads and how do you insure that you are calling on either the decision maker or the person that will carry your water to get you the order?
• Are you able to measure the cost per qualified lead – knowing that it also involves your marketing and sale department staff?
• Once you get a lead how do you deliver your message? Do you have sales and product information available to support your field efforts?
• Do you/can you tailor sales support materials to each unique potential customer – particularly one that has used/is using your competitor’s products?
• Are your sales reps trained to handle objections? Can they identify and get to potential users?
• Do you provide after sales service – and is it part of the acquisition cost?

Some enterprising embedded vendors have come up with a limited free-use strategy in which one can download a single user, limited function, product for use by developers to try and evaluate. If the developer likes the product and wants to use the design, it is easily transferable to the larger, more powerful purchased product. How does your sales strategy encourage a potential buyer to use and try your product?

As an illustration of these considerations, one of my medical products was a premature infant monitor that although less expensive than our competitors, usually exceeded a hospital’s capital equipment budget. Also the capital acquisition process took at least 4 months for approval. Moreover, if an intensive care facility had a maximum capacity of, say, 12 infants they would need to have at least than number of monitors available. Legal exposure to malpractice considerations made it such that they couldn’t monitor some of the infants and not others – they would have to monitor all or none.

In doing our research we found that hospitals had separate budgets for deposable products that didn’t come under capital equipment considerations. (Note – in the past, cardiac patient electrodes were cleaned and re-gelled by nurses; a time consuming, costly and unnecessary chore, so hospitals found it cheaper and more sanitary to buy pre-gelled, disposable electrodes).

So we leased our capital monitoring equipment for $1 per year per monitor, based on the purchase of an agreed upon number of disposables per monitor per month (which had a 95% gross margin). Based on our success in the nursery, we expanded into respiratory therapy and anesthesiology since our equipment worked on adults with little modification. This strategy was based on information gathering, user knowledge and on establishing a level of credibility.

What is your Cost Basis for Providing Sales and Marketing Support?

Let’s turn now to what you should consider as an internal cost review so that you strategically understand what it is costing your organization to sell into the embedded marketplace.

#1: How do you get your market information and what does it cost you?

• I purchase it from reliable market intelligence source (cost ranges from $12,500 to $100,000)
• I hire a market researcher to read through journals and use Google ($50,000+)
• I use my marketing staff to visit customers and listen to their complaints and needs (limited data). Cost is $100,000+
• I hire consultants to work with my researchers and marketing staff ($50,000+)

#2: How do you translate market information into strategic planning and sales support?

• I pay the market research data provider to do crosstabs that we think we need to look for competitive and sales support information ($10,000 – $50,000). I still need my staff to use the information effectively, but I can reduce the staff size.
• My staff takes the market data and excerpts relevant information and prepares reports (depends on the size of your staff – estimate $200,000 – $1 million)
• I hire a consultant who is recognized and respected and pay him/her/them to write favorably on my behalf ($25,000 – $75,000)
• I take out journal ads and buy booth space at conferences (very expensive) to get information and get my message out.
• I ask my sales team to provide me with information (minimal cost; minimal benefit)

Regardless of what you do – you are ALWAYS selling

Caution – you are entering a commercial message. We offer valuable sales and marketing information/intelligence at a cost effective price. Our subscribers get:

• Two extensive crosstabed databases from the EMF Survey of Embedded Developers that present the responses of 5 types of engineers, 10 vertical markets, chip architectures including DSP, FPGA and Multicore to each question in the survey
• A custom Executive Dashboard that permits you to filter the data according to  your customers, your competitor’s customers, potential customers and broad categories of developers. You will discover what they like and dislike and what issues most confront them. You can develop sales materials, competitive analysis, and target your competitor’s customers as well as potential customers with facts regarding the larger population of developers and their designs outcomes
• You can develop materials to support sales by responding to leads with accurate and persuasive supporting items – including ROI analysis
• Consulting: access to Dr. Jerry Krasner for discussions and feedback on your market analysis – and being kept up to date on buying trends and breaking embedded news

This is what we provide at a total cost of $12,500. We work to support your sales and marketing organization. Match that against the cost of employing a department of marketing/sales support or having your internal people try to obtaining compelling competitive information.

EMF data and the Executive Dashboard are use by the Navy, Marines, NASA and prime contractors as a definitive benchmark of embedded developments, OS and tools utilization and design outcomes. Your larger potential customers know how your products are being used – I would think that you might want to know this as well.

Jerry Seinfeld tells the story of a woman complaining to her hairdresser that she has a bad marriage and asks if she should get a divorce. The hairdresser says, “wow, that’ a serious question. I think that you should ask the manicurist instead of me”.

Be careful where you get your information – it can be more costly than you think.

 The year 2010 is just around the corner, and we are doing what we do best — forecasting. After all it’s our name. But we aren’t just guessing — we base our forecasts on historical facts and data. For the past 12 years, we have been tracking what developers are doing, what tools, OSes and processes they are utilizing and what their design experiences have been. We also report on what issues trouble them the most.

Now we are preparing our 2010 detailed and comprehensive EMF Executive Survey of Embedded Developers and Managers. We will be inviting you to take the survey to see how you our “loyal readers” compare with the larger statistically based responses (please contact us at surveys@embeddedforecast.com if you are willing to participate). Respondents who take the survey will receive a complimentary copy of our survey overview (a $399 value).

With our unique Executive Dashboard tool we are able to crosstab and simultaneously compare (for tools, programming languages, processors used in designs, etc.) “time to market” as well as “percentages of developments completed ahead of schedule/behind schedule/and cancelled”. We also know how close to pre-design expectations developer’s final design results compared.

We do this analysis for OSes (commercial and roll your own), IDEs, modeling tools, communication middleware, static analysis tools, requirements management/change management/validation tools, etc. The Dashboard allows vendors to compare the use of their products to those of their competitor’s – and it permits developer/managers to make design decisions predicated on the experiences of fellow developers.

Every year we speak with users and vendors to get their take on what they are expecting, and every year the survey results frequently surprise us – one and all.

Mark Twain wrote, “it’s not what you don’t know that can come back to bite you; it’s what you know for sure that ain’t true”. So we are not only challenging ourselves – but all who care to offer what they “know for sure” to speculate along with us.

Let’s first look at embedded markets – which ones we predict grow and which will suffer.

Winners

Medical

The medical device marketplace has been growing at a double digit rate – and new considerations should enhance opportunities for embedded vendors in 2010 – IF they take the time to correctly understand the selling points

• Considerable attention has been given to the medical marketplace by vendors seeking a safe haven from the expected decline in mil/aero. EMF believes that many such vendors don’t understand the market segment, how to sell to it, or what the users need and will purchase
• It would be funny if it wasn’t sad that certain leading RTOS vendors are pushing their certified high power, mission critical OSes towards an industry that develops products whose defining frequency requirements are less than 100 Hz

A Senate Bill cosponsored by Senators Edward Kennedy (D – MA) and Chuck Grassley (R– IA) was filed (Drug and Medical Device Accountability Act of 2009) that  would require senior officers or directors of drug and medical device companies to certify under penalty of perjury that all information submitted for a product’s approval is accurate and in compliance with federal regulations. Product applications later found to have contained false or misleading information would be subject to stiff fines (up to $5,000,000), assessed both to companies and their senior officers, who, in addition, could face jail sentences of up to 20 years.

EMF will soon publish a report presenting alternative paths for developers to produce quality software for medical devices, minimize product recalls, and affordably provide comprehensive audit trails for CDRH inspectors. EMF has identified 15 major best practices points which medical device developers can follow to align them with CDRH (Center for Devices and Radiological Health – FDA) suggestions. 

Consumer Devices and Products

There are three segments of the consumer electronics marketplace that are experiencing significant growth. Moreover with “smart devices” that will interact with IT based data reservoirs, the future for embedded technologies will involve this segment. EMF expects this market segment to grow the fastest and achieve large revenues. 

The three are:

• Consumer electronics including cell technologies and gaming devices
• Home entertainment
• Hand held devices

Industrial Automation (IA) 

IA is highly fragmented yet growing in many segments. Industrial automation, industrial controls, robotic factories, and automated assembly/manufacturing have huge security needs, testing requirements and process controls.

IA has grown to be the largest among the emerging embedded market segments.

Losers 

Telecom/Datacom

• Verizon’s rural assets following their acquisition of Alltel and the required divestiture have been bought by smaller rural service providers who are under no pressure to offer advanced services or do any network build-out. This means that less network equipment will be purchased. Of the larger service providers, both Sprint-Nextel and Qwest continue to show weakness and financial difficulty. These circumstances will have a dampening effect on telecom opportunities
• Wireless subscription growth has diminished as the market nears saturation. Approximately 89% of teenage and adult Americans have at least one cell phone. Wireless service providers have limited options and have found that customers are not likely to pay for new data services
• China is restructuring and consolidating their telecom services from six providers to three full service carriers. They are trying to break the monopoly that China Mobile has had
• Fewer buyers make the segment more competitive and harder to get design wins. This filters down to embedded vendors that supply the communications OEMs and systems integrators

Mil/Aero

• The Aerospace and Defense Industries of the United States are poised to undergo one of the most significant changes since the end of the Cold War; perhaps the most significant since World War II. We believe that observers (embedded vendors included) who expect small changes are mistaken, thereby fostering a false and dangerous sense of security across much of the industry and government
• The impact to our economy goes far beyond our current financial problems and involves fundamental structural changes taking place in the industry and in the market. As in prior shifts of this nature, there will be winners and losers – however these shifts may be profound, creating more dramatic winners and losers than in the last cycle
• That the DoD will experience an 18% to 40% reduction in discretionary funding is a certainty. Such luminaries as Ken Krieg, former Deputy Secretary for Defense Acquisition, and Booze & Company have affirmed this to be the case. The ripple down effect from Tier I primes to Tier III embedded suppliers will be severe
• According to the Congressional Budget Office, the share of the US gross domestic product (GDP) allocated to defense spending declined from 5.6% in the 80’s to 3.8% in the 90’s and 3.1% in the new millennium. This is expected to become worse in the ensuing few years 

Automotive 

The government bail out of GM and Chrysler and the attendant end-of-life for many auto brands has been devastating to this market segment. Moreover, the efforts of the current administration to engineer the government takeover of these industries by imposing requirements created by inexperienced bureaucrats is setting back technological innovation and the acquisition of embedded technologies for many years to come

What we learned in 2009 and what we might expect in 2010 

Operating systems 

2009 saw the continued use of embedded OSes as ThreadX, Nucleus and Micrium. ThreadX continued (for the 4^th consecutive year) to show the best time to market and percent of designs competed on or ahead of schedule for a commercial OS while MontaVista Linux had the best ROI for a commercial Linux product. All commercial Linux products outperformed free Linux offerings. 

It became abundantly clear that the smaller OSes have a significant role to play – and are preferable to the high power OSes for many applications. Linux has become pervasive across many embedded verticals. 

It will be interesting to see what the 2010 EMF Embedded Developer Survey will teach us. 

Chips

That we are heading into a multicore world is a certainty – we expect the 2010 survey to show this trend. What multicore needs is better development and testing tools than what is currently available. FPGA use and FPGA technologies have advanced to the point that they are becoming preferred over DSPs and commercial chips for many applications. Long term programs that are commonly found in military systems deployments have a vested interest in processor availability. FPGA vendors won’t play the end-of-life game that the larger processor companies play. Xilinx continues (consistent with the preceding 5 years) their lead over Altera for embedded use.

In 2010 EMF added a list of multicore processors to examine which are preferred. It will be interesting to see if ARM continues to gain ground over Intel’s Atom.

Modeling Tools 

Simulation-modeling tools have enjoyed the greatest growth of any embedded tools. We expect to see this trend continue. EMF has posted for free download several papers showing the advantages of using model driven development (MDD).   

Rhapsody, now an IBM Rational tool, continues to find applications for complex designs. MDD is the only technology for effectively dealing with systems and systems-within-systems developments and maintenance. 

Other Embedded Offerings

The embedded industry has long had frugality – or the notion of a free lunch – as a strategic initiative. The fallacy herein is that the “total cost of ownership” has been ignored at the altar of acquisition costs. 

Principal among this aspect of the embedded marketplace is that of embedded communications middleware. The use of roll your own (RYO) middleware consumes more than 50% of the marketplace – notwithstanding the lack of scalability, the large cost of managing and supporting deployed systems, and the unnecessary complexity of such systems.

It will be interesting to see if RTI again is shown to have the best design outcomes and if RTI and OIS continue to outperform RYO communication middleware developments. 

It will be interesting to see whether the use of requirements management, change management and static analysis tools become more prevalent in embedded development. 

Finally, we will see which development and management practices produce the best design outcomes; which interconnect technologies are used; which programming languages are used; and which tools are purchased and used and which have been purchase but NOT used.

IBM gets it! Why don’t others? With $22 billion in annual software sales they certainly qualify as the 2000 pound gorilla – but they don’t act that way. They didn’t get to that level by being arrogant (like another large gorilla?) – quite to the contrary.

• They strongly support the analyst community
• They have no secrets – they show us their roadmap, tell us what they have in the works, confess their concerns, listen and encourage other views
• Unlike some embedded vendors, they see analysts/editors as a respected strength to their business
• They subscribe to the best market intelligence and they study it and use it

I was recently at their Software Analyst Connect meeting as one of 100 invited analysts and the only guy who covers the broad embedded market (they do have a strong embedded component in Rational and their larger software business certainly supports embedded needs). Steve Mills, IBM’s number 2 guy (he reports directly to Sam P) was once again in attendance and available. Think of it – the genius who runs IBM’s $22 billion software division not only makes himself available, but brought more than a dozen of his VPs, IBM Fellows, Distinguished Engineers, etc. Casually dressed, friendly and likely to be spotted at the Sushi Bar, Steve is more than willing to engage in discussion or debate. Although he confesses to stealing from his people the best slides for his presentations, he is eager to make sure that we meet with whatever expert we need to engage.

This is a smaller IBM venue than what I annually attend in Orlando (over 2500 developers). The meetings go off like clockwork and events are managed professionally. They hire the best and support them. Diane Flis’ group is superb – the support staff that makes sure that I can meet who I need to speak with (one-on-one if I choose) and supports me all year is the best in the business. Linda Voyles, Silvia Galgano, Carol Gibbins, Teressa Jimenez, and Claudia McQuade were not only available, but frequently sought me out to make sure that I had the information I needed and that I was aware of presentations in which I might be interested. 

Diane’s dedication to supporting us is very important to the IBM philosophy. Some embedded vendors are very good at working with analysts – conversely and unfortunately some embedded CEOs don’t look upon us as a virtue – but as an obstacle. 

Steve Mills outlined the IBM software roadmap – and it has tremendous implications for the embedded world. His markets (at least those that want to survive) are moving away from the inefficiencies and associated cost of their businesses and industries to software solutions that not only have long term financial benefits, but have total payback of their investments within a year.

What does Steve Mills and his team know that you may not?

First, IBM focuses on solutions – not isolated tool or software sales. Their sales teams are focused on long term ROI as well as short term payback. Annual EMF surveys of embedded developers demonstrate that change for the sake of change is no longer a virtue. EMF data shows that the willingness of customers to change vendors is based on long term ROI and we have shown that the willingness to change processes and tool sets can be predicted from the gap between what developers say they use and what they perceive to be a best practice. 

IBM recognizes that businesses today are confronted by unparalleled rates of change that create tremendous challenges. Companies need to differentiate products, react to on-going market shifts, efficiently streamline support of deployed products and exploit globalization. 

What does IBM see that helps to size the potential embedded market? 

• Our world is becoming instrumented: there are 30 billion RFID tags in use and over a billion cell phones
• Our world is becoming interconnected: 2 billion people on the web and a trillion connected objects
• All things are becoming intelligent. There are 15 petabytes of new information generated daily

These are building blocks for what IBM calls a smarter planet. As our cell phones adopt 4G capabilities, think of the plethora of embedded devices that can connect to higher level databases through IT systems and Cloud-based computing. News specific to one’s needs can be automatically captured and delivered in realtime to hand-based or home-based systems. The same holds true for entertainment, banking, external monitoring of utilities, weather updates, automotive planning and assistance, police/emergency access, personal pharmaceutical updates and drug interaction alerts – just to name a few applications that are within our reach and are based on interactivity of embedded devices matched with enterprise data sources. 

Add to this the fact that we have extensive infrastructures built into energy delivery (National Grid), telecom/datacom facilities, traffic control systems, warehouse and supply systems, etc.

What characterizes these infrastructures is that it would cost trillions of dollars to replace them – this won’t happen given the cost of each and the disruption that would be created. They are further characterized as being systems and systems-within-systems and therefore address a different level of embedded requirements than RTOSes, software tool sets, embedded databases, and communication protocols. Such systems technologies lend themselves to Model Driven Development (MDD) usually based upon the Unified Modeling Language (UML), and currently used in not only advanced systems developments, but more now in complex embedded product developments. 

These infrastructures do lend themselves to innovative software developments, using established technologies that make these systems more intelligent and easier to deploy and maintain. The efficiency that such software development brings to these older technologies is that businesses see very short term payback of their investments by reducing the cost of support teams and having longer time periods before required maintenance, 

This is the future of embedded computing and a peek at the growth potential of our industry. Interestingly, IBM doesn’t own it alone. Their IT, enterprise and MDD capabilities are designed to make use of other embedded products. 

Just a final note: the conference was held at the beautiful Hilton Hotel in Stamford Connecticut which had wonderful accommodations – BUT can’t figure out how to deploy wireless access. Their rooms only have Ethernet connections (only half work) and their open spaces seem to provide the quality usually found with two tin cans tied together. 

I suggest that Hilton try to get IBM to buy them. Steve, are you interested? They have a really nice Sushi Bar.

Co-authored by: Dolores Krasner, VP Market Intelligence, EMF

Remember the old song “Signs”? The lyrics went “signs, signs, everywhere signs, messing up the scenery blowing my mind - don’t do this do that, can’t you read the signs”?

With all of the FUD, claims and counterclaims of misrepresentation between embedded vendors, what is a developer, manager or executive to believe, and how is one to make sense of whether one product or another is best suited for one’s use? No wonder potential users are leery of advertised and promoted claims.

Is it possible that those making the most noise and creating the most FUD are those messing up the scenery for the rest of us? Moreover, are these disruptions taking us away from the real signs that are defined by developers and managers that detail their likes, dislikes, and issues of greatest importance? Finally, what are the market trends that are characterized by revenue growth, best practices and ROI calculations?

I chose the above graphic to illustrate my frustrations (and I suspect the frustrations of others) with the misleading hype that has unfortunately become part of our embedded market culture. What I loved about the graphic was the ridiculous message that hid the information of most importance to the reader – the bridge was out!

So what should the embedded market signs tell us – based on year-over-year EMF Developer Surveys, vendor reported shipments and EMF privleged information - about the road ahead and how to avoid the bridges that are out?

 Sign #1: Danger Ahead

There will be a ripple down effect from primes to Tier II suppliers to Lower Tier vendors. The larger embedded vendors will get hit but not as bad as smaller vendors that don’t plan ahead and create value. Consolidations may result with financially more stable companies picking and choosing technologies at fire sale prices. It wasn’t too long ago that Motorola Computer Group/Force Computers were sold off at 28 cents on the dollar.

Sign #2: Remind your Customers of Your Value 

It’s a good idea to not only remind your best customers how you are performing for them, making a contribution to their goals and saving them money. It’s best to show them (if you have the data) how developers and managers throughout the industry (or within a specific vertical) are performing with your products and support. 

Sign #3: Promote Yourself

Certain behaviors which are highly correlated with high performing product developments may also help suppliers target their preferred customers, and help promote being a high performance supplier.

EMF data was separated into two cadres: A ‘Leader” cadre tended to complete product development on, or ahead of schedule, and the delivered product met pre-design expectations.  A “Laggard” cadre tended to finish late and delivered products that missed pre-design expectations

Comparing these high and low performing organizations, we found that high performers:

• Were more likely to use modeling for design, system architecture, algorithms and other components than laggards, who were less likely to incorporate modeling into the design process.
• Were less likely to use CMMI.  Laggards were roughly twice as likely to use CMMI as leaders
• Were more likely to use object oriented development.  Leaders were roughly twice as likely to describe their development processes as “object oriented” than laggards.
• Were likely to use peer reviews and design walkthrough in their product design processes, and were more likely to describe their design processes as model driven.  Laggards were more likely to say they had no product development processes.
• Were likely to have some budget for product developer tools, but were less likely to have large budgets.  Laggards were roughly twice as likely to have personal budgets of more than $25,000 for developer tools, than leaders.
• Tend to use licensed (not free) Linux when Linux is used. They were, for example roughly twice as likely to use MontaVista, or LynuxWorks Blue Cat than laggards. This is consistent with prior EMF findings that “free” tools usually cost more in the long run.

 Sign #4

Simulation-Modeling:

EMF’s report, 2009 Embedded Tools and RTOSes illustrates the growth of embedded market segments. RTOS/IDE has grown (through 2008) at a 11.2% CAGR while software tools grew at an 8.8% rate and the total embedded market grew at an 11% rate. Simulation-modeling grew at a substantially higher CAGR.

 Simulation Modeling (Model Driven Development – MDD – is the major component of this growth) is growing at a 17.5% CAGR based on 3 factors: 

• It provides an enhanced (and documented) ROI
• Systems and systems-within-systems represent the largest embedded growth market and require MDD
• Product line engineering is predicated on MDD

Have you noticed that we didn’t include any signs for EAL or MILS certification?