During this webcast, Steve Balacco, Director of the Embedded Software & Tools Practice, will present data from our 2010 study on embedded /real-time operating systems. Specifically, he will discuss: consolidation in the embedded and real-time operating system market; migration to commercial and open source operating systems; multicore processors and embedded software considerations; virtualization in embedded systems; and embedded engineering trends.

1. VDC RESEARCH WEBCASTS
Embedded / Real-time
Operating Systems
June 2010 Market Update
Embedded Software & Tools Practice
Steve Balacco, Director

2. Recording Available
These slides are from a webcast presented on 06/16/10
A full audio recording is available for download at:
http://www.vdcresearch.com/market_research/embedded_software/freeresearch.aspx
1– 2010 VDC Research Group, Inc.
Embedded Software & Tools Practice

3. VDC Research Group
Complimentary Insights and Marketing Data on the
Embedded Software & Tools Market Available at:
www.vdcresearch.com
To receive the practice monthly bulletin
and receive other practice news please opt-in at:
www.vdcresearch.com/signup/
2– 2010 VDC Research Group, Inc.
Embedded Software & Tools Practice

4. Today’s Speakers
• Steve Balacco, Director – Embedded Software & 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– 2010 VDC Research Group, Inc.
Embedded Software & Tools Practice

5. Agenda
About VDC & Our Research
Market Definition & Segmentation
2010 Embedded Software & Tools Service Status
Market Estimates & Forecasts
Recession & Industry Consolidation
Embedded / Real-time Operating System Trends
Multicore & Virtualization Embedded Trends
Selected Embedded Engineering Stats
Question & Answer
5– 2010 VDC Research Group, Inc.
Embedded Software & Tools Practice

6. VDC Research Group, Inc.
Embedded Software & Tools Practice
• VDC Research was founded in 1971.
 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 & Constant primary research.
 Supply side – Operating system, software development tools, and multi-core components
and tools suppliers telephone interviews annually.
 Demand side – OEMs & integrators web surveys and telephone interviews annually.
• Syndicated & Custom engagements with clients in the embedded software and tools market.
• Practice Team Members:
 Steve Balacco, Director
 Chris Rommel, Analyst
 Jared Weiner, Analyst
• Practice Blog – On Target: Embedded Systems
 http://blog.vdcresearch.com/embedded_sw/
6– 2010 VDC Research Group, Inc.
Embedded Software & Tools Practice

7. Market Definition & Segmentation
Scope of VDC’s Research
Geographic Regions
Business/Office Automation
Retail Automation
Industry
Others
Military/Aerospace
Segments
Mobile phones
Industrial Automation
Embedded / Real-time Operating Systems
Automotive
Consumer Electronics
Medical
Telecom/Datacom
Embedded Software Development Tools
Technologies
Mobile Operating Systems
Multicore Components & Tools
7– 2010 VDC Research Group, Inc.
Embedded Software & Tools Practice

8. 2010 Embedded Software & Tools Service
Schedule status
• Track 1: Embedded Software Engineering Market Technologies
 4 Technology Volumes
• Volume 1: Embedded / Real-time Operating Systems – published in May
• Volume 2: Embedded Software Development Tools – published in May
• Volume 3: Mobile Operating Systems – planned publication June / July timeframe
• Volume 4: Multicore Components and Tools – planned publication August / September timeframe
• Track 2: Embedded System Engineering Survey Data
 6 Engineer Survey Data Volumes – all planned for publication in the August timeframe
• Volume 1: Operating Systems
• Volume 2: Development Tools
• Volume 3: Vertical Markets
• Volume 4: Regional / Country
• Volume 5: Processor Architectures
• Volume 6: Engineer System Engineer Type
• Track 3: Embedded Systems Market Statistics
 8 Vertical Market Volumes – planned for publication in the November / December timeframe
• Automotive/ transportation, consumer electronics, industrial automation, medical devices, military / aerospace,
mobile phones, retail automation, and telecom / datacom.
8– 2010 VDC Research Group, Inc.
Embedded Software & Tools Practice

9. Market Estimates & Forecasts
Embedded / real-time operating systems
Worldwide Shipments of • VDC estimates the market for embedded /
Embedded / Real-Time Operating real-time operating systems was slightly
Systems & Related Services
2009 - 2012 CAGR: > 7%
greater than $1.0 billion in 2009, a
decrease of some 6% from 2008.
• The year-over-year decrease represents a
slightly higher percentage than VDC had
previously forecasted.
(Millions of Dollars)
• Major market drivers in 2009 negatively
affecting the market include:
 Recession and industry consolidation
• Future forecast and outlook
 Market is expected to grow at a compound
annual rate of >7% per year through 2012.
 Overall economic recovery and growth
opportunities in markets such as automotive,
medical device markets, and others.
Revised 2009 2010 2011 2012
2008  Device sophistication driving increasing software
content and the need for more formal OSs.
9– 2010 VDC Research Group, Inc.
Embedded Software & Tools Practice

10. Recession & Industry Consolidation
Recession – predominant issue facing the market
• The global recession was the predominant issue affecting the embedded landscape in 2009.
 Vendors across the industry reconsidering their short- and long-term strategies to best handle
the overall challenges of the market.
• Many OEMs reigned in spending due to the unpredictable economy, reduced development
staffs and delayed or canceled projects.
 Increased focus on ROI for product investments and methodologies as project budgets decreased.
 Software component investments scrutinized.
• What products are critical to project success?
• Will engineer productivity improve?
• Can quality be improved?
• What impact will this have on schedule?
• Resulted in a negative financial impact to many embedded / real-time
operating system suppliers.
 Reduced upfront project license / subscriptions fees.
 Reduced maintenance and support fees.
 Reduced product shipments – impact to royalty stream in some cases.
10 – 2010 VDC Research Group, Inc.
Embedded Software & Tools Practice

11. Recession & Industry Consolidation
Consolidation affected market size and growth and the competitive landscape
• What consolidation?
 Intel acquires Wind River Systems and RapidMind.
 Mentor Graphics acquires Embedded Alley.
 Cavium acquires MontaVista Software.
 April 2010 Research In Motion (RIM) announces the acquisition of QNX Software Systems from Harman International.
• As wholly owned subsidiaries of semiconductor suppliers, both Wind River and MontaVista
messaging have focused around silicon neutrality.
• VDC expects that the Intel acquisition of Wind River Systems and ensuing uncertainty
contributed to the decrease in market growth and a changes in the competitive landscape.
 Uncertainty across the spectrum of software and hardware partners and device manufacturers.
 Microsoft Windows Embedded business group # 1 market share leader based on revenue.
• As a result, many competitors are looking to take advantage of this market consolidation
to increase market share.
 Expand relationships within the semiconductor industry.
 Offering migration / porting support.
 Deliver greater value from investments in software components.
 Lower software development costs and increase productivity.
 By listening to customers’ requirements –creating roadmaps that balance now-term ROI and
potential for longer-term sustained competitive differentiation.
11 – 2010 VDC Research Group, Inc.
Embedded Software & Tools Practice

12. Embedded / Real-time Operating System Trends
Complexity of embedded devices accelerating adoption of more formal operating systems
Type of Operating System(s) Used on Target • OEMs have many choices in deciding what target
Embedded System on Previous Project, Current operating system to integrate.
Project & Expected to be Used on Next Project
(Percent of Responses) • Device / system functionality is driving complexity
44.4% and increased software content.
No formal operating system used 33.1%  More sophisticated system interfaces.
18.6%
 Complex graphical elements.
19.0%
Commercially licensed operating  Wired and wireless capabilities, and others.
27.6%
system
27.4% • As a result, the types of operating systems used
20.3% in target devices have continued to shift from no
Publicly obtained open source
23.2%
operating system
27.8%
formal and in-house developed (RYO) to a variety
20.3%
of other commercial and open source offerings.
In-house developed operating
system
16.5%
15.2%
• While the use of commercially licensed (not open
12.5%
source) operating systems is expected to remain
Chip/board vendor supplied fairly stable, almost 50% of the surveyed engineers
15.4%
operating system
13.5% report that their target OS is selected on a project-
Commercially licensed or 7.8% by-project basis.
Consortia/industry group-obtained 9.8%
open source operating system 12.7%
3.0%
Don't know or not yet decided 1.6%
16.0%
0% 10% 20% 30% 40% 50%
Previous Project, N = 232 Current Project, N = 254 Next Project, N = 237
Note: Percentages sum to over 100% due to multiple responses.
12 – 2010 VDC Research Group, Inc.
Embedded Software & Tools Practice

13. Embedded / Real-time Operating System Trends
In-house (RYO) solutions losing traction
• The decision to develop and support in-house RTOS solutions has been increasingly
scrutinized, as issues around stability, support, cost-effectiveness and time-to-market
pressures have become principle themes in project planning.
 OEMs have been increasingly concentrating on their own core competencies and shifting internal
resources away from in-house operating system design, support, and maintenance.
 Increased stability, support, and cost-effectiveness have all been factors in pushing OEMs away
from in-house solutions and toward full-service commercial platforms.
 ISVs have also attributed new projects to wins over in-house operating systems that are not
sufficient for the complexities of multicore architectures or that cannot be easily or effectively
transitioned to support multicore silicon.
• The increased focus on safety and security within certain industries has also amplified
OEM concern with in-house solutions and expanded their consideration of commercial
platforms due to the safety-critical experience and expertise that commercial vendors
and their products provide.
13 – 2010 VDC Research Group, Inc.
Embedded Software & Tools Practice

14. Embedded / Real-time Operating System Trends
Use of Linux and other open source operating systems intensifying
• The use of Linux and other open source OS solutions in embedded systems has continued
to intensify, from commercial vendors, semiconductor suppliers, and the open source
community.
• A key driver of these solutions continues to be the low cost/no cost availability of Linux
distributions, as well as the extensiveness of available developer resources and the
maturing ecosystem of applications.
 Driving the growth of commercial Linux is the availability of:
• Distributions that support various processor architectures and include a complete software stack.
• Support services and maintenance obtainable through those vendors for OEMs that lack the in-house Linux expertise.
• The emergence of the Google and OHA’s Android platform has the potential to have a major
role in the direction of the embedded industry, as companies such as Mentor Graphics,
Viosoft, and others seek to adapt and complement the platform to support device
classes beyond the traditional mobile phone environment.
 The emergence and rapid adoption of the Android operating system has also pressured traditional
Linux market participants such as Wind River and MontaVista to adapt some of their own go-to-market
strategies and business models to capitalize on the subsequent professional service opportunities
surrounding OHA’s OS.
14 – 2010 VDC Research Group, Inc.
Embedded Software & Tools Practice

15. Multicore & Virtualization Embedded Trends
Multicore expectations continuing to expand
2009 Embedded Engineering Survey 2010 Embedded Engineering Survey
Current & Expected Characterization Current & Expected Characterization
of the Processor Design of the Processor Design
(Percent of Respondents) (Percent of Respondents)
61.2%
Single processor 62.1%
30.0% Single processor
30.0%
21.9%
Multiprocessor 21.4%
32.1% Multiprocessor
19.8%
6.5%
Multicore 9.1%
13.6% Multicore
21.3%
Multicore and 8.6%
Multicore and 4.9%
multiprocessor 18.5% multiprocessor 20.5%
1.8% 2.5%
Don't know or N/A Don't know or N/A
5.8% 8.4%
0% 20% 40% 60% 80% 0% 20% 40% 60% 80%
Current Project, N = 278 Current Project, N = 285
Expected in Two Years, N = 243 Expected in Two Years, N = 263
15 – 2010 VDC Research Group, Inc.
Embedded Software & Tools Practice

16. Multicore & Virtualization Embedded Trends
Operating system virtualization use limited but future use expected to increase
Hypervisor / Virtualization
Layer / Microkernel Use in Current
Projects & Expected Use in Two Years
(Percent of Respondents)
3.3%
10.1%
0% 3% 6% 9% 12% 15%
Current Project, N = 243
Expected in Two Years, N = 227
16 – 2010 VDC Research Group, Inc.
Embedded Software & Tools Practice

17. Multicore & Virtualization Embedded Trends
Suppliers ramping messaging and product support for multicore and virtualization
• Both of these technologies are well understood and in wide use outside of the embedded
market.
• While the use of multicore and operating system virtualization technologies is currently
limited to a small percentage of projects under development, an increasing percentage of
embedded engineers are expecting to incorporate these technologies in future projects.
• The reality of these expectations are being matched by supplier messaging and the
availability of training seminars and product support for both operating systems
and tools solutions to support both multicore and virtualization environments.
• Both technologies offer a path for delivering increased capabilities:
 Multicore in terms of performance and throughput as well as a means to improve heat dissipation
and consume less power and real estate.
 Operating system virtualization in terms of meeting the challenge caused by silicon obsolescence,
migrating legacy software assets for which significant investments have been made, and providing
an environment where multiple guest operating systems and applications can operate in isolation.
• VDC expects that both of these topics will continue to be a significant focus of many
suppliers over the next several years and offer increased opportunities for revenue growth.
17 – 2010 VDC Research Group, Inc.
Embedded Software & Tools Practice

18. Select Embedded Engineering Stats
Embedded / real-time operating systems
Approach of Engineers' Company Product Selected First for Current Project
to Operating System Selection (Percent of Respondents, N = 255)
(Percent of Respondents, N = 253)
Processor(s) 62.7%
Consider on a project-by-project
48.6%
basis
Embedded/mobile operating
20.0%
system(s)
Try to use same/incumbent OS on
40.3%
new projects
Software development tools 11.8%
Don't know or N/A 11.1%
Don't know 5.5%
0% 20% 40% 60% 0% 20% 40% 60% 80%
18 – 2010 VDC Research Group, Inc.
Embedded Software & Tools Practice

19. Select Embedded Engineering Stats
Embedded / real-time operating systems
Operating System Supplier Brand End User Awareness of Device
Used on Current Project Operating System
(Percent of Respondents, N = 260) (Percent of Respondents)
25.5%
Same operating system brand as End user WILL be aware of OS 23.8%
54.6%
most recent, similar project
24.4%
58.0%
End user WILL NOT be aware of OS 61.3%
Different operating system brand 19.6%
53.3%
16.5%
Don't know or N/A 14.9%
Don't know or N/A 25.8%
22.3%
0% 20% 40% 60% 80%
-20% 0% 20% 40% 60% Previous Project (N = 243) Current Project (N = 248) Next Project (N = 238)
19 – 2010 VDC Research Group, Inc.
Embedded Software & Tools Practice

20. Select Embedded Engineering Stats
Embedded / real-time operating systems
Most Important Characteristics for Selecting Engineers' Real-time Interrupt
Embedded Operating System Requirements for Current Project
(Percent of Respondents, N = 234) (Percent of Respondents, N = 255)
Overall cost 40.6%
Less than 10 microseconds 17.3%
Real-time capabilities/ performance 30.8%
Availability of dev. tools 30.3%
Reliability/ stability 29.1% 10 to 49 microseconds 14.1%
Technical capabilities 23.9%
Run-time royalty cost 17.9% 50 to 99 microseconds 9.4%
Familiar programming interface 17.5%
Technical support from vendor 15.4%
100 to 249 microseconds 9.4%
Customer requirements 14.5%
Bundled software components 9.4%
Variety of microprocessors suppt'd 8.1% 250 to 499 microseconds 3.9%
Footprint vs. memory prices/ avail. 7.7%
Size of developer community 6.4% 500 to 999 microseconds 4.7%
Security 4.7%
Reputation of vendor 4.3%
1 or more milliseconds 25.5%
Support for multicore architectures 4.3%
Independence from semiconductor companies 3.8%
Don't know 15.7%
Virtualization capabilities 3.4%
Suppt. for multiprocessing architectures 2.1%
0% 10% 20% 30%
0% 10% 20% 30% 40% 50%
Note: Sums to more than 100% due to multiple responses.
Respondents could select up to three (3) factors.
20 – 2010 VDC Research Group, Inc.
Embedded Software & Tools Practice

21. Research in the Works
New product offering available shortly
• Software & System Lifecycle Management (SSLM) Tools –
June 2010 Proposal Release
 Multi-volume proposal
 Cover both the Embedded and greater Enterprise IT market segments
 Topics to include:
• Software & System Modeling Tools
• Automated Test & Verification Tools
• Requirements Management Tools
• Source / Change / Configuration management (SCCM) Tools
• Engineering Design Methodologies, Processes & Standards
• To receive the practice monthly bulletin and receive other practice news please opt-in at:
www.vdcresearch.com/signup/
21 – 2010 VDC Research Group, Inc.
Embedded Software & Tools Practice

22. Q&A Session
Thank You for Attending this VDC Webcast
For more information about VDC Research coverage of the global markets
for the Embedded Software & Software & Systems Lifecycle Management Tools
Markets – please contact:
Steve Balacco
Director, Embedded Software & Tools Practice
sbalacco@vdcresearch.com | 508.653.9000 x124
Cyril Bernard
Account Executive
cbernard@vdcresearch.com | 508.653.9000 x142
Chris Rezendes
Executive Vice President
cjr@vdcresearch.com | 508.653.9000 x120
22 – 2010 VDC Research Group, Inc.
Embedded Software & Tools Practice