functional safety development & test solutions...arinc-653, etc.). this report quantifies and...

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Functional Safety Development & Test Solutions

November 2019 - Track 3, Topic 3By Roy Murdock, Analyst, with Steve Hoffenberg, Director

and Chris Rommel, Executive Vice President

https://www.vdcresearch.com

© 2019 VDC Research | Functional Safety Development & Test Solutions 2

INSIDE THIS REPORT

WHO SHOULD READ THIS REPORT?

VENDORS LISTED IN THIS REPORT

WHAT QUESTIONS ARE ADDRESSED?

AdaCoreAnsysArmDassault SystèmesGAIO TechnologyGreen Hills SoftwareIARIBMLauterbach LDRAMathWorks

Mentor Graphics (Siemens)National InstrumentsJamaParasoftPerforcePolarion (Siemens)PTCSynopsysVector InformatikWind River

This report analyzes the market and emerging trends for commercially available software and system development tools employed in the development of functional safety-related projects. These tools are used on projects where embedded software must meet a standards-certified architecture/design to ensure functional safety (e.g., ISO26262, IEC62304, ARINC-653, etc.). This report quantifies and qualifies market dynamics by vendor, region, and product type. It also includes an in-depth discussion of recent mergers and acquisitions, end-user trends, and vendor strategy.

This research program is written for those making critical business decisions regarding products, markets, channels, and competitive strategies and tactics. This report is intended for senior decision-makers who are developing and using embedded, IoT, and cloud services technology, including those in the following roles:

What are the relative sizes of the market for different tools used in safety-certified development—requirements management, software development, software & system modeling, and test tools?

How are various organizations, both hardware and software-oriented, addressing this important market?

How do tool budgets differ between general purpose and safety-critical projects?

Which vendors are best positioned to expand tool sales into the functional safety market?

CEO and other C-level executivesCorporate development and M&A teamsMarketing executivesBusiness development and sales leadersProduct development and product strategy leaders

https://vdcresearch.com/


Contents

List of Report ExhibitsExhibit 1 Global Revenue of Functional Safety Development & Test Tools, by Tool TypeExhibit 2 Global Revenue of Embedded and FUSA Requirements Management ToolsExhibit 3 Global Revenue of FUSA Requirements Management Tools, by Product TypeExhibit 4 Global Revenue of Embedded and FUSA Software Development ToolsExhibit 5 Global Revenue of FUSA Software Development Tools, by Product TypeExhibit 6 Global Revenue of Embedded Software & System Modeling ToolsExhibit 7 Global Revenue of FUSA Software & System Modeling Tools, by Product TypeExhibit 8 Global Revenue of Embedded Software & Security Test ToolsExhibit 9 Global Revenue of FUSA Software & Security Test Tools, by Product TypeExhibit 10 Global Revenue of FUSA Requirements Management Tools, by Vertical MarketExhibit 11 Global Revenue of FUSA Software Development Tools, by Vertical MarketExhibit 12 Global Revenue of FUSA Software & System Modeling Tools, by Vertical MarketExhibit 13 Global Revenue of FUSA Software & Security Test Tools, by Vertical MarketExhibit 14 Global Revenue of FUSA Requirements Management Tools, by Leading Vendors Exhibit 15 Global Revenue of FUSA Software Development Tools, by Leading Vendors Exhibit 16 Global Revenue of FUSA Software & System Modeling Tools, by Leading Vendors Exhibit 17 Global Revenue of FUSA Software & Security Test Tools, by Leading Vendors Exhibit 18 Certification/Approval Standards Required for Current ProjectExhibit 19 Budget for Development Tools Being Used on Current or Most Recent Project, by FUSA ComplianceExhibit 20 Types of Tools Used in Current/Most Recently Completed Project, by FUSA Compliance

Inside This ReportExecutive SummaryGlobal Market Overview FUSA Requirements Management Tools FUSA Software Development Tools FUSA Software & System Modeling Tools FUSA Software & Security Test Tools Recent DevelopmentsComparative Forecasts by VerticalCompetitive LandscapeEnd-User Insights Overview of FUSA Compliance Usage & Tool Budgets FUSA Tool Usage Outlook Scope and MethodologyAppendix and DefinitionsAbout VDC Research

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The market for functional safety (FUSA) development & test tools & related services amounted to $1.3B in 2018 and is expected to grow at a CAGR of 8.5% to reach $2.0B in revenue in 2023. We segment the overall FUSA market into four major subcategories of tools: Requirements Management (RM), Software Development Tools (SDT), Software & System Modeling Tools (SSMT), and Software & Security Test Tools (TEST).

EXECUTIVE SUMMARY

FUSA RM tools totaled $156.8M in 2018 (65.5% of all embedded RM tool revenue in 2018).FUSA SDT tools totaled $145.5M in 2018 (69.7% of all embedded SDT tool revenue in 2018).FUSA SSMT tools totaled $682.4M in 2018 (74.9% of all embedded SSMT tool revenue in 2018).FUSA TEST tools totaled $346.6M in 2018 (71.8% of all embedded TEST tool revenue in 2018).

Across these four tool segments, the SDT market will grow the slowest at a 3.8% CAGR through 2023. The FUSA SDT market remains relatively sheltered from the declining revenue share of general purpose and non-deterministic OSs (Windows) towards Linux and free/open source alternatives, but high-quality open source and free alternatives are exerting downward pressure on the market in general, with some open source distributions even preparing to certify kernels to functional safety standards in the 2020 timeframe.

FUSA TEST tools sales will grow at the quickest CAGR of 9.3% to reach $539.6M in revenue in 2023. The need to establish bi-directional traceability to meet FUSA certification requirements is fueling interest in using integrated application lifecycle management (ALM) and product lifecycle management (PLM) solutions to manage the entire product development process. FUSA RM and SSMT tools will grow at CAGRs of 8.5% and 9.0%, respectively, as high demand from growing investment in the automotive industry and sustained aerospace & defense activity buoy revenue growth across the specialized FUSA tool markets.

KEY FINDINGSNearly 3 in 4 surveyed embedded engineers had some sort of requirement to meet, with the overarching ISO9001 for quality management being the most-used across industries and geographies, followed by various FUSA standards by relevant vertical.

FUSA projects garner 64% higher budgets on average than non-safety-critical projects. General-purpose budgets cluster around the $2,000–$20,000 range, whereas FUSA projects cluster around the $25,000–$100,000 range.

Engineers working on FUSA projects are less likely to use general SDT tools—build tools, compilers, IDEs, JTAG debuggers—and are more likely to use the other three categories of tools covered in this report—RM, SSMT, and TEST. Of these three categories, testing is used by the highest percentage of FUSA engineers, with around 25% of engineers using test management, statics analysis, or unit testing tools on their projects.



GLOBAL MARKET OVERVIEWExhibit 1A: Global Revenue of Functional Safety Development & Test Tools, by Tool Type

(Millions of Dollars)

Exhibit 1B: Global Revenue of Functional Safety Development & Test Tools, by Tool Type(Percent of Dollars)

$156

.8

$173

.2

$190

.7

$207

.4

$223

.1

$235

.5

$150

.7

$157

.7

$164

.0

$170

.1

$177

.1

$181

.2

$682

.4

$756

.5

$838

.4

$912

.0

$985

.9

$1,0

50.1

$346

.6

$384

.1

$425

.2

$467

.8

$508

.6

$539

.6

$0

$200

$400

$600

$800

$1,000

$1,200

2018 2019 2020 2021 2022 2023

FUSA Requirements Management Tools (RM) FUSA Software Development Tools (SDT)FUSA Software & System Modeling Tools (SSMT) FUSA Software & Security Test Tools (TEST)

11.7%

11.7%

11.3%

9.0%

51.1%

52.3%

25.9%

26.9%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

2018 Share

2023 Share

FUSA Requirements Management Tools (RM) FUSA Software Development Tools (SDT)FUSA Software & System Modeling Tools (SSMT) FUSA Software & Security Test Tools (TEST)

The market for functional safety (FUSA) development & test tools & related services amounted to $1.3B in 2018 and is expected to grow at a CAGR of 8.5% to reach $2.0B in revenue in 2023 [Exhibit 1A]. We segment the overall FUSA market into four major subcategories of tools: Requirements Management (RM), Software Development Tools (SDT), Software & System Modeling Tools (SSMT), and Software & Security Test Tools (TEST). Please refer to the “Appendix & Definitions” section of the report for further details on what is included and excluded from each category of tools.



FUSA Requirements Management Tools

Exhibit 2: Global Revenue of Embedded and FUSA Requirements Management Tools(Millions of Dollars)

Exhibit 3: Global Revenue of FUSA Requirements Management Tools, by Product Type(Millions of Dollars)

$239.2$260.4

$283.7$306.0

$327.6 $344.5

$156.8 $173.2$190.7 $207.4 $223.1 $235.5

$0

$50

$100

$150

$200

$250

$300

$350

$400

2018 2019 2020 2021 2022 2023

Embedded RM FUSA RM

$53.2

$21.4

$56.2

$26.0

$80.5

$36.3

$78.7

$40.1

$0

$10

$20

$30

$40

$50

$60

$70

$80

$90

Licensing - Subscription Licensing - Perpetual Maintenance/Support Professional Services

2018 2023

The market for FUSA RM tools totaled $156.8M in 2018, making up 65.5% of all embedded RM tool revenue for the year. FUSA RM sales will grow at a CAGR of 8.5% to reach $235.5M in revenue in 2023, outpacing overall embedded RM sales, which will grow at a CAGR of 7.6% [Exhibit 2]. The greatest competition to RM tool providers is still informal methods of managing requirements such as using email and general office productivity software, but the large base of FUSA-related RM tools will remain sheltered from free/general purpose solutions as safety-critical OEMs and T1s continue to rely on commercial RM traceability for demonstrating standards compliance.

More engineering organizations are attempting to improve efficiency reusing common design elements shared between closely related products (e.g., product lines or families) rather than recreating everything from the ground up. Recognition of the value in using a variant management tool to help coordinate and maximize reuse within product lines is expanding across several embedded industries. VDC expects demand for variant management functionality to continue mounting



Exhibit 4: Global Revenue of Embedded and FUSA Software Development Tools(Millions of Dollars)

Exhibit 5: Global Revenue of FUSA Software Development Tools, by Product Type(Millions of Dollars)

$216.2 $224.2 $230.0 $234.6 $241.4 $244.4

$150.7 $157.7 $164.0 $170.1 $177.1 $181.2

$0

$50

$100

$150

$200

$250

$300

2018 2019 2020 2021 2022 2023

Embedded SDT FUSA SDT

$14.4

$93.9

$24.2 $18.2$16.0

$112.6

$30.8$21.9

$0

$20

$40

$60

$80

$100

$120


2018 2023

rapidly. Several leading RM and ALM or PLM platform suppliers, such as Dassault Systèmes, IBM, PTC, and Siemens, are offering variant management functionality or modules that are integrated within their existing tool chains to serve this growing demand. However, challenges with respect to variable safety analyses, regulations, and reuse of certifications reduce the efficiency of variant management tools in the safety-critical context. Cloned assets, even from a verified source, generally still require a reassessment of the confirmation measures (reviews, risk assessments). Nevertheless, this is a promising direction for RM providers to explore to boost FUSA-related sales and reduce customer time-to-market.

IBM remains the leading vendor by market share in both the embedded and FUSA requirements management space, followed by Siemens (Polarion), and PTC.

FUSA Software Development Tools



The market for FUSA SDT tools totaled $150.7M in 2018, making up 69.7% of all embedded SDT tool revenue for the year. FUSA SDT sales will grow at a relatively slow CAGR of 3.8% to reach $181.2M in revenue in 2023, growing slightly more rapidly than the sluggish 2.5% CAGR for the overall embedded SDT market.

Dynamics in the functional safety development tools market mirror those in the wider real-time operating system (RTOS) and embedded OS market, given that SDT and OS development are so closely intertwined and many of the leading IoT & Embedded OS vendors provide SDT offerings, many free of charge with an accompanying OS license. The FUSA market remains relatively sheltered from the declining revenue share of general purpose and non-deterministic OSs (Windows) towards Linux and free/open source alternatives. With a few open source projects looking into functional safety certification, such as the Zephyr project, which is targeting an IEC 61508-certified kernel and LTS release in 2020, FUSA tool vendors can also expect to see their tool revenues begin to slowly erode through 2023.

Still, future competition from open source competitors is far in the future for many vendors, which will continue to see growth primarily from the automotive industry as it continues to undergo a sustained boom in R&D efforts and activity. The aerospace & defense industry also provides a stable base of revenue, although growth is muted compared to automotive. Most FUSA SDT vendors are focused on staying current with leading standards as they are revised or edited, maintaining the quality of their existing tools rather than adding new functionality and capability. Cybersecurity standards are gaining in relevance, especially in automotive, and leading suppliers should investigate methods to incorporate elements of SAE J3061 into their products as customers may begin to converge around its usage.

Competition is relatively even in the FUSA software development tools market with IAR, AdaCore, LDRA, Mentor Graphics, Wind River, and Green Hills all sharing between 6% and 14% of the market. A relatively small tail of RTOS vendors and tool specialists makes up the rest of the market, generally selling tools for specific FUSA verticals.

FUSA Software & System Modeling Tools

Exhibit 6: Global Revenue of Embedded Software & System Modeling Tools(Millions of Dollars)

$911.5$998.8

$1,094.4$1,184.4

$1,268.9$1,356.9

$682.4$756.5

$838.4$912.0

$985.9 $1,050.1

$0

$200

$400

$600

$800

$1,000

$1,200

$1,400

$1,600

2018 2019 2020 2021 2022 2023

Embedded SSMT FUSA SSMT



Exhibit 7: Global Revenue of FUSA Software & System Modeling Tools, by Product Type(Millions of Dollars)

$242.8

$108.8

$277.3

$53.6

$389.4

$152.6

$427.7

$80.3

$0$50

$100$150$200$250$300$350$400$450


2018 2023

The market for FUSA SSMT tools totaled $682.4M in 2018, making up 74.9% of all embedded SSMT tool revenue for the year. FUSA SSMT sales will grow at a CAGR of 9.0% to reach $1.05B in revenue in 2023, outpacing overall embedded SSMT sales, which will grow at a CAGR of 8.3% [Exhibit 6]. Overall SSMT market revenue is rising due to an increase in new modeling tool users along with broader use within existing accounts. General issues associated with change, such as cost and complexity of transitioning from legacy development processes and migrating legacy code remain the primary factors inhibiting FUSA SSMT uptake.

Vendors, even within the traditional FUSA market, are beginning to offer their customers more flexibility in subscription and pricing, with some adding (or planning to add) cloud-based SSMT offerings. VDC believes this strategy will help vendors shift perpetual and annual licensing agreements towards more predictable, flexible subscription-based pricing, along with an increased opportunity to sell maintenance/support services. Providing industry or process-standard specific best practices and targeted resource libraries supporting engineers in these fields will help maximize related sales opportunities, especially within the FUSA SSMT market.

MathWorks is the leading FUSA SSMT vendor by a substantial margin, followed by IBM, National Instruments, Dassault Systèmes, Ansys, Vector Informatik, and PTC. The market has a long tail of smaller vendors that continue to serve long-time customers in this relatively sticky market that is insulated from displacement by newer offerings and competitors.



FUSA Software & Security Test Tools

Exhibit 8: Global Revenue of Embedded Software & Security Test Tools(Millions of Dollars)

Exhibit 9: Global Revenue of FUSA Software & Security Test Tools, by Product Type(Millions of Dollars)

$483.0$531.6

$584.8$639.9

$692.3$729.5

$346.6$384.1

$425.2$467.8

$508.6 $539.6

$0

$100

$200

$300

$400

$500

$600

$700

$800

2018 2019 2020 2021 2022 2023

Embedded TEST FUSA TEST

$120.5 $126.5

$74.9

$24.8

$196.7 $191.6

$112.5

$38.8

$0

$50

$100

$150

$200

$250


2018 2023

The market for FUSA TEST tools totaled $346.6M in 2018, making up 71.8% of all embedded TEST tool revenue for the year. FUSA TEST tools sales will grow at a relatively rapid CAGR of 9.3% to reach $539.6M in revenue in 2023, outpacing overall embedded TEST tools sales, which will grow at a CAGR of 7.6% [Exhibit 8]. The need to establish bi-directional traceability to meet certification requirements is fueling interest in using integrated application lifecycle management (ALM) or product lifecycle management (PLM) solutions to manage the entire product development process. The increased discipline found by following these development practices will drive more demand for automated testing solutions. As ALM and PLM use rises, it will be increasingly important for test tool suppliers to provide APIs needed to integrate test cases and results into the development toolchain.

One of the most important multi-year trends in the overall test tools market is the increasing need for testing and verification on the algorithm side of the development process as systems have increased in complexity. Traditional



customers developing aircraft and automobile subsystems have always prioritized functional safety, but testing on the algorithm side is now becoming more important in medical and industrial as software takes over more of how systems operate across industries.

VDC expects that enforcement of vendor-specific coding standards, such as those now used by General Motors (GM), will become more commonplace in the FUSA industries, such as automotive and aerospace, which have extensive, multi-layered supply chains. Providing clear software component guidelines reduces risk for OEMs and helps accelerate their verification and validation processes. Tool suppliers with deep, specific industry expertise and/or involvement in the development of the functional safety standards themselves should proactively pursue partnerships with major OEMs or industry groups. OEMs can benefit from tool supplier expertise in these areas. Meanwhile, tool suppliers gain the advantages of being ready to rapidly provide modules for updated standards and by having a tacit recommendation for use of their tools when developing to the applicable standards.

High-revenue growth opportunities in emerging technology areas within FUSA-related verticals are drawing numerous OEM/tiered supplier startups into the embedded market. Traditional OEMs now face new competition from companies such as Cruise Automation and Zoox in automotive, Fetch Robotics in industrial automation, Vionx Energy in energy/power, and many others across the FUSA verticals. Many of these companies lack extensive industry-specific expertise in comparison to long-standing OEMs and are viewed as potential acquisition targets. This provides more opportunities for established tool suppliers to provide professional or managed services to less-seasoned teams, and to land larger OEM accounts through acquisitions. Traditional and FUSA test tools vendors should look to bolster their application consulting/testing services to layer incremental revenue on top of their legacy subscriber base.

MathWorks, Synopsys, Parasoft, Perforce, GAIO Technology, and IBM lead the market in revenue. MathWorks leads the FUSA dynamic and model-based test portion of the market with its broad adoption of Simulink across safety-critical industries, and the strong presence of Polyspace in the static analysis market. Synopsys, however, tops the FUSA static analysis portion of the market with its (sequential) acquisitions of Kalistick, Codenomicon, the Seeker solution from Quotium, Protecode, Goanna Software, Cigital, Codiscope, Forcheck, and Black Duck Software, bolstering its market position.

Recent DevelopmentsNew Partner/Pre-Certified Programs ProliferateIn an effort to speed time-to-market for customers, a number of hardware and software organizations are partnering to offer pre-certified or certifiable systems to add value on top of their silicon designs and products. NXP has launched its SafeAssure program, Xilinx provides FUSA isolation guidelines and holds two yearly conferences in Munich and Michigan for its customers, and NVidia is in the process of pre-certifying its autonomous driving SoC + GPU platform.

To better address the functional safety market, Arm launched its “Safety Ready” program and released its Cortex-A76AE just over a year ago, aiming to give developers a clear portfolio of certifiable hardware and software to reduce risk and speed time to market. Additionally, in August 2019 Arm announced its “Functional Safety Partnership Program” to give customers access to preferred suppliers for software & tools, design services, and training services. Partners at launch included Cadence, CoreAVI, Encore Semi, EnSilica, Green Hills Software, Inomize, LDRA, Mentor, Mobica, Parasoft, and ResilTech. Many of the most lucrative opportunities in this ecosystem revolve around the software and tools needed to consolidate digital clusters in cars and design for mixed criticality systems.

Functionally, many of these selected partners are linking their software and tools into Arm’s development tools, such as Arm Development Studio, so that engineers can (for example) test software without leaving their Integrated Development Environments (IDEs). FUSA tool vendors must continuously evaluate their relationships with hardware and silicon suppliers to ensure they are providing customers the easiest setup and path to market through the often complex FUSA regulatory landscape.



COMPARATIVE FORECASTS BY VERTICALFUSA Requirements Management Tools

Exhibit 10: Global Revenue of FUSA Requirements Management Tools, by Vertical Market(Millions of Dollars)

45.5%$71.3

42.7%$67.0

3.6%$5.6

4.6%$7.1

3.0%$4.7

0.7%$1.0

Aerospace & Defense Automotive Industrial AutomationMedical Devices Rail/Transportation Other

40.9%$96.4

45.5%$107.3

3.8%$9.0

5.9%$13.9

3.2%$7.6

0.6%$1.4

2018 Total (US $M) $156.8 2023 Total

(US $M) $235.5

Technological innovation and evolving market dynamics are fueling demand for RM tools across the embedded industries. Digitalization of formerly mechanical and hydraulic components, exponential growth in IoT deployments, and the need to counter new competition—often from companies with novel software-focused business plans—are fueling a rapid increase in embedded system complexity. Development budgets and project deadlines remain tight while engineering teams must design devices that deliver improved functionality, usability, and security. These challenges are most acute in industries with safety-critical applications. The performance and safety of embedded systems in automotive, aerospace, medical devices, and industrial automation is growing ever-more dependent on software for system behavior. As a result, regulatory agencies and OEMs are mandating compliance to functional-safety and development process standards with greater frequency.

In 2018, A&D was the largest industry for FUSA RM tools, accounting for 45.5% ($71.3M) of the FUSA RM market. Software code bases in both military and civilian aviation applications are extremely complex and are highly regulated due to security and functional-safety concerns. Government agencies and aircraft manufacturers often mandate the use of RM tools, sometimes requiring the use of particular brands. As a result of these market conditions, the industry has the highest reported use rate of commercial RM tools among the embedded industries. However, the A&D RM tool market is comparatively saturated due to decades of extensive RM tool use. This saturation and the frequency of lengthy development cycles limit RM tool revenue growth opportunities. RM tool revenue will expand at a CAGR of 6.2% to reach $96.4M in 2023.



Exhibit 11: Global Revenue of FUSA Software Development Tools, by Vertical Market(Millions of Dollars)

34.6%$52.2

37.9%$57.1

15.7%$23.6

7.7%$11.5

3.9%$5.8

0.3%$0.4


31.9%$57.7

39.4%$71.4

17.0%$30.8

8.1%$14.7

3.4%$6.2

0.2%$0.4

2018 Total (US $M) $150.7 2023 Total

(US $M) $181.2

Automotive was the second-largest vertical market by revenue for FUSA RM tools in 2018, amounting to $67M in revenue, or 42.7% of the overall FUSA RM market. RM revenue in the industry is expanding rapidly at a CAGR of 9.9% and will reach $107.3M in 2023. Challenges in developing for mixed criticality systems, integrating consolidated vehicle control units (VCUs), and developing for increasingly autonomous vehicles are fueling increased RM tool adoption despite a long history and existing broad base of use across the industry. Demand for new software-intensive components such as advanced driver assistance systems (ADAS), alternative powertrains, autonomous driving systems, and connected vehicles is pushing code complexity and content requirements ever higher. RM vendors must work closely with automotive-focused silicon providers in order to position themselves well in this dynamic market. We expect the automotive revenue to overtake A&D revenue by 2021.

FUSA Software Development Tools

Much like the other FUSA tool categories under study, the FUSA SDT market is primarily split between A&D and automotive. Automotive accounted for 37.9% of the market in 2018, and will expand much more rapidly than A&D at a CAGR of 4.6% to reach $71.4M in 2023, while A&D will lag behind with a 2.0% CAGR. Vendors in the automotive market will have the opportunity to tie security into their offerings, most notably in the automotive market. SAE-J3061 is gaining momentum as a cybersecurity standard and should be supported by FUSA SDT toolsets and services/consulting departments.

A few of the smaller verticals, such as industrial automation and medical are seeing the highest overall growth rates, but are growing from a much smaller base than automotive and A&D. Although medical has been “on the cusp” of providing more opportunities for the past decade, we still have yet to observe a strong uptick in revenue among FUSA SDT



vendors. IEC62304 does not have the same teeth that DO178 or ISO26262 has, and consequently we expect revenue to stay low until a major IoT hack or event causes the FDA and other global regulatory bodies to reevaluate medical device OEM oversight.

FUSA Software & System Modeling Tools

Exhibit 12: Global Revenue of FUSA Software & System Modeling Tools, by Vertical Market (Millions of Dollars)

34.9%$238.5

36.4%$248.3

5.6%$38.5

14.8%$101.0

8.0%$54.7

0.2%$1.4


29.6%$310.8

38.7%$406.7

6.4%$66.8

18.2%$191.4

6.9%$72.3

0.2%$2.1

2018 Total (US $M) $682.4 2023 Total

(US $M) $1,050.1

A majority of overall SSMT revenue is currently generated from use in the A&D and automotive industries. Engineering organizations in these markets were early adopters of modeling. However, as embedded software becomes more sophisticated and devices more interconnected in a system of systems architecture, investment in modeling tools is now rapidly growing in several industries. FUSA modeling tool revenue is expanding most rapidly in medical devices and industrial automation (most notably energy/power) at 13.6% and 11.6%, respectively, through 2023.

Automotive is the top industry for FUSA SSMT revenue, generating $248.3M in 2018. Model-driven development practices are well established in the automotive industry, but the aforementioned drivers will continue fueling rapid modeling tool revenue growth for both proprietary language-based modeling (PLBM) and standard language-based modeling (SLBM) tools through 2023. The explosive growth of ADAS applications for modeling will provide an even sharper increase in demand for SLBM tools than is seen in the PLBM segment. Actively supporting or targeting academia, which MathWorks and National Instruments do effectively, can provide a buffer against displacement by new entrants in the market. Recent engineering graduates are disproportionally over-represented in these new and expanding technology areas. Modeling platforms that establish a large base of users in this population will benefit from carry-over business as students enter the workforce.



Exhibit 13: Global Revenue of FUSA Software & System Modeling Tools, by Vertical Market (Millions of Dollars)

23.5%$160.6

17.9%$121.9

4.6%$31.7

2.9%$20.1

1.6%$11.0

0.2%$1.2


19.8%$208.0

20.8%$218.0

5.5%$58.0

3.4%$36.0

1.7%$18.3

0.1%$1.3

2018 Total (US $M) $346.6 2023 Total

(US $M) $539.6

Engineering organizations in the A&D industry have a long history of using model-based development practices to help reduce the reliance on costly prototypes. A&D was the second-largest industry for modeling tools by revenue, totaling $238.5M in 2018. This will increase at a CAGR of 5.4% to $310.8M in 2023. The majority of this revenue is from PLBM tools, with major SSMT vendors seeing an interest in impact analysis to model and verify changes to legacy code bases to avoid introducing new bugs. Long-term aviation global growth projections forecast single-digit growth in revenue and passenger demand for commercial airlines, although recent events surrounding Boeing’s 737 MAX 8 planes will undoubtedly increase scrutiny of functional safety practices in the industry. Tooling revenue gains will be driven by new project starts as airlines replace older, less efficient aircraft, and increased use of model-based system engineering development methodologies helps manage manufacturing partners.

FUSA Software & Security Test Tools

In 2018, A&D was the largest overall vertical market for FUSA test tools, with the highest volume of static analysis tool revenue and the second-highest volume of dynamic and model-based tools going towards FUSA-certified avionics projects. Increasing use of third-party software components to speed development and the need to address security concerns will fuel continued static and dynamic tool revenue growth and encourage adoption of binary analysis tools within A&D. Automotive was the second-largest FUSA test vertical overall, and the largest market for dynamic test tools, generating $121.3M in revenue. The need for automotive engineering teams to measure and report on code coverage and to support model-based system engineering practices will increase demand for dynamic and model-based test tools through 2023. Revenue for the tools will increase faster (12.4% CAGR through 2023) than in the overall embedded market (9.3% CAGR through 2023), and much faster than the A&D segment, leading to automotive overtaking A&D by 2023.



Automotive engineering teams have long used dynamic testing tools to produce software in compliance with several standards, such as MIRSA, ISO 26262, and AUTOSAR. In the aerospace and defense industry, extraordinarily complex projects and stringent functional safety certification standards such as DO-178B/C have long encouraged use of static analysis and dynamic testing tools. Across the embedded industries, adoption of static and binary analysis tools is increasing as engineering teams recognize the benefits of using the tools to prevent violations of coding standards, avoid licensing conflicts, and reduce the introduction of security vulnerabilities. VDC expects static analysis revenue to increase most rapidly in industries or application areas where disruption from connected, intelligent systems is the most common. In the automotive, industrial automation, medical, and rail/transportation industries, CAGRs for static analysis revenue will exceed 10% through 2023. Increased deployment of new, software-intensive solutions in these markets will accelerate the growth of code bases and encourage greater use of software from third-party sources. Static and binary analysis tool revenue will expand as more organizations use the tools to help control development costs and meet go-to-market deadlines.



COMPETITIVE LANDSCAPEExhibit 14: Global Revenue of FUSA Requirements Management Tools, by Leading Vendors

(Percent of Revenue)

Exhibit 15: Global Revenue of FUSA Software Development Tools, by Leading Vendors(Percent of Revenue)

53.0%

13.5%

12.4%

6.5%

5.9%

8.7%

IBMPolarion (Siemens)PTCJamaDassault SystèmesOther

2018 Total (US $M) $156.8

14.4%

10.2%

10.1%

9.3%

9.2%7.4%

6.5%

32.9%

IARAdaCoreArmLDRAMentor GraphicsWind RiverGreen HillsOther

2018 Total (US $M) $150.7



Exhibit 16: Global Revenue of FUSA Software & System Modeling Tools, by Leading Vendors(Percent of Revenue)

Exhibit 17: Global Revenue of FUSA Software & Security Test Tools, by Leading Vendors(Percent of Revenue)

37.8%

13.1%8.7%

6.9%

6.3%

4.5%

4.1%

18.7% MathWorksIBMNational InstrumentsDassault SystèmesAnsysVector InformatikPTCOther

2018 Total (US $M) $682.4

32.1%

29.3%

9.0%

7.2%

5.9%

4.8%

11.7%

MathWorks

Synopsys

Parasoft

Perforce (RogueWave/Klocwork)

GAIO Technology

IBM

Other

2018 Total (US $M) $346.6



Arm is the most shipped CPU architecture in embedded processors today with 150bn chips shipped to date, and aims to provide a complete Internet of Things solution by offering not only IP products but also cloud services that allow customers to manage the deployment of products

throughout their lifecycle. The company was acquired by SoftBank Group at the valuation of £23.4B in September 2016. With three headquarters located in Cambridge, UK, San Jose, and Shanghai, it employed approximately 6,000 people and generated total revenues of $1.9B in 2018.

Arm’s DS-5 tool suite provides comprehensive support for software development, bringing together multicore scalability and enhanced productivity enabled by its Cortex Microcontroller Software Interface Standard (CMSIS). The previous Arm DS-5 has been superseded by Development Studio. By transforming both the previous DS-5 and Keil Microcontroller Development Kit (MDK), an addition from Arm’s acquisition of Keil in 2005, this new embedded tool suite features Arm compilation tools, system auto-detection, streamlined performance analyzer, as well as Armv7 and Armv8 architecture support. Moreover, Keil MDK itself is a complete software development environment for a wide range of Arm Cortex-M based microcontroller devices. Both MDK and DS-5 are built on the same C/C++ toolchain and are qualified for industrial, medical, automotive, and railway industries. Please see the “Recent Developments” section for a detailed discussion of Arm’s new FUSA partner program.

Arm offers a variety of products from processor IP, IoT Platform, to software and tools. The company’s IP is far-ranging from cores for CPUs, multimedia graphics processors, physical and wireless IP, system IP, as well as security IP. It is the industry’s leading supplier of microprocessor technology, and its Pelion IoT Platform supports the secure and flexible foundation of IoT services for connectivity, device, and data management. Investing in long-term, secular growth markets, Arm is aiming to grow its technology licensing by more than 100 every year on top of its 1,620+ current licensees. Its strategy includes not only maintaining market share, but also increasing the value of Arm technology per smart device, as well as investing to create a sustainable business for the long term.

Green Hills Software, headquartered in California and the United Kingdom, is a privately held company that is a leading supplier of IoT & embedded OSes and SDT tools. Its products range from platform-independent, real-time operating systems to embedded development solutions that support hardware and software platforms. Green Hills also owns and operates INTEGRITY Security Services (ISS), a subsidiary that provides

embedded security solutions.

Recently, Green Hills announced its participation in Arm’s new Functional Safety Partnership Program as the first Software and Tools partner. The collaboration aims to advocate for its products and services that, together with the support of the Arm architecture, are utilized for safety-critical embedded systems for automobiles, building security, aircraft, and more. In early 2019, Cadence invested ~$150M in Green Hills for an approximate 16 percent ownership stake, with Cadence CEO Lip-Bu Tan joining the Green Hills Board of Directors. The newly-expanded partnership will pair Cadence’s expertise in hardware design tools with Green Hills’ FUSA software focus, allowing both to play a larger role in end-to-end FUSA procurement decisions

Green Hills’ products include platform solutions, operating systems, virtualization, development tools, processor probes, and OS middleware. In the range of its development tools products, the MULTI IDE has brought continuous enhancement for decades. With features such as the MISRA C/C++ Adherence Checker, OSA Explorer, Debugger, and EventAnalyzer, it is can quickly detect and solve software problems in complex systems. Its collection of compilers enforces stricter coding standards than regular C and C++ via GHS Standard Mode, simplifying the building process and boosting productivity. With MULTI for Linux, engineers who develop software for embedded Linux systems are also able to utilize this tool to visualize and debug all aspects of the system.



Traditionally known for its strong base of A&D customers, Green Hills has moved quickly to capitalize on trends in the automotive market. The company has focused on safety-critical and highly regulated markets since its inception, and has considerable expertise in safe and secure run-time software. Green Hills also has one of the strongest security technology and services portfolios among the OS vendors, and their virtualization software comes into play when customers choose to run Linux or Android as INTEGRITY guests alongside INTEGRITY critical native tasks. The company is well-positioned to continue its growth into the burgeoning automotive market, and should continue to invest in its tool portfolio and expand its partner network going forward.

Lauterbach, headquartered in Germany, is a leading supplier of complete, modular microprocessor development software worldwide. It was founded in 1979 and has more than 30 years of experience in embedded microprocessor

designs and development tools. The company’s product philosophy is to have “everything from a single source”—everything that is required for emulation, debugging, real-time trace and logic analysis in embedded designs can be supplied by Lauterbach. At the headquarters in Höhenkirchen, near Munich, the engineering team develops and produces comprehensive and specialized Development Tools, which are utilized worldwide under the brand TRACE32.

The company has focused recently on improving traditional tool products and expanding support, improving the streaming capabilities of µTrace and strengthening its JTAG Switcher for multi-processor designs. Newly supported (or improved) platforms are FUSA-industry focused and include Lynx MOSA.ic, SAFERTOS, Wind and the River Helix Platform Virtualization platform, among others.

Lauterbach’s products comprise debugger hardware, trace products, software-only debugger, logic analyzer, ROM analyzer, ICE In-Circuit Emulator, and other useful products. Its TRACE32 Debugger is a JTAG debugger probe that works with the Nios II debug core to debug Nios II based embedded software. In addition, Lauterbach TRACE32 tools support almost all common microprocessor architectures in use in the embedded market, providing a comprehensive debug environment supporting all standard features. Lauterbach continues to support its traditional customers and is a fixture within the SDT embedded engineering community due to its longstanding usage in the functional-safety industries.

LDRA is a provider of automation software for code analysis and software testing. The company has international headquarters in the United Kingdom, the United States, India, and Germany coupled with an extensive distributor network. It is certified for Quality Management System – ISO 9001:2015. Its tool suites are qualified to be used in safety-related software development and certified by TUV SUD and SGS-TUV SAAR.

The company primarily focuses on five industry sectors: Aerospace & Defense (mission critical software), Industrial & Energy (operation critical software), Automotive (performance critical software), Rail (passenger critical software), and Medical (life critical software). The LDRA tool suite enables automation on unit and system-level testing and performance of coverage analysis. It supports the DO-178, EN 50128, IEC 61508, IEC 62304, IEC 60880, ISO 26262 and SAE J3061 development processes from requirements through to deployment.

Recently, NOW Technologies has chosen the LDRA tool suite to perform static analysis of software code in its multi-purpose Gyroset Glory headset that enables gesture-based motion control to drive wheelchairs for injured and disabled users. The headset is developed with the IEC 62304 medical device software life cycle processes, and the MISRA C:2012 software development guidelines to help ensure functional safety and security. The company has also released the LDRA Face Conformance tool suites, which are uniquely positioned to target the aerospace and defense community. LDRA’s products have been used in critical embedded software development for over 40 years, and the company is currently a contributing participant in the Open Group Future Airborne Capability Environment (FACE) standard to provide software tools to help military customers.



LDRA has made effort to improve its automation performance. Earlier this year, it partnered with Siemens Polarion to boost traceability and verification for critical embedded systems. The software integration with Siemens Polarion leverages LDRA’s automated static review and dynamic coverage analysis as well as automated test case generation, execution, and results capture.

MathWorks is a privately held company that specializes in the development of mathematical computing software for engineers and scientists. The company is headquartered in Natick, MA and employs approximately 4,500 employees. The company has a strong embedded tool market penetration into several industries, including automotive, aerospace & defense, rail/transportation, energy, and medical devices. It is the leading automated test tool supplier in the embedded/IoT market, and a leading vendor of modeling tools in the embedded/IoT market with its MATLAB and Simulink platforms viewed as de facto standards for modeling tools in various market segments.

MathWorks is one of the vendors at the front of the push for ML and deep learning integration into embedded tools, commercially through its portfolio of Toolbox extensions for MATLAB and Simulink. MATLAB is

a multi-paradigm numerical computing environment tuned for iterative analysis and design processes. Simulink is a product for simulation and model-based design before moving to hardware, allowing developers to combine textual and graphical programming in a simulation environment.

The company recently announced the release of 2019b MATLAB and Simulink with new capabilities including those in support of artificial intelligence, deep learning, and the automotive industry. One of the highlights for MATLAB is the Live Editor Tasks which enables users to interactively explore parameters, preprocess data, and generate MATLAB code that becomes part of the live script. Highlights of Simulink include the new Simulink Toolstrip, which helps users access and discover capabilities. Recent FUSA customers include LG Electronics, who adopted Model-Based Design with MATLAB and Simulink to develop and verify high-speed motor control software based on AUTOSAR and ISO 26262. MathWorks must walk a fine line between supporting popular open-source frameworks and championing its own commercial products (or more likely, describing how its commercial products extend what’s available in those frameworks). Nevertheless, its strong base of functional safety customers that rely on robust, industry-tested tools such as MATLAB and Simulink will continue to buoy sales of Toolboxes for new ML and deep learning applications as these technologies are increasingly used in concert within the autonomous vehicle and IoT contexts.

PTC is a computer software and services company founded in 1985 and headquartered in Boston, Massachusetts. It is a public firm with over 6,000 employees in 30 countries, 1,150 technology and service partners, and 300,000 developers in its global ecosystem. With 41% of revenue generated in the Americas, it achieved $1.24B in revenue in 2018.

The company announced at its 2019 LiveWorx digital transformation event, ThingWorx 8.5, is available with new capabilities that equip engineers, manufacturers, service professionals, and IT/OT digital transformation teams with domain-specific functionalities, including expanded analytics ecosystem, centralized administrative portal, enhanced integration with Microsoft Azure and Azure IoT Hub.

Besides ThingWorx, PTC has a variety of products ranging from Augmented Reality (AR) tools & solutions, Industrial Internet of Things (IIoT) Software, CAD Software, PLM Software, PTC Mathcad Software, Service Lifecycle Management (SLM) Software, and other management and developer tools. Windchill, a product lifecycle management software, integrates with other enterprise systems to expand product data access to stakeholders and effectively avoid over-customization and complexity. It manages product data, BOM, change and configuration, platforms, manufacturing process planning, and quality.



One important component of PTC products’ success has been the expansive Partner Network and its strategic alliances with Rockwell Automation and Microsoft. PTC has been highlighted as Manufacturing and Resources Partner of the Year at the 2019 Microsoft Partner of the Year Awards. To further continuous growth, PTC should maintain and cultivate its network and alliances.

Wind River Systems is the leading provider of RTOS solutions and Commercial Linux in the overall IoT & embedded OS market with its flagship VxWorks and Wind River Linux OS products, along with its strong Workbench, Diab tools, and compilers. Wind River

was acquired by Intel in 2009 and subsequently divested in 2018 to TPG Capital.

Wind River’s product business is currently organized into two categories: (1) operating systems, tools, and platforms, and (2) the Titanium virtualization product line, primarily serving industrial and networking markets. It has recently announced IEC 62304 medical standard compliance for the latest release of VxWorks Cert Edition.

Wind River’s tools for embedded software development fall into two products—Wind River Workbench and Diab Compiler. These tools enable developers to quickly configure the operating system, analyze and tune the software, and debug an entire system, while Wind River’s simulation system, Wind River Simics, brings more efficient automation and allows continuous development practices to deliver better software.

WorkBench: a complete suite of developer tools for software running on Wind River platforms. Diab Compiler: helps create safety-critical applications, boost application performance, reduce memory footprint, and produce high-quality, standards-compliant object code for embedded systems. Simics: enables secure access to virtual hardware anytime and anywhere, incorporates automation where physical hardware automation would be difficult, and tests security vulnerabilities in a controlled environment.

VxWorks, an RTOS that has enabled security, safety performance of embedded applications for more than 30 years, is undergoing continuous evolution. It now empowers developers from all backgrounds and supports various popular programming languages along with infrastructures to create mission-critical applications that require the highest levels of security and safety.



VDC conducts regular surveys of embedded and IoT engineers from around the world and across vertical markets, including an annual survey that encompasses a variety of engineering requirements and trends. Below are some relevant highlights from the most recent VDC survey, conducted in August 2019, which had nearly 800 respondents working on enterprise, IT, IoT, and embedded products.

Overview of FUSA Compliance Usage & Tool Budgets

END-USER INSIGHTS

Exhibit 18: Certification/Approval Standards Required for Current Project(Percent of Respondents)

Note: Percentages may sum to more than 100% due to multiple responses.

4.9%3.9%3.9%

4.7%5.2%

6.4%7.5%7.9%8.2%8.6%8.8%9.3%9.6%9.6%9.6%10.1%

11.0%12.2%

13.6%13.7%

18.5%26.7%

0% 10% 20% 30%

OtherEN 50128

MIL-STD 498Def Stan 00-55

FDA 510(k)/CFR 21IEC/EN 60601

IEC-62679 / EN 50128 / 49CFR236 Rail systemsIEC 60880 Nuclear Domain

CMMIDO-278A / ED-109A

ISO 26262IEC 62061AUTOSARIEC 61508

IEC/EN 62304 MedicalISO-14971 Medical

ANSI/UL 1998ARINC-653 Avionics Application

DO-178B / DO-178C / ED-12B / ED-12CCNS/ATM EUROCAE ED 109

ISO 9001:2008No safety-critical/process standards

IoT and embedded engineers are complying with a wide mix of standards and certifications on their current projects. Nearly 3 in 4 surveyed engineers had some sort of requirement to meet, with the overarching ISO9001 for quality management being the most used across industries and geographies. A&D showed a healthy mix of standards compliance with over 10% of overall respondents indicating they were using ARINC-653, EUROCAE ED 109, or DO-178. In industrial automation, IEC61508 was required on a surprisingly small portion of projects with under 10% of engineers indicating its use, even though the largest portion of the sample, nearly 25%, was working on an industrial automation or energy/utilities project. AUTOSAR compliance was slightly higher than ISO26262 compliance among those surveyed; a good sign for the consortium as AUTOSAR Adaptive Platform takes shape for the automotive industry.



Exhibit 19: Budget for Development Tools Being Used on Current or Most Recent Project, by FUSA Compliance(Percent of Respondents)

Given the increased need for tools in order to comply with regulations and achieve certification, it is no surprise that FUSA project tool budgets are higher than their general purpose counterparts. The degree of separation is somewhat surprising though, with FUSA projects garnering 64% higher budgets on average than non-safety-critical projects. General-purpose budgets cluster around the $2,000–$20,000 range, whereas FUSA projects cluster around the $25,000–$100,000 range. While 10% of engineers respond that they are using free tools on their project, only 3% of FUSA engineers say the same. There is clearly a much higher opportunity for FUSA vendors to generate revenue within FUSA projects—64% higher to be exact.

6.8%

5.8%

3.4%

3.4%

3.4%

6.8%

5.8%

14.1%

13.6%

11.7%

14.6%

10.7%

8.3%

7.3%

3.5%

11.0%

10.1%

11.3%

11.0%

13.6%

8.7%

7.8%

4.8%

2.7%

0% 2% 4% 6% 8% 10% 12% 14% 16%

Don't know

$200,000 or more

$150,000 to $199,999

$100,000 to $149,999

$75,000 to $99,999

$50,000 to $74,999

$25,000 to $49,999

$10,000 to $24,999

$5,000 to $9,999

$2,000 to $4,999

$1 to $1,999

$0 (Free)

Safety-Critical Non Safety-Critical



Exhibit 20: Types of Tools Used in Current/Most Recently Completed Project, by FUSA Compliance(Percent of Respondents)

FUSA Tool Usage Outlook

0% 10% 20% 30% 40% 50% 60%

Other

Don't Know

Interactive Application Security Testing (IAST) Tools

Model-Based Software Testing Tools

Static Application Security Testing (SAST) Tools

Dynamic Application Security Testing (DAST) Tools

Software/System Modeling Tools (Proprietary)

Dynamic Software Testing Tools

Requirements Management/Definition Tools

Software/System Modeling Tools (Standard)

Binary/Assembly Code Analysis

Software Test Management Tools

Static Analysis Tools

Unit Testing Tools

JTAG Debuggers/In-circuit Emulators

Editors

Build Tools

Debuggers

Integrated Development Environments (IDE)

Compilers

Non Safety-CriticalSafety-Critical

Note: Percentages may sum to more than 100% due to multiple responses.

When looking at tool usage across FUSA-compliant projects versus general purpose projects, a few categories stand out. First is the significantly decreased usage of general SDT tools—build tools, compilers, IDEs, JTAG debuggers—among those engineers working on FUSA systems. Instead, these engineers are more likely to use the other three categories of tools covered in this report—RM, SSMT, and TEST. Of these three categories, testing is used by the highest percentage of FUSA engineers, with around 25% of engineers using test management, statics analysis, or unit testing tools on their projects. Modeling tools show the highest discrepancy between their relatively low usage in general purpose projects and higher levels of usage (around 20% for both standard and proprietary language-based) among FUSA engineers.

Going forward, there is a fair bit of uncertainty regarding tool usage, especially among FUSA engineers, who use 4.7 different tools on average on their current project, but that only expect to use an average of 4.1 tools on their next project. Project and software complexity is not decreasing, but outside of basic debuggers and emulators, FUSA engineers find it difficult to forecast what they will be using. RM tools are among the few categories that show an increased expectation of use, while most modeling and testing tools show slight declines in expected use. Vendors should look to consolidate FUSA products across their disparate silos and continue to integrate FUSA tools to decrease uncertainty across such a large selection of tools, and to encourage engineers to stay within their portfolio.



SCOPE AND METHODOLOGYDefinitionsFor the purposes of this report, VDC defines Functional Safety development tools & test solutions to be tools/platform used on projects where embedded software must meet a standards-certified architecture/design to ensure functional safety (e.g., ISO26262, IEC62304, ARINC-653, etc.). Products in this market fall into four main tool categories:

Software Development Tools (SDT): Software that helps in the creation of new software. Includes Compilers, debuggers, visual programming tools, and IDEs, among other basic software development tools.Requirements Management Tools (RM): Tools used primarily for requirements elicitation, definition, and/or management that can function without the presence of additional lifecycle management tools from the same vendor.Software and System Modeling Tools (SSMT): Both standard language-based tools such as UML, SysML, and SDL-based modeling environments, as well as UML-based state chart/machine tools used for model-driven design; and proprietary language-based such as standalone automated code generators commonly integrated with system modeling and simulation environments, as well as dynamic Human-Machine Interface (HMI) design tools used to develop complex, model-based interfaces within embedded systems software and system modeling tools intended to facilitate the process of developing object-oriented and/or event-driven software and systems.Test Tools (TEST): Dynamic test tools and related services including: test coverage analysis, unit testing, integration/system testing, regression and load testing, tracing, tuning, and other testing necessitating the execution of the program; Model-based testing tools used to generate and/or execute tests or analyze software/system models (UML, SysML, MATLAB/Simulink, etc.) or model-designed tests; and static code analysis tools and related services, including syntax parsers, coding rule compliance checking, static verification, symbolic execution, and other automated test tools used without executing the program.

The market for tools that depend on a specific third-party application, API, open source repository, or platform without an independent value-add, user interface, business model, and pricing scheme.The market for tools that meet one or more capabilities as defined by VDC, but do not meet the entire integrated capabilities of an SDT, RM, SSMT, or TEST tool.The captive portion of the functional safety development tools & test solutions market, which we define as technology designed and built internally at OEMs solely for internal use or integration into their own larger systems or end products.

The following markets are specifically excluded from the forecasts in this report:

MethodologyVDC produces its forecasts from a combination of primary and secondary data, including our own surveys and in-depth interviews with OEMs and industry executives; internal historical data sets and market models; public and privately disclosed numbers from vendors and customers, industry organizations, trade publications, and conferences; and our analysts’ extensive base of industry experience and knowledge.



APPENDIX & DEFINITIONSIoT, Embedded, and Enterprise

VDC Definition

Embedded Devices

VDC defines embedded devices as specialized or dedicated computer systems used to control items such as automobiles, industrial machinery, military hardware, medical devices, consumer electronics, and business automation equipment. Specifically excluded from VDC’s definition of embedded devices are general-purpose computing systems such as desktop PCs, laptop PCs, and enterprise servers. Smartphones and tablets contain both embedded and general-purpose computing systems, and our forecast for embedded security software includes such software installed at the embedded level (such as within wireless SoC chips), but excludes software installed by end users—that is, app store downloads.

Embedded Engineer

An embedded software engineer (or developer) is defined as a person specifically tasked with engineering software for embedded systems/devices. An embedded software developer’s primary focus is on the engineering of firmware, operating systems, and/or application/middleware. This definition specifically excludes hardware engineers (or designers), project managers, system architects, test and quality assurance engineers (many of whom may be involved in software engineering tasks), as well as engineers and programmers working to develop software for desktop or general-purpose server computing machines. This evaluation of embedded software developers also specifically excludes engineers who install or maintain already manufactured embedded systems.

IT/Enterprise/ISV

All types of enterprise hardware and software intended to be deployed into general-purpose computers (i.e., desktop PCs, standard laptop PCs, enterprise servers, etc.). IT/enterprise/ISV computers are not deployed to meet real-time requirements and are often reconfigured by end users to satisfy a wide range of computing tasks.

IT/Enterprise/ISV Developer

A person who is part of a project team that designs hardware or software for general-purpose systems/devices. An IT/Enterprise/ISV software developer’s primary focus is on the engineering of general-purpose computing, networking, or security applications that apply to a network of general-purpose computers. An IT/Enterprise/ISV hardware developer’s primary focus is on the engineering of general-purpose computer boards intended for PCs, desktops, and servers.

Internet of Things (IoT)

Technologies that enable the exchange of data, communication, and services between devices, machines, and/or network infrastructure to the backend/cloud for the purposes of analysis and eventual feedback to the devices. Both embedded and general-purpose computers can be considered IoT systems if they include networking technology that enables Internet connectivity.

IoT Engineer

A person who is part of a project team that designs hardware or software for IoT systems/devices. Both embedded and IT/enterprise/ISV engineers can be considered IoT engineers if they are working on a project that includes networking technology to enable Internet connectivity.



Tools Definition

Software Development Tools (SDT)

Software that helps in the creation of new software. Includes Compilers,debuggers, visual programming tools, and IDEs, among other basic softwaredevelopment tools.

Requirements Management Tools (RM)

Tools used primarily for requirements elicitation, definition, and/or managementthat can function without the presence of additional lifecycle management toolsfrom the same vendor.

Software and System Modeling Tools (SSMT)

Both standard language-based tools such as UML, SysML, and SDL-basedmodeling environments, as well as UML-based state chart/machine tools usedfor model-driven design; and proprietary language-based tools such asstandalone automated code generators commonly integrated with systemmodeling and simulation environments, as well as dynamic Human-MachineInterface (HMI) design tools used to develop complex, model-based interfaceswithin embedded systems software and system modeling tools intended tofacilitate the process of developing object-oriented and/or event-driven softwareand systems.

Test Tools (TEST)

Dynamic test tools and related services including: test coverage analysis, unittesting, integration/system testing, regression and load testing, tracing, tuning,and other testing necessitating the execution of the program; Model-basedtesting tools used to generate and/or execute tests or analyze software/systemmodels (UML, SysML, MATLAB/Simulink, etc.) or model-designed tests; andstatic code analysis tools and related services, including syntax parsers, codingrule compliance checking, static verification, symbolic execution, and otherautomated test tools used without executing the program.

Geographic Region Definition

Americas Canada, United States (including Alaska and Hawaii), Mexico, Caribbean, and Central and South America

Asia-Pacific (APAC) Asia (excluding Russia, but including India and Pakistan), Southeast Asia, Australia/Oceania

Europe, the Middle East, Africa (EMEA)

Western Europe, Eastern Europe (including Russia and former Soviet bloc countries such as Kazakhstan), the Middle East, Africa



Vertical Market Definition

Aerospace & Defense

Aircraft (commercial/passenger/cargo) and subsystems (such as avionics, flight controls, in-flight entertainment), aerospace rockets, satellites, and other space systems; and any military/defense equipment (ground, sea, or airborne), such as radar, sonar, simulation, command and control, communications, electronic warfare/weapons controls, situational awareness wearables, etc.

Automotive (in-vehicle)

In-vehicle electronics, including airbag/passenger safety systems, infotainment/visual displays, vehicle gateways/communications, transmission controls, energy/electric motor management, body electronics, braking/traction/engine/steering controls, navigation, telematics, advanced driver assistance systems (ADAS), autonomous vehicle systems, etc.

Communications & Networking

Switches, routers, gateways, LAN equipment, modems, transmission equipment, network management, wireless infrastructure (including base stations and backhaul), VoIP, teleconferencing, call center/KTS/PBXs, test and measurement equipment, etc. For VDC’s embedded software forecasts, this market refers to the software within the embedded systems of such equipment, and excludes conventional enterprise IT computing software that may interact with such equipment.

Consumer Electronics (including Smart Home)

Home automation systems (including heating and lighting controls, smart locks, smart speakers, home gateways), digital TV/displays, TV set-top boxes and DVRs (OTA/satellite/cable/IP), home and portable audio/video players, home gaming systems, digital still/video cameras, e-readers, electronic toys, consumer wearables such as smart watches, fitness bands, etc.

Digital Security & Surveillance

Commercial video surveillance systems used for safety and security, business analytics, intelligent traffic/city management, and other non-manufacturing applications for video-based systems and analytics.

Energy & Utilities

Systems for oil and gas extraction, distribution, and refining (including drilling rigs, pipelines), power generation including green/renewable energy conversion (biomass, solar, wind, etc.), electric power grid, street lights, power system protection/conversion, transformers, utilities/energy control/monitoring (including commercial and residential smart meters), etc.

Industrial Automation & Control

Factory automations systems, commercial building automation (HVAC, security, fire/safety), data acquisition, machine vision, machine and motion controls, operator interfaces, process control/monitoring, robotics, warehouse automation/controls, etc.

Medical

Systems for professional medical and health care diagnosis and treatment. Includes patient monitoring, intensive care/prenatal monitors, medical therapy, defibrillators, blood analyzers, pacemakers, therapeutic lasers, diagnostic equipment, EKG, imaging systems, other bedside or operating room hospital equipment, medical-grade wearables (for institutional and home care), etc.

Mobile Phones

Cellular handsets including feature and smartphones as well as other converged devices that include telephony capabilities. For VDC’s embedded software forecasts, this market refers to the software within embedded subsystems (such as wireless modules, TPMs, primary and secondary operating systems, etc.), but excludes application layer “apps.”



Vertical Market Definition

Office AutomationEquipment for business office use, such as printers, copiers, fax machines, scanners, multifunction peripherals, digital whiteboards, projectors, videoconferencing equipment, desk phones, etc.

Retail Automation & Digital Signage

Systems deployed in establishments for retail (including point-of-sale terminals, barcode scanners, and credit card readers), restaurant/hospitality systems, informational kiosks, entertainment (e.g., casino gaming/slot machines, pinball/pachinko, etc.), and banking (including ATMs).

Transportation & Related Infrastructure

Roadway traffic control, tolling, parking infrastructure (street metering, gated lots/garages), public transit systems (including bus and subway vehicles, fare collections systems, monitoring, control, dispatch), ships and boats (commercial and recreational), long-haul rail cars and railway control systems, etc.

OtherOther embedded systems not attributable to the categories listed above, or that may be used within multiple categories.

Business Model Definition

Annual Developer Subscription Fees

Revenue associated with annual product subscription fees, including operating system distributions, development tools, and software updates.

Perpetual Software Licensing

Revenue associated with one-time or paid-up-front software licenses. Revenue from multi-year term licenses in which the majority of associated revenue that is recognized within the quarter of sale is also included within this segment.

Run-time Royalties/Per-unit Licensing

Revenue associated with run-time royalty and per-unit device licensing fees.

Maintenance and SupportRevenue associated with ongoing maintenance and support of licensed software.

Professional Services/Consulting

Revenue associated with consulting, system integration and training, etc.



Roy Murdock has a passion for new technologies of all sorts. His work experience in Afghanistan and Ghana has exposed him to a range of challenging and unconventional business environments in emerging markets. Roy’s research background includes data-backed product management plans and comprehensive reports on bleeding edge technologies, such as virtual currencies. He enjoys camping, kayaking, and traveling. He also spent a year studying at the London School of Economics. Roy holds a B.S. in Business Administration from Babson College.

Steve Hoffenberg is a leading industry analyst and market research professional for Internet of Things technology. He has more than two decades of experience in market research and product management for technology products and services. Prior to joining VDC, he spent 10 years as Director of Consumer Imaging and Consumer Electronics Research at the firm Lyra Research, where he led industry advisory services providing extensive market research on consumer technology trends, user adoption, market sizing, marketing strategy, and competitive analysis for major consumer electronics manufacturers. Previously, he worked in product management for electronic design companies that developed and licensed embedded digital imaging and audio products. Steve holds an M.S. degree from the Rochester Institute of Technology and a B.A. degree from the University of Vermont. He is also a Certified Information Systems Security Professional (CISSP).

Chris Rommel is responsible for syndicated research and consulting engagements focused on development and deployment solutions for intelligent systems. He has helped a wide variety of clients respond to and capitalize on the leading trends impacting next-generation device markets, such as security, the Internet of Things, and M2M connectivity, as well as the growing need for system-level lifecycle management solutions. Chris has also led a range of proprietary consulting projects, including competitive analyses, strategic marketing initiative support, ecosystem development strategies, and vertical market opportunity assessments. Chris holds a B.A. in Business Economics and a B.A. in Public and Private Sector Organization from Brown University.

Founded in 1971, VDC Research provides in-depth insights to technology vendors, end users, and investors across the globe. As a market research and consulting firm, VDC’s coverage of AutoID, enterprise mobility, industrial automation, and IoT and embedded technologies is among the most advanced in the industry, helping our clients make critical decisions with confidence. Offering syndicated reports and custom consultation, our methodologies consistently provide accurate forecasts and unmatched thought leadership for deeply technical markets. Located in Natick, Massachusetts, VDC prides itself on its close personal relationships with clients, delivering an attention to detail and a unique perspective that is second to none.

Chris Rommel

Roy Murdock

Steve Hoffenberg

ABOUT THE AUTHORS

ABOUT VDC RESEARCH

TRADEMARK ACKNOWLEDGEMENT: Many names of companies, associations, technologies, products and product types, etc. mentioned in this report comprise marks of trade, service or incorporation, either registered or non-registered, owned by various entities. These are too numerous to mention individually. VDC acknowledges that ownership of these Trademarks exist, and requests that readers acknowledge this as well.

© 2019 VDC Research Group, Inc. | P 508-653-9000 | [email protected]


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