Down 2009 likely to lead to growth in 2010 for embedded/RTOS market

DUBLIN, IRELAND: Research and Markets has announced the addition of the "Embedded/Real-time and Mobile Application Operating Systems" report to their offering.

The global recession has, and will continue to, negatively impact the market for embedded/real-time and mobile application operating systems.

Although limited growth is expected within certain vertical markets in 2009, VDC expects the overall market growth to rebound materially in 2010. The changing economic climate has led to a more cautious development approach:

In the recent past, engineering teams would have made more of the software purchasing decisions with minimal process requirements that were managed inside teams.

Since the middle of last year, the process has become more controlled and involves more formal review and approval from higher-levels of engineering management. OEMs have begun vigorously re-evaluating "build-versus-buy" cost analysis.

* More complexity and functionality/new features in software.
* Sustained time-to-market pressures.
* Increasing management oversight on development budgets.
* Reduced engineering resources.

Software vendors are under increasing pressure to articulate and deliver highly differentiated product offerings as industry consortia accelerate the maturation and value proposition of non-commercial, open source operating systems.

This study covers the worldwide market for embedded/real-time and mobile application operating systems employed in the development of embedded and mobile systems. Specifically, our research efforts focused on the markets for:

Real-time operating systems as well as non real-time operating systems used in embedded applications; and Mobile application operating systems used in embedded applications.

The analysis includes revenue from companies that offer the above operating system types, in cases where operating system and bundled product revenue represents a majority of product sales. Therefore, also included within this analysis is other licensing revenue for operating system suppliers that may be derived from:

* Development tools;
* Middleware;
* Product maintenance and support;
* Professional service fees; and
* Other bundled products and services.

The recently published report indicates that embedded system manufacturers' requirements and end-consumers' expectations continue to drive substantial investment in embedded software and development tools.

The embedded and real-time operating system market, in particular, has faired better than many other sectors of the broader embedded market, with 2008 revenue demonstrating 9 percent growth over 2007. However, even this achievement is qualified with the expectation of the first industry contraction in 2009 since 2002.

"As a whole, the embedded operating system market has been greatly affected by the reduction in unit shipments over the past nine months due to the substantial percentage of market revenues typically derived from production licenses," says Chris Rommel, Analyst with VDC's Embedded Software and Tools Practice. "However, the magnitude of the recession's impact has been tempered within the embedded and real-time segment due to the growing demands for software-driven functionality coupled with mounting device safety and security considerations and new device requirements."

Although the recession has and is expected to continue to negatively impact the market for embedded and real-time operating systems in 2009, certain vertical markets have been less affected in the short term while others hold the potential to rebound significantly in 2010.

For example, innovation within the medical device industry will drive growth as cart-mounted devices consolidate sensing and computing components into smaller, mobile form factors and device software is placed under greater regulatory scrutiny. By contrast, the retail automation industry market is expected to demonstrate the largest percent decrease from 2008 to 2009 as retail stores combat falling revenues by limiting capital expenditures on new kiosks and POS equipment.

However, we expect the retail segment to rebound significantly after showing modest growth in 2010 to grow in excess of 20 percent in 2011 as these companies begin to parlay increased cash flow into investments in enhancing efficiencies and consumer experiences.

We expect market participants who, in spite of the current economic climate, remain focused on targeted product development for and marketing to these and other key vertical markets will improve their ability to emerge from this downturn with greater revenue growth and market share.