The international Embedded World conference, which took place at the end of February 2013 in Germany, provided a strong indication that the traditional embedded market is changing. One theme run like a red thread through the show activities of many exhibitors: software monetization.

What is the reason behind this new focus? Vendors no longer concentrate on hardware development only; instead, the application feature side comes to the fore. With devices becoming more intelligent and connected through the Internet, the software required to enable a single device as well as a combination of devices is becoming quite complex.. For example in the automation space “intelligence” is becoming even more important, as it is “connectivity”. Both requirements are currently driving the demand of embedded software. Considering the fact that there are many more devices out there than people, the market potential is huge.

Companies have identified these market needs and adjusted the development resources. Very often the size of the software engineering teams has surpassed, and in some cases doubled, the size of those of hardware engineering at many manufacturers.. As a result the product functionality gets more and more complex and companies need to differentiate their offerings in features. But to develop several products is costly, as well as time-consuming and head count intensive. Therefore, the ideal solution would be to reduce all three factors and develop only one single product which can be sold at all the levels (premium, mid, low end). For this approach a solution is required that combines feature enablement and licensing solutions.

Interestingly enough the embedded software market resembles the “normal” software market more and more. For example the innovation cycles get shorter and shorter, and low-cost competitors from emerging markets are threatening traditional and higher-cost vendors. Cost pressure continues to increase, and customers are demanding more tailored solutions – and they are willing to pay only for what they need and use.

As described the value of software in embedded products is on a rapid growth trajectory. Even traditional hardware vendors are realizing this and investing in new products and services. But new market opportunities mean also new threats. Therefore, despite all the positive sentiment, security issues shouldn’t be neglected. In the past some sectors such as the gaming industry and telecom equipment vendors have been affected by embedded software IP and reverse engineering theft especially. As general rule device/machine vendors that derive their customer value from making their hardware perform intelligently are facing competitors that are eager to steal IP to save development time.


Article contributed by Ansgar Dodt, SafeNet Regional Vice President Embedded Systems EMEA, and Aurelius Wosylus, SafeNet Director Business Development for Software Monetization in Embedded Markets