OEMs (original equipment manufacturers) continue to face pressure in developing software for embedded devices that require increasing levels of functionality in the face of shrinking time-to-market windows and the need to control costs. In 2003, the competition in the market offered embedded developers a choice for their development projects in providing technology solutions and flexible business models that are aligned with the way developers are actually working.

Design and development complexity has taken on new levels of risk in these projects as OEMs struggle with OSs, tools, middleware, and silicon. Within the embedded software market, suppliers are redefining product strategies and business models, shifting the value proposition for their solutions higher up the software stack in an effort to improve development processes, manage costs, and reduce risks for OEMs.

Microsoft continues to leverage the popularity it gained over the last year focusing on providing software platforms and a simple pricing and engagement model. The company's surge in revenue placed [it] first in terms of embedded [operating] system market share.

"During 2003, Microsoft expanded its product by introducing a new 'Core' licensing level for its Windows CE .NET OS designed for use in low-cost embedded devices and expanded the availability and use of source code for CE .NET," said Stephen Balacco, Embedded Software Senior Analyst at VDC. "The new core license will allow Microsoft to compete in more traditional embedded applications where it was previously unable."

The largest pure play embedded software vendor, Wind River Systems, has diversified its integrated platforms strategy with a shift from being an inwardly focused OS supplier to becoming a supplier of embedded technologies for developers.

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