How to Display Uncertainty in Forecasts – Embedded Software Market Size Growths

by David Land
@Cambashi_david
LinkedIn

Following on from our discussion of Horizon Graphs last month, this month we look at a way of showing forecasts.

The diagram here shows our forecast from the Systems Engineering and Embedded Software Observatory (SE/ES Observatory) 2015 – the observatory that tracks the use of development tools for smart products and the Internet of Things (IoT).

It uses a fan chart, which shows both observed data and possible ranges of values for future data, suggesting the most likely value for future outcomes.

As predictions become increasingly uncertain the further into the future one goes, these forecast ranges spread out, creating distinctive wedge or “fan” shapes, hence the name.

Cambashi Software Engineering and Embedded Software market forecast 2013-2017

How to read the chart

One possible way of reporting this data is to announce that “Cambashi says Embedded Software tools market might top $5.5bn by 2017”; but that would be a little misleading.

In fact, we think it’s just as likely to be around $4bn in 2017; but again that would be underplaying the scenario.

What you can say with some certainty is that the likely trend is a slight acceleration of the recent 12% p.a. growth rate. In 2013 we can see there was just over $3bn of spend on embedded software tools. As you can see from the shading we would expect the market to reach around just under $5bn by the end of 2017, although there is scope – at lower probability – that it could reach higher than that.

Analysts’ predictions – buyer beware

When you read analysts’ predictions for market sizing in the future, you should always bear in mind that the real picture is more like the one in the chart above.

Ask yourself if they are predicting the mid-line or a more optimistic view.

If you’re using the forecast to plan your business or develop your marketing strategy, then bear in mind the possibility that things might not go as expected.

That is why the ability to respond to changes is important – if growth does not meet expectations, then you might need to reconsider investment priorities; on the other hand, if the market is exceeding expectations, you might need to increase investment.

More detail on the embedded software tools market

The Cambashi SE/ES Observatory provides revenue figures from research into over 300 companies, selling more than 500 software product lines. It supports business and marketing planning by helping to:

  • quantify how growth in the software aspects of product development in the smart industries is reflected in global and regional volume and growth of SE/ES tools
  • see market share and workflow focus of leading providers
  • plan product development or partnership approaches to this market, based on realistic revenue and competition expectations
  • look at the growing market for tools used for systems engineering and the design, development and maintenance of embedded software

The growth in the use of embedded software means the use of tools to develop and maintain that software gaining in importance.

Currently the largest geographic region for embedded software tools usage is the Americas and the largest industry is Automotive, mainly driven by growing use of connected devices in cars.

With leading players like IBM, Intel and Vector Informatik tracked in the SE/ES Observatory, there has also been a rise in acquisitions such as:

  • Ansys acquiring Esterel
  • PTC acquiring MKS, Axeda & ThingWorx
  • Siemens investing in Polarion.

The Internet of Things (IoT) is an important driver, since each connected ‘Thing’ will contain embedded software.

If some of the growth forecasts for IoT turn out to be correct, SE/ES growth could test the upper edge of the fan.

To get more sales and marketing insight, subscribe to the Cambashi e-zine

Want to find out more about the SE/ES Observatory?

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

This site uses Akismet to reduce spam. Learn how your comment data is processed.