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Outsourcing in the Embedded Market

OEMs turn to third-party engineering services for a variety of reasons.

A recently published industry brief by VDC Research examines OEMs’ use of third-party outsourcing for various embedded software engineering services including its benefits, drivers, inhibitors, and competitive landscape. The industry brief also includes various statistics around the use of outsourcing within embedded engineering development projects.

Engineering Tasks Most Frequently Outsourced to External Companies

(Ranked by Percent of Respondents)

Not outsourcing any engineering tasks


Software application/middleware development/test


Board level engineering test


Firmware development/test


Mechanical engineering


System integration/test/verification


Outsourcing in embedded software development is driven by OEMs seeking decreased costs and/or improved product quality and by vendors supplying the market with complex, customized combinations of services. Today’s embedded products have become increasingly sophisticated and software development comprises a growing proportion of the product development lifecycle, leading many OEMs to turn to outsourcing to leverage the experience and efficiencies of third-party providers.

Outsourcing vendors that compete in the embedded software space are located throughout the world and include large multi-national companies as well as smaller, boutique firms that focus on specific geographies and/or vertical markets. These vendors seek to differentiate themselves by leveraging alliances, partnerships, acquisitions, and/or experience. They also look to emphasize the talent and global reach of their engineering work force as well as the completeness and flexibility of their service offerings and pricing models.

VDC examines outsourcing in greater depth in the recently published Third-Party Outsourcing of Embedded Software Development Services – An Industry Brief. The brief also includes profiles of several competing vendors as well as an examination of how OEMs should approach the outsourcing decision and what vendors should consider when positioning their service offerings. To view a complimentary executive brief highlighting additional findings from the report, click here.


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