Says Arun Kumar, chairman National Association of Software and Service Companies (Nasscom): ''With software becoming an important source of functionality enhancement and differentiation in many traditionally non-computing devices such as cell phones and consumer electronics, the embedded software and system market is expected to grow at a healthy 16 per cent CAGR in the next three years.''

Given that multinational company majors such as Texas Instruments, ST Microelectronics, Motorola, Intel and Cadence are setting up large development centres in the country and leading Indian IT companies such as TCS, Wipro, HCL Technologies focusing on this sector, India is all set to capture a significant pie of this emerging opportunity.

Industry performance by verticals in IT software exports

According to Kumar, embedded systems are increasing in key user industries such as telecom and datacom computing, consumer electronics, industrial automation, automobiles and office automation. In the automotive sector, for example, major new product advances such as automatic braking systems, telematics and engine control are all powered by embedded software systems. In most of these cases software is playing an increasing role because the performance improvement of traditional electro-mechanical parts has peaked.

For instance Delphi, the leading global automotive supplier develops embedded software for automotive controllers in India. It plans to invest $ 35 million in India over three years. ''The advances in embedded technologies and cheaper but powerful hardware is what is enabling embedded technologies to register growth,'' says Nasscom president Kiran Karnik. ''Additionally, automatic code generation tools are significantly accelerating the process of code generation. Therefore, development as well as value needs in the future will lie in the software.''

According to Nasscom the rising software content, rapidly evolving hardware, absence of protocols and the lack of software skills with original equipment manufacturers (OEM) would give opportunities for Indian companies to flourish in the embedded software domain.

Activities that can be carried out by third-party providers or offshore hubs in India as identified by Nasscom include:

1. Product development partnerships: Companies can work with customers' in-house team to share product development workload, reducing costs and time-to-market.
   
2. Validation services: Companies can use extensive tools to objectively validate the code written by in-house engineers or other vendors.
   
3. Maintenance services: Companies could maintain the customer code, making and documenting any changes required during the lifecycle.
   
4. Professional services: Companies could help their customers' customers (end-users) modify and use their products.