Embedded Sweden
Pea Soup and Pancakes

A quick word association test – when I say Sweden how do you respond? The Swedish chef from the Muppets? ABBA? Meat balls? Or flat-pack frustration from IKEA?

Or do you say Volvo, SAAB, Ericsson? If you are in the embedded world, perhaps you should say Telelogic, IAR and ENEA.

Why is Sweden, a country the size of California with only a quarter of the population, one of the world’s technology centres with a significant footprint in the embedded world?

Telelogic’s roots lie in telecommunications and the company was originally part of the Swedish state-owned telecoms agency, Televerket (now privatised as Telia). With the increasing use of software in switches and other areas, Televerket created a separate unit to attract top quality staff, develop links with universities and build skills in software engineering, in particular modelling. SDL (Specification and Description Language, a modelling language developed for telecommunications as a CCITT/ITU standard) was the natural choice and the unit developed tools to generate executable code from SDL models. By 1987, as well as using such tools in-house, Televerket was selling them to other telecoms authorities, including Norway, Finland and Holland and later to equipment manufacturers, particularly those who were developing base stations for cellular telephony.

With privatisation Telia wanted to concentrate on telephone services, and what was now Telelogic was sold firstly to a division of SAAB and then to private investors before an IPO on the Swedish stock exchange in 1999. During this period it set up international offices to support new customers across Europe, North America and the Asia/Pacific regions and began to change culture – from engineering driven to customer driven. It also began to look at moving to a wider industry base outside telecommunications.

Customers helped Telelogic identify three areas that were complementary to its modelling and code generation skills: requirements management, configuration management and change management. The company began an acquisition programme, buying market and technology leaders in these areas. Fortunately this programme, which broadened both the product base and extended the industry base into aerospace and defence, was well under way before the dot.com bubble burst in 2001. Since there was still a substantial telecom business there were significant cutbacks, over 30% of the staff worldwide, but the sales team was left untouched.

Since then the company has been rebuilding and extending still further into the enterprise world. It has released UML 2.0 compliant products and acquired companies with products for decision support and enterprise modelling. It now offers software for the Enterprise Lifecycle Management (ELM): integrated complex and sophisticated tools that allow organisations to model and analyse corporate structures and to manage and record the application lifecycle and the product lifecycle. (Telelogic only covers the development phase of the product lifecycle.)

Earlier in 2006 Telelogic effectively re-entered the embedded market when it bought I-Logix, the developers of the Rhapsody UML product. There is obvious synergy between the I-Logix and Telelogic products, and the company feels that with the increasing need for greater traceability and accountability, many embedded projects could use the management and tracking tools from the enterprise area.

The second company, IAR, is also developing a solution set, but from a different perspective. Based in Uppsala, just north of Stockholm, IAR was also founded in the 1980s as a compiler company. It also went public, in 2000, and began to expand by acquisition. It was making significant recovery from the dot.com bubble bursting when it was bought in 2005 by the Nocom Group and de-listed.

IAR has also set up a worldwide network of sales and distribution, and has made the move from technology focus to customer focus. The compilers, which include debuggers, have been joined by RTOS and middleware, hardware debug probes, IDEs and development kits and state machine design test and verification tools. Targets are 8, 16 and 32 bit microcontrollers from a wide range of manufacturers. IAR sells directly to designers, has close links with many chip manufacturers, providing tool sets for their products, and works with other specialist software suppliers.

ENEA, listed on the Swedish exchange, launched OSE, its RTOS, in 1984. OSE, in different flavours, is still the mainstay of the business. It is widely adopted, and is used, for example, in 50% of all 3G cellular phones. Around this ENEA has assembled middleware (Element), a database (Polyhedra) and the LINX inter-process communication layered architecture. Eclipse is also supported with the Optima tools. The company has expanded around the world to support its customers and has assembled a consultancy team to work with them.

Rather than go cross-industry, ENEA is maintaining a focus in telecommunications and data communications. Manufacturers and service suppliers are going to have to keep costs very low to meet the next wave of demand for cellular phones, and ENEA plans to match this demand. The first step is the integrated software suite, “Telecoms-in-a-Box”, a joint development with MontaVista. It combines Linux and RTOS with HA middleware, a fault tolerant database and Eclipse based tools: manufacturers will have only to implement applications on top of the platform.

Like Telelogic and IAR, ENEA suffered from the dot.com bubble bursting, and had a hard time building back up again. In the last year ENEA has had significant senior management change and has moved to a new building in the high-tech Stockholm suburb of Kista. Here it is close to customers and to other international electronics companies. In the new building, individual offices have been replaced by open plan, to bring the engineering people closer to the rest of the company. It is re-evaluating its revenue/licensing models and is continuing to organise for strong growth.

Those are the three players – so why have they successfully recovered from the dot.com slide and what is it that sends them out across the world?

Looking first at the country: Sweden sees itself as a small country that has to work internationally if it is to maintain a satisfactory standard of living, and Sweden generally does have a comfortable standard of living. It also has a relatively flat income spread: the difference between the lowest and highest paid employees is nowhere near as large as that in most developed economies. which makes employing senior staff comparatively inexpensive.
While the country appears to many outsiders to be on the edge of the map, it was a major player in European politics until the nineteenth century and benefited from being neutral in the two world wars. Several of the people I spoke to emphasised that Swedes feel the need to travel, and that almost anywhere in the world that you go, you will find Swedes. The country is both well educated and English speaking. (“Very good command of English” is required for entry to university, and 50% of young Swedes go on to higher education).

All this makes for a strong people base. Additionally there is a strong technology base. While Volvo and SAAB have sold their car divisions, to Ford and General Motors respectively, they are still very active. Volvo has truck production plants in Europe, South America, North America (it owns Mack Trucks), Asia, Africa and Australia. One-fifth of the world’s heavy trucks produced in 2005 were manufactured by either Volvo or Swedish rival Scania. Volvo also has an aerospace division. SAAB has concentrated on technology, in defence, aviation, space and civil security and is a leader in the consortium (along with Volvo, Ericsson and others) developing and manufacturing the JAS 39 Gripen jet combat aircraft.

The climate for technical investment in Sweden seems very positive, with a lot of small investors. ENEA and Telelogic have around 20,000 investors, as does IAR’s parent, Nocom. And government policy through support of universities, university based research and general attitude is strong.

The Swedish attitude towards company financial information is very different to that in, for example, the USA. I spoke to senior people, who discussed their company, its finances and revenues, without a PR person present. Telelogic has publicly set a goal of 5X5Y – growing five times in five years. The board biographies on the web sites, as well as in the annual reports of the quoted companies, include details of stockholding and options.

Within this base environment all three companies are now thriving. They all have significant international operations, normally with the majority of their staff and providing the majority of their income. IAR, in particular, makes a point of having international staff in their head office and also running national operations with local staff, not expatriates. All three companies appear to have successfully switched their focus from technology and engineering to the customer. This is a concept that companies frequently pay lip service to, but all three seem to mean it, and have invested time and effort into making it work. For those working on embedded projects – keep an eye open for further developments from Sweden, all sorts of interesting things are happening.

Oh – and the headline? On Thursday the traditional Swedish meal is pea soup, made from dried peas, followed by pancakes and jam. Just thought you would like to know.

Dick Selwood, Embedded Technology Journal

December 12, 2006

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