Comments from the CEO

Comments from the CEO

Together with our customers from digitization to protected innovation

In 2018, we strengthened our vision, a vision that has set the tone in how we present ourselves to our customers and that summarizes the journey we are taking together with them towards a secure and sustainable future. The year was characterized by messages that reflect our journey together with our customers over the last 35 years.

In terms of both technology and the organization, 2018 was dominated by the acquisition of Secure Thingz. We started the year with the launch of security products and quickly realized, when we saw the demand that followed, that security is truly an area worth investing in. Even though Embedded Trust was only in its infancy, demand for the product exceeded even our most optimistic expectations. Customers clearly needed a way to protect their product development and prevent theft and illegal copying, and for us it was an opportunity to capture an exciting new market. Acquiring Secure Thingz was the obvious way forward, and the fact that it was financed with support from our owners is both reassuring and inspiring. Together, we saw opportunities to invest in the security market.

We began the integration of Secure Thingz more or less immediately after the acquisition was finalized in the second quarter, with a focus on integrating product development in order to complete the projects we had planned and announced faster and more efficiently. We realized that we needed to expand our product offering to meet our customers’ different needs, and Embedded Trust was supplemented with C-Trust for IAR Embedded Workbench. We have invested in offering products that are secure in their structure and use, which requires several special tests and quality assurance procedures. While this prolongs the product development process, it is also important to let it take the time needed.

At the end of the year, we chose to launch our security products under shared packaging. This offers a possibility for our customers to train themselves as they implement security in their own product development. Our meetings with customers throughout the year have helped us understand that even if the importance of security is obvious, insight and knowledge vary considerably. For us, it is important that our customers understand to what end and how they should implement security, and a great deal more information and training will be necessary to achieve this. There will be reason to return to the topic of security, but for now I’ll just say that we see a great deal of potential in our security offering!

Our financial performance followed the same trend of steady growth that we have seen in recent years, although our growth was higher this year than in previous years. This stability is attributable to our business model and our loyal customer base. Overall, two factors were particularly noteworthy this year. First and foremost, more customers than ever chose to standardize based on our products during the year. This resulted in one major order every quarter, which contributed to our positive performance, and helped us to grow compared with earlier years. When it comes to the distribution of these major orders as well as general performance, Europe was particularly dominant.

The second factor underlying our financial success was a specific product segment: functional safety. Our functional safety offering is unique not only because it encompasses several processor families, but also because it is combined with analysis tools. Analysis tools have proven to be a first step for many of our customers in meeting the quality and security challenges that arise when developing their products. Structuring their product development, which is often outsourced to several locations or even several countries, on coding standards is an important step, and having analysis products that support the process is of obvious benefit. It results in higher quality and shorter development time, something that has become central in our customers’ specification demands in recent years.

The three areas I have just described – code quality/analysis, functional safety and security – are how we want to describe, and have described, our product offering to our customers. This product offering reflects the path we have taken to develop our product portfolio and establish relationships with our customers. We began our relationship with our customers when they digitized their products, we have helped them develop through analysis and quality, and we have secured functions through a certified product family. Now we are entering the next phase: protecting their software.

This year was about financial stability and successful development, a strong product offering and future potential in our loyal customer base. We will now go forward as a larger company with new products and increased expertise in our organization. We are proud of what we do, largely thanks to our values and our ambitious goals. We are thankful to have been chosen by our customers, which has contributed to our success, for the loyalty and outstanding work demonstrated in our organization and for the confidence our owners have shown in us. I look forward to exciting and gratifying year together in 2019!

Stockholm, March 7, 2019
Stefan Skarin,  CEO, IAR Systems Group

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