Traditionally embedded systems are developed with a specific control task in mind, and are able to affect only a limited set of actuators, based on measurements from a limited set of sensors. With the arrival of cheap and efficient communication technology, this traditional picture is starting to change. It is our belief that future embedded systems will interact with each other, forming federations to provide new emergent services to their users. With this in mind, a pre-study was performed to discern the main concepts of such federations and the related challenges that need to be addressed. This has led to two parallel research directions, presented in this paper. One is focusing on the enabling technology that is needed for dynamic creation of new types of federations, while the other deals with the methodological concepts for creation of ecosystems in which federations of embedded systems can be dynamically formed.