The principle subject of the DVCon 2009 Executive Panel in San Jose in February was "EDA: Dead or Alive?"

The seven speakers on the panel were unequivocal in the answer: EDA is definitely alive, because it’s the single most important pre-requsitive for progress in electronics. The electronics industry will never die and, therefore, neither will EDA.

In the weeks after the event, I spoke at length with all seven panelists individually to follow up on various topics discussed at DVCon. This article recaps my conversation with Atrenta executives, Ajoy Bose and Mike Gianfagna. Links to the rest of the conversations in the series can be found at the end of this article.

Ajoy Bose – I certainly believe EDA is alive. EDA is critical for semiconductors, and semiconductors are critical for electronics. If EDA dies, electronics will die, and that won’t happen. EDA is certainly alive and well – no ambiguity there!

Having said that, we are seeing a lot of concern among our customers, the large chip companies, including reductions of 25-to-50 percent in revenue. So while EDA’s alive, it definitely has challenges, which can be an opportunity in these difficult times. Management guru Tom Peters says a customer in trouble is an opportunity for the vendor. Historically, EDA as a vendor has damaged its relationships with its customers. Now the industry should step up and craft a better, more strategic alignment with our customers. We have a rare opportunity to mend fences between EDA and the semiconductor industry, to convert the relationship into a long-term healthy, positive one.

Semiconductor companies see EDA with an expense price tag that comes without strategic alliances. Most customers grumble about their EDA budgets – particularly SoC startups.

Mike Gianfagna – Think about how an EDA sales person or executive sits down across from the customer: "Hello. I’m here to get all of your budget. I’ll make bigger and bigger deals until I’ve extracted all of the EDA budget, and then I’m going to leave. So, let me figure out how much technology I can throw at you before moving on. I don’t really care about your problems."

There has clearly been too much of a predatory relationship here, locking up the customer at all costs without adding value to the customer. But there’s not that much more money to get anymore [from the customer]. Now there’s a different point of view. It’s a chance for EDA to step up and say, "These are hard times for you. These are times for us. So, what are your business imperatives? Time to market? Efficiency? Too much dependency on certain tools sets? An inability to harness new technology?"

If the EDA vendors can understand the technology and business needs of their customers, they can either offer a solution, or they can offer to partner with the customer: "I’ll build a solution for you."

Then, the customer says, the systems or semiconductor company, "This is a valued relationship. The vendor showed up and tried to meet my business needs. Great! My EDA vendor told me how to do the job with less people, and was willing to develop a business alliance."

It’s far more of a win/win situation for everyone.

Ajoy Bose – I recently read an article Jack Harding did about negative relationships. Jack’s main point was, EDA vendors are not perceived as sharing the risk that semiconductor companies have. Jack articulates it well, and I’ve seen it in so many instances. If you probe into the relationships of a half dozen semi companies, they’ll have a somewhat negative image of the EDA industry and EDA vendors since the very earliest days.

How did it happen? Through a lack of perceived risk. The semi companies have seen the EDA companies as having too little skin in the game. It’s been largely true but the perception has been even worse. Also, if you look at the way chip companies deal with EDA – they always have a CAD manager, which allows them to keep EDA at an arm’s length. So, EDA doesn’t get into the core of design when they are always interfacing through the CAD manager.

Yes, there is a similarity here between the IT manager procuring software from a vendor, but still there is a much closer relationship to the CIO for the enterprise software vendor than there is between the CAD manager and the EDA vendor.

Mike Gianfagna – It’s been many years, but Gary Smith first said it – If you don’t remember anything else about EDA, always remember that it’s an outsourcing business.

True, back in the early 1970’s and 80’s, all of the tools were built internally – at places like Bell Labs, IBM, RCA, and TI.

I was part of that world, and so was Ajoy. The EDA industry was born back then because customers would say, "I used to build this tool myself but I’ll pay you just slightly more than it would cost me to build it." The EDA vendors responded, and since that time the foundation of selling the value of the tools has been [troubled]. In addition, the customers second-guess the EDA vendor every step of the way.

This is not the same as enterprise software, which companies have generally never built before. EDA however grew out of a situation where the customer already knew how EDA tools should work. All of this set the industry of to a bad start at the outset. Nonetheless, you can’t blame the customers. It’s always been incumbent on the vendor to [articulate the value proposition] in the tools.

Ajoy Bose – Ultimately, it’s the responsibility of the EDA industry to do something. Given the shifts going on globally, let’s take this chance to get closer to our customers, to create more strategic alignments. Some companies in our industry are doing a better job than others with all of this. These are the companies that will have an opportunity to come out of this downturn as stronger companies.

EDA is a product industry. We need to keep a focus on that, while building even tighter collaborations with our customers. We help our customers by customizing our products, but we’re always mindful that the proportion of revenue we get from our customers is more from the product segment of our business than the service segment. It’s always a balance. If you do everything a customer wants you will turn into a service company.

So the challenge is to know how to get more skin in the game. I think EDA is absolutely ripe for new innovate business models, a revenue model that’s more aligned with our customers’ success. But this makes it difficult, at least for the small companies, because the established models are so embedded in the industry.

In the early days at Atrenta, we tried to experiment with different types of models but it made the sales process that much more difficult. It’s difficult enough to explain the technology in the tools to the customer, without coming out with created business models that nobody understands. And Atrenta is not unique in that. Other startup CEOs are open to creative ideas, but we are too small here in the early days to implement them. The leadership here has to come from the established companies – to determine exactly the shape of the shared-risk revenue model. It will require a lot of analysis and discussion.

Mike Gianfagna – It’s difficult to turn a ship as large as the EDA industry, particularly if you don’t have a large position on the playing field. However, Atrenta’s done a lot of joint development with our strategic customers. It’s the way our early products were born, and has been a process of listening and collaboration. Depending on the strategy and the way the EDA vendors work with their customers, clearly there is already a lot of shared risk going on in those relationships.

We say to a particular customer, "We think you’re a great teaching customer. For 50 cents on the dollar, we’ll build this tool for you. Then, we will expect you to help us get it to production status, and then we will sell it elsewhere."

The customer’s not absorbing all of the cost of developing the tool, and we are [shouldering] the risk that the tool may not pan out. WE put our R&D on the line and we trust the customer to help us get the product over the finish line. That is definitely a way of having skin in the game. There are very real dollars at risk when you entertain a development strategy like that. Atrenta is a little unique that way, but we think it has paid off very well for us.

The key goal at the end of the day is to be perceived as a true partner with the customer, and this requires some level of real, shared financial risk.

March 25, 2009

Ajoy Bose has enjoyed a long and distinguished career in EDA, including executive leadership in places such at AT&T Bell Labs, where he headed the IC Design Automation Department, and Cadence Design Systems, where he was VP of Engineering. He has founded numerous companies, including Software & Technology, Interra, and Atrenta in 2001. Currently, Bose serves as Chairman, President and CEO of Atrenta. He has a BSEE from IIT Kanpur, and an MS and PhD in EECS from the University of Texas at Austin.

Mike Gianfagna's career spans 3 decades in semiconductor and EDA. Prior to his role as VP of Marketing at Atrenta, he was VP of Design Business at Brion Technologies, President and CEO at Aprio Technologies, VP of Marketing at eSilicon, and held senior executive positions at Cadence, Zycad, GE, and Harris Semiconductor. His career began at RCA Solid State. Gianfagna has a BSEE from New York University and an MSEE from Rutgers University.

Copyright (c) 2009, Peggy Aycinena. All rights reserved.