Internet Wonat Expand EDA Market

Electronic News, May 8, 2000 by Steve Carlson

Santa Clara, Calif. Has the Internet become the adversary of the EDA industry because it is stealing talent and investor mind share? Or will it be the salvation of the industry?

Intellectually, I have trouble believing that the Internet is the enemy of EDA. Conversely, I also have trouble believing that the Internet will solve all of EDA's woes or the increasingly complex problems associated with chip design. Instead, I predict it will offer an evolution for EDA companies and their designer customers and not a revolution in design methodologies.

While there is proven economic benefit from having a strong Internet strategyanot to mention the positive impact on Wall Street perceptionsaquestions remain. Can EDA companies harness the Internet to catalyze more design starts? Will leveraging the Web grow the market? I contend that the answer to both of these questions is an emphatic no.

The Internet is not a panacea for growth in EDA. While the rest of the world is moving at the speed of the Internet on a 24/7 schedule, the EDA industry is viewed as being out of touch. That is, it is seen as being out of touch with its customer baseaalways a process technology generation behindaand just not "cool," per the Internet vernacular. In the "me, too" rush for an Internet strategy, many companies have simply bolted a Web access mechanism onto traditional business models. This is not the answer to the demands from our customers to build better tools, to offer improved service, to deliver superior support, and to provide free upgrades.

However, the Internet has had positive impact. The EDA industry benefits each time there is a shift in design methodology that precipitates retooling. It also gains when a new industry forms that designs ICs. The shift to register transfer level (RTL)-based design flows is an example of the former, while the rise of the networking business at the end of the last century is an example of the latter.

The Internet has spawned fertile ground for EDA companies. New Internet appliances and other products developed as a result of the explosive growth on the Web comprise a significant percentage of design starts today. Many new products are being created by start-ups, which all need EDA tools, services, and support to get their products to market as fast as possible.

Efficiently reaching small, midsize, and large companies with a practical business model is more important than ever. One size does not fit all in this market. Flexibility is crucial. Training, extended product evaluations, large hotline staffs, and predictable release patterns are important to the giants, while flexible business models and fast response times are among the things that are critical to start-ups.

The Internet provides an invaluable source of flexibility in reaching and supporting new companies, as well as improving service and reducing costs associated with supporting midsize and larger companies.

One of the primary issues confronting EDA companies, and start-ups in particular, is the cost of developing and maintaining a quality sales channel. The Internet holds the promise of streamlining the costs of selling, as well as providing a path to an efficient product distribution and support channel.

A traditional and ongoing issue for EDA users has been the quality and complexity of the tools. There will always be pressure to get new technologies to market a little bit sooner than they should. This makes it extremely difficult to imagine a completely satisfactory experience without support staff assistance. Buying and/or accessing tools over the Web does not increase a tool's quality or ease of use. In fact, we'll probably find it causes more unanticipated problems. While the Internet may provide some interesting new ways to facilitate support-related communication, adequate staffing of online support is the more likely means of improvement.

Instead of looking to the Internet as a new revenue stream, I propose we view it as a super marketing and sales channel, and a latter-day communications vehicle. It has already proven to be a ready resource locator. As time goes on, portals specifically targeted to IC designers could expand their reach to become resource aggregators as well.

Steve Carlson is CEO of Tharas Systems Inc. in Santa Clara, Calif.