November 15, 2004
Interview With A CEO
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Major challenge facing a CEO?
This is a difficult climate to operate in EDA. Part of this is the economy; a lot of it is macroeconomic changes around the semiconductor industry. I think it is finding a niche that customers are willing to buy into and building that up into a high value position, while dealing with the fact that everyone is becoming very cost conscious. In many ways the mainstream flow is reasonably well set in terms of tools. There are no huge gaps in the design flow. It is really dealing with the whole economic situation to build your product and be successful with the customer.
Most Effective Marketing Tool?
The press is still very important but progressively on-line is becoming more and more important, especially in EDA the technical forum for information. I believe that more and more distribution will move on-line certainly for low end products. EDA customers are much more likely to purchase and have a relationship with you, if they believe in your technical credibility. They see the technical forum as being important: white papers, SMUG, EDACafe, technical articles, articles by customer.
How do you recruit and retain talent?
Engineering folks want to produce a product that is successful. They need to buy into the vision of the as company as being successful. That is probably the single biggest recruiting tool; people believing in a vision and wanting to participate. That's not to say that they will work for you for free or for no stock.
In this climate it is not particularly difficult to recruit even very good talent. Connections are the best way. I have some luxury of having been at this for 20+ years. I know half the people in the industry at this point.
Future of EDA?
The future of EDA is really tied to the evolution of semiconductor industry. People in the past looking at EDA saw chips as being the implementation platform. Where you do the backend is the difference between ASIC and customized tooling. I think we will be move moving progressively towards structured ASICs which have a low amount of recurring engineering. We are going to be looking at .18 micron fabs as being able to do analog and mixed signal at very low NRE. The high volume stuff will stay at 130 nm to 90 nm. So there is going to have to be specialization along the implementation flow. FPGAs will have to be dealt with by everyone. It is the vanilla digital ASIC implementation of
choice right now unless it can't meet you goals. The future of EDA is really tied to these varied implementation platforms and its ability to build solutions that target those effectively rather than slick Swiss army knives. If you look at a processing in the fab, you see these backed by slow leakage processes that people go through incredible pain to produce so that they can service handheld market which is completely different from those servicing the microprocessor market - they can attach a fan on the top. We will see specialization along these lines. If EDA can adjust to that then we will be okay.
Time based license mode is here to stay. That is going to be the predominant business model. Some customers may try to negotiate back to the perpetual but TBL will be the dominant model. There is a lot more acceptance of low end tools being sold through the web without a sales force. Customers have gotten more comfortable buying their own stuff on-line and this will eventually move into the EDA world.
There will be a flow overseas. It will come in waves. The stuff that is well characterized, easy to understand and well communicated will move offshore just because of cost. All of the sophisticated design and architectural work will remain here. There will be many overseas choices as to where you take different products. Four to five years ago every startup chip company wanted to own the backend tools, do everything themselves, total control. Today, it's lets contract out this layout stuff. If you look the cost of the layout stuff it isn't labor cost, it is really tool cost. If the tool cost were to be at a reasonable price, there would be less incentive to outsource. There will be
structural changes with respect to who is going to be doing what. Some of those are driven not so much by cost as by risk. Today you can spend $1M on your backend system and if you hire the wrong person to run this, your chip will not work. That has to get a lot easier to do for the EDA industry to be able to sell its entire tool set to the entire design flow
If you look at the cost of place&route seats, DRC, extraction, LVS, timing and so forth for a 3-6 month project to layout a chip, the tools are a much higher price tag than the labor costs. EDA tools especially the backend tools are not an insignificant factor in a lot of these startups willing to spend the money. Tools are a significant factor with startups. It is much more efficient for someone who does this as a full time business who can keep those tools running a high percentage of the time and can amortize the cost of the tools over a much larger number of chips. This is why you see the growth in the e-Silicon business.
How do you spend your time?
I have been running companies for a long time, so I have developed a system to it. I get up very early in the morning and get to work at 5-6 AM. My goal is not to work too late into the day. I have a family and nobody cares if you are home for breakfast but they do care that you are home for dinner. I skew my hours earlier to deal with the family issue. I do technical work or what I call “content generation”, i.e. marketing, writing, specifications, until 9 AM. Six to nine is solid work. I spend the rest of the day in human interaction, working with customer and people in the company.
The model is to establish in the US then go simultaneously attack a region in Europe and ASIA, usually ending up with distributors all over Asia and Europe. The key strategy when you go over seas is you need people that can efficiently run these operations, who are used to it otherwise you will be up 24 hours a day.
Micro versus macro management?
I believe in micro management at the beginning of the company because it is all about details. But as it grows you want to delegate and have people take over key pieces.
The founders have to establish the initial product and business. Once you have a formula it is much easier to evolve the product and to bring up a channel. At the beginning it is the people who really understand the product and the market, the founders, who really need to bear the brunt of establishing the initial wave.
How do startups succeed in a market dominant by giants?
The big three's revenue is largely derived from acquisition. Effectively you have to be able to have a unique idea, sell around them and either the business model becomes profitable enough so that you can go public (Verisity) or you have a highly valued point solution that needs to be incorporated into the big players' business and those companies basically get bought.
The key for startups, especially those doing replacement products is if you go into large accounts to sell a replacement product, it is very difficult top sell against the big guys because of the size and the discounting of the deal. The dominance of the three players really does effects how long it takes to proliferate against the big large corporate deal, what is called the fam or family of product deal.
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-- Jack Horgan, EDACafe.com Contributing Editor.
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