A Perspective:
What does an IDM value from the EDA Industry?


by Thomas Harms

posted March 19, 2006

Dear Peggy,

I would like to follow-up on our conversation after Lucio Lanza's panel at DATE. Certainly there is a lot of discussion around the 'value' of EDA lately. Here are statements you would hear from the EDA companies at conferences such as DATE, or read in the press:

- "We have to extract the value of our tools from the customers."
- "We have to sell our tools at value."

However, "value" is not, and can not be, a single-sided proposition from the EDA companies. Rather, value is in the eye of the beholder, and that "beholder" is us, here on the customer side.

We, as an industry of suppliers and buyers, will only be able to solve this EDA crisis when we sit together to discuss what we would potentially value from the EDA companies – that for which we could be willing to pay more for, in the future – if, in return, the EDA companies are open to discussing changes to the current business models.

Attached please also find my presentation from the Executive Track at DATE 2006 [see below]. Infineon is moving strongly in this direction, to form solution-oriented partnerships around subflows with a few key partners. Within such partnerships, we can have good discussions on increased value in return for open discussions on new business models that move away from 3-year TBLs [time-based licenses]. Reactions to our "value" proposition, however, are vague at best at this time.

Actually, if you would look at a potential scenario in which the EDA industry would increase pricing/reduce discounts or else, our natural reaction will be to better manage our precious EDA assets (licenses).

There are several tools available on the market today, which do not see a lot of use at this time. However, if licenses do become more expensive, we clearly would consider the use of such tools to better utilize EDA licenses in order to control overall cost better. This would mean a continued flat EDA market, or at least a much slower growth than expected.

Changes in the EDA industry are imminent to solve their overall financial situation. To address the problem best and most quickly, the EDA customers and the EDA companies have to jointly discuss the best approach and make adjustments on both sides.

Best regards,

Thomas Harms
Director, Alliance Management
Communication Solutions
Design Automation & Technology
Infineon

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DATE 2006

What does an IDM value from the EDA Industry? A Perspective

Thomas Harms
Director, Alliance Management
Communication Solutions
Design Automation & Technology
Infineon

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Slide # 1: Problem Statement
  • Internal CAD organizations provide design system solutions to their design teams addressing design issues which in turn drives business value, EDA vendors only contribute tools (and services)
  • Solution orientation does not yet exist in the EDA industry
  • EDA vendors are pushing product platform "solutions", however "solution" is defined by the customer
  • EDAC Panel, Nov 30, 2005: Value comes simply from providing the solution to customers' problems
  • Traditional EDA models of selling tools and services are becoming increasingly inflexible and are not suited for solutions
  • EDAC Panel, Nov 30, 2005: EDA companies that perceive that the value they provide is in their software are in for a rude awakening

    • Comments on Slide # 1

  • Today, system integration for design system is part of the EDA customer’s organization forming the link between EDA tool suppliers and end users. EDA companies only sell tools and services into this context.
  • A solution orientation in a similar sense, as provided by an internal CAD organization, does not yet exist in the EDA industry despite some proclamations to the contrary.
  • Rather, EDA vendors are now selling platform "solutions" following the same routines as with tools + services. What constitutes a solution for a customer, however, can only be defined by the customer.
  • The EDAC panel in November 2005 stated that ‘value comes simply from providing the solution to customers’ problems’.
  • I hear a lot about the value of EDA right now, so this should be relevant. If it is so simple, where do you start? I would argue it starts with the customer’s problems; and to understand them well, you would need to partner with the customer more intensively than in the past.
  • We believe that the traditional EDA models are not suited for solution orientation, since they are becoming increasingly inflexible and are not tied to measurable business value.

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    Slide # 2: What is a Solution?
  • At the most basic level, a solution has two components:
  • Identification of customer needs or problems
  • Utilization of a vendor’s capabilities (technology, processes, and people) to resolve these problems
  • A solution is a combination of products, services, and intellectual capital/ property, focused on a particular business or technology problem, which drives measurable business value
  • Ultimately, a solutions orientation shifts the focus from the product to the customer’s business needs. A solutions company, by definition, is a customer-centric company
  • Solutions aren’t sold; they are bought, and it’s a buyers’ market
  • A marketing-led sales approach will be most effective

    Comments on Slide # 2

  • Let’s define what I mean when I talk about "solutions."
  • It basically starts with the identification of your customers’ needs and problems. These are the needs and problems of Infineon overall, and not those of the Infineon EDA users – at least not primarily.
  • Then it proceeds with utilizing your company’s various capabilities (technologies - tools, processes – flows, know how, resources) to solve these problems.
  • Therefore, a solution is a combination of your products, your services, your knowledge/experience and IP focused on our particular needs and problems to drive a measurable business impact.
  • This means that EDA companies would have to shift from a product focus (which certainly is prevalent today) to a focus on the customer’s business needs in order to become customer-centric.
  • Since solutions should address our needs and problems, which we believe we understand better than you (at least for now), we are looking for improved partnerships to contribute to such solutions.
  • We do not believe that solutions are available "off-the-shelf," ready to buy.
  • Experience in other industries has shown that a market-led sales approach is most effective to drive the required cooperation between the various involved departments, and to align the various components.

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    Slide # 3: What Infineon would value from the EDA Industry
  • Open and constructive cooperation with EDA partners to jointly establish a solution orientation for Infineon and the EDA marketplace driving measurable business results
  • Learn and listen, evolve together to adjust current practices, partnership and business models
  • New contract structures supporting solution orientation and linking to measurable business value
  • Infineon is offering to work closely with few EDA partners to jointly master the transition to an EDA solution provider for our mutual benefit
  • Focus on individual parts of the design process ("subflow") with a single partner
  • Leverage our mutual know-how and experience in an open intellectual exchange beyond the existing R&D interactions
  • Establish win-win through early mover advantage

    Comments on Slide # 3

  • What we would value is, foremost, an open and constructive cooperation, a willingness to engage and listen so that we can jointly establish a solution orientation for the benefits of Infineon and the partner’s other customers.
  • With that, let’s evolve together, adjust current practices and partnership model, i.e., how we interact and work together from early roadmap definition and requirements gathering, through implementation, as well as to a common approach to deployment, support and marketing towards our common customer base.
  • It would also be required to adapt the business models to emphasize an increased level of partnership, as well as the business value orientation away from counting licenses and service time.
  • To accomplish this transition, we offer to work closely with a few EDA partners with a focus on exclusive partnerships around subflows – well-partitioned parts of the overall design process, which are integral items of our design system solution.
  • When we start now, we can benefit from an early mover advantage turning this into a win-win for both sides.

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    Copyright (c) 2006, Thomas Harms. All rights reserved.