Like Wayne Gretzky, EDA Aims To Be Where The Puck Is Going, Not Where It Has Been

When I launched this blog series, I set out to share some of the more unique industry transitions I’ve witnessed over my 20+ year career in EDA.

The B2B sales process has not been immune to change and transition. In fact, you could create a college curriculum with a daunting syllabus on the major transitions that have impacted the B2B sales process. I won’t drop that on you.

The room where it happens

Instead, I’ll focus on what I’ve seen firsthand in the buyer’s journey: being in the room where the purchase of EDA tools and solutions happens. Keep in mind, my perspective evolved as my career took on a broader scope and scale of global responsibilities.

Similarly, the sales process has been influenced by the diversity of customers and industries EDA now serves, which also triggered strong revenue growth. Until about 20 years ago, the industry’s annual revenue plateaued at around $4 billion. It employed some 20,000 people. In 2020, EDA’s annual revenue clocked in at $11.5 billion.

And unlike 20 years ago when the industry reliably maintained the status quo—meaning no growth—EDA is projected to reach $18.1 billion in annual revenue by 2026 with a CAGR of 7.7%, according to Markets and Markets. Cadence has produced 15% CAGR revenue growth over the past three years. The industry’s workforce is now well over 37,000 workers.

The demand for EDA solutions has busted out of its core customer base of semiconductor firms and expanded into systems houses with focused attention on verticals such as aerospace and defense, automotive, data center/hyperscaler, gaming, mobile, and IoT. Systems companies moved from buying generic semiconductors to creating customized chips, enabling them to develop and offer differentiated products in their markets.

Consequently, the $11.5 billion EDA industry broadened its shoulders because it’s the foundation of a $1.6 trillion global electronics industry. The stakes are high, and I see this play out in the room where purchase orders are signed. Here’s how:

• Deals were more transactional 20 years ago. Contracts are now bigger and encompass more technology to deliver a full solution. Customers want an integrated solution that optimizes the results across multiple point tools. In the past, customers stitched together point tools, which increased their support burden and created non-optimized results. Selling the technology focused on the tool’s technical capability. Today, the problems are exponentially more complex. Optimizing one step of the flow can create a significant detrimental impact downstream, resulting in an endless cycle that will never converge. Selling an integrated solution raises the discussion to a more predictable, efficient, and optimized result.
• Our customer’s business goals and most difficult technical challenges are our primary focus. Customers want to leverage the most advanced node technologies to differentiate their products in the market, and they can’t do that without EDA. Customers are bringing us in earlier in the product development cycle, allowing productive discussions on the technology challenges associated with their product and marketing goals. The more they can share about their goals and challenges, the stronger the partnership and the more we can help to provide optimized solutions.
• We’re working with a wider set of stakeholders within the customer organizations such as CFOs, CROs, and CMOs, as well as our traditional CTO/Engineering heads. The larger investment in tools has a macroeconomic impact on a company’s expense, and they are expecting a solid return on that investment (ROI). CFOs and C-suite management want to see how Engineering is working with Marketing to justify the expense and how the product will drive topline growth. Most importantly, will the additional tool expense deliver a differentiated product to the market sooner in a cost-effective manner? EDA suppliers have created more flexible business models that better align with their business needs: EDA cards, SaaS, access to CPUs on an as-needed basis, and pricing model flexibility, to name a few, helping to address some of these challenges.

Artificial intelligence (AI) and machine learning (ML) injected into EDA are changing the ROI equations. AI/ML techniques can explore the whole solution space, which includes data points that may not be obvious to engineers. However, using AI-based solutions requires more CPUs and EDA licenses. These changes require a different ROI analysis, trading off engineering time and better performance, power, and/or area for additional CPUs and licenses. In the end, the analysis will show that AI-enabled software coupled with additional CPUs and smart engineers can outperform smart engineers with older software and limited CPUs. (Tech Companies Leverage AI to Increase Engineering Productivity)

That was then, this is now

The relationship between the EDA supplier and consumer has transformed in many different ways over the last 20+ years. Customers have seen that a closer partnership with their EDA partner allows for a more productive and focused engineering team. This level of partnership takes trust and a track record by the EDA partner to deliver on promises. The transformation from EDA supplier to EDA partner will continue going forward, and those that embrace this partnership will benefit the most. However, it’s imperative that customers feel comfortable sharing their business goals and technical challenges, which in turn gives the EDA partner an opportunity to explore innovative solutions to overcome these challenges. EDA’s goal should be to predict these challenges and have solutions available before the customer needs them. This is our differentiated value. As Wayne Gretzky used to say, “Skate to where the puck is going to be, not where it’s been…”