Events in recent months have highlighted to all of us the perils of miscalculating risk. In most facets of our lives, outcomes usually match incentives. So, it's worth thinking about the behaviors that are incented by risk-reward profiles in EDA today.
Let's first take a step back to the classic concepts of the "innovator's dilemma" and the "innovator's solution".
The EDA Innovator's Dilemma.
In the "innovator's dilemma" (Christensen, 1997), a market leader competes by adding incremental features to its market-leading product until eventually displaced by a "disruptive technology" in one of two ways.
(1) In low-end disruption, the market leader's stream of added features eventually overshoots the market need, opening the door to simpler and lower-cost solutions. The history of Tangent, Avant!, Magma, Silicon Perspective, (Sierra, Atoptech, etc.) in the SP&R space is a good example of cyclical low-end disruption in EDA.
It recalls an old March 2003 quote, "SOC designers ultimately can't use big Swiss Army knives stuffed with too many back-end EDA technology options," and the saying that "those who don't learn from history are doomed to repeat it".
(2) In new-market disruption, a disruptive technology opens up markets that did not previously exist. From the analyst and investor standpoint, a key challenge for the EDA industry is that it doesn't experience nearly enough new-market disruption.
The EDA Innovator's Solution.
The "innovator's solution" (Christensen and Raynor, 2003) is a set of precepts and strategies with respect to market segmentation, leadership, growth, etc., according to which successful companies can identify, develop and unleash the next disruptive technology. Two key elements of the "innovator's solution" are (1) outsourcing of commoditized, "more than good enough" solutions, and (2) strategic investment in disruption-based growth.
Unfortunately, the EDA industry's outsourcing and investment doesn't match the "innovator's solution" model: companies still compete on commodities (back-end data models, power formats, etc.) while outsourcing long-range R&D. Why does this fail as an "innovator's solution"? First, outsourcing of R&D is neither sufficient nor stable. The 'research funding gap' mentioned in my last posting is a world-wide insufficiency that is, essentially, a 'tragedy of the commons'. This has occurred despite the efforts of many champions across companies, consortia and funding agencies who have tried to maintain research investment levels and well-considered project portfolios.
As for stability, the past few years have seen the pools of startup-based "outsourced EDA R&D", as well as EDA research at universities and consortia, dry up as a consequence of macroeconomics and new funding targets (cleantech, biotech, homeland security, etc.). Second, long-term success is difficult when one has outsourced the strategic R&D that gives rise to future disruptive technologies.
With this backdrop, let's return from the "innovator's solution" and R&D investment to "risk-reward structures in EDA".
Risk vs. Reward in EDA Companies.
Consider the risk-reward structure in an established EDA (or, IC design) company. Technology assets are primarily software (C++ or Verilog), the original developers are long gone, and there is a lot of "legacy" in the IP portfolio. This leads to a highly risk-averse profile, i.e., a tendency toward "don't touch" and "leave well enough alone".
Legacy codedespite the benefits of seasoning and reuseeventually becomes an albatross. Given the incremental product evolution that is inherent in the "innovator's dilemma" (recall the path to low-end disruption!), it is no wonder that market leaders can end up far off target with their "next-generation" products.
I would claim that low-end disruption in EDA does not resemble laser mask writers being displaced by e-beam mask writers, or vertically integrated steel mills being replaced by mini-mills. All too often, the periodic event in the EDA world is not the emergence of a new and disruptive technology, but simply a mundane, inertial loss of agility and ability to respond to the market.
Question: How can EDA companies regain the agility needed to compete?