Design tools 'Made not in USA'

The EDA industry consists primarily of U.S. companies, but the software they sell wasn't necessarily developed here. In search of new talent, EDA vendors have fanned out to the far parts of the globe, setting up R&D centers in India, China, Russia, France, Germany, Poland and Egypt.

Most EDA engineering still takes place in the United States, especially for more complex tools. EDA vendors say they're going offshore mainly for talent, and, indeed, many of the offshore centers were set up in the halcyon days of the late 1990s, when local talent was hard to find. Vendors also say they want to be closer to the international customers who make up a large part of EDA industry revenues.

"You go offshore for critical skills; you don't go offshore for cost," said Wally Rhines, the chief executive officer at Mentor Graphics Corp. (Wilsonville, Ore.).

"Forty-five percent of our revenues are outside the U.S., but only 25 percent of our engineers. It's hard to argue we're taking jobs away from the U.S.," said Raul Camposano, chief technology officer at Synopsys Inc.

In any case, many of the EDA engineers located in the United States aren't native-born Americans. Jaswinder Ahuja, corporate vice president for R&D globalization at Cadence Design Systems Inc., estimated that 35 to 40 percent of Cadence's engineering team in San Jose, Calif., is comprised of immigrants, largely from India, Taiwan, China and Europe. A large number of EDA executives and entrepreneurs came from other countries as well.

Search for talent
Synopsys has about 300 offshore engineers, compared with more than 1,000 in the U.S. The company's largest offshore centers are in India and China, and Synopsys also has R&D operations in Dublin, Ireland; Aachen and Munich, Germany; and Grenoble, France.

"Most of these sites were established in the late 1990s, when we were desperate for talent and would go wherever it took to find that talent," Synopys' Camposano said. Synopsys set up an R&D center in Bangalore, India, in 1995, and then acquired a center in Hyderabad after the Avanti acquisition.

The cost difference between India and the United States varies widely. "If you take people who are just starting, the difference in salary can be one to 10," Camposano said. "If you add costs, you may lose half of that advantage. With higher levels of management, it's more like one to two."

EDA in Egypt: Mentor Graphics' Cairo design center gets visit from CEO Wally Rhines (second from left on the couch).

Synopsys also has R&D centers in Taiwan, and in the mainland cities of Beijing and Shanghai. "China is a little bit behind but coming on line very quickly," Camposano said. "In EDA, it's more difficult to find people."

Cadence's largest offshore center is in Noida, India, where 300 engineers work on logic verification, synthesis, physical design, analog design and other products. Cadence's other research and development facilities are in France, Scotland, Ireland, Russia, Taiwan, China and Canada. About one-quarter of Cadence's 1,500 engineers work offshore.

The main reason for going overseas, Ahuja said, is to find talent, though he also noted a "significant cost advantage" for India, China and Russia. The "loaded cost of operations" for these three countries is pretty similar, he said, averaging out to about one-third of the U.S cost per person.

Still, there are challenges. "It takes discipline to work with cross-geographical teams," Ahuja said. "You have to have work well-partitioned in each geography, and in reality that's often very hard." Also, "the most talented EDA engineers are still in North America, and the most significant innovation still happens here," he said.

Out of a total of 1,224 engineers, Mentor Graphics employs 696 in the United States, 221 in India, 220 in Europe and 87 in Egypt. The European sites are primarily legacies from acquisitions, as is the Egyptian site, which was originally an analog modeling center for Anacad, a French company acquired by Mentor.

Offshore development is more difficult and expensive than it may appear, Rhines said. "It's hard to measure the cost of communications and travel. And there are a limited number of things you can easily communicate that can be carried out," he said. It's also difficult to find good managers outside of the United States, he noted.

Recent centers
While many of the offshore EDA R&D centers were established during the technology boom, some are more recent. Magma Design Automation and Sequence Design, for instance, both set up centers in India in 2003. CoWare opened a design center in India in February 2004, staffed largely by engineers who came along with CoWare's acquisition of Cadence's system-level design tools.

Some 40 engineers work for Magma in India, developing synthesis, analysis, delay calculation, floorplanning and other technologies. It's all part of a search for global talent, said Hamid Savoj, Magma senior vice president of product development. "We could not have easily hired these people in the U.S.," he said.

Savoj said that Magma expects costs in India to be about one-fourth of those in the United States. Even so, most of Magma's engineering team is still in the states, where there's a higher percentage of PhDs and where the most complex products are developed.

A few EDA companies do most or all of their R&D work overseas. One example is FPGA tools provider Aldec, whose entire R&D effort is carried out by more than 100 engineers in Poland. Stanley Hyduke, Aldec founder and president, came to the United States from Poland in 1966.

What Poland provides, Hyduke said, is a "huge pool of talent," including a number of Ukrainian engineers that Aldec brought to that country. Costs are $1,500 per person per month, he said. However, working in a country that has recently emerged from communism hasn't always been easy, he noted.

"Even though I am an expatriate, we failed for the first few years in Poland because we didn't understand the [cultural and corporate] differences [between ways of doing business]," Hyduke said. "The difference is that [U.S.-trained managers] are very performance-oriented. But people coming out of a socialist system pay attention to what they look like, not how hard they're working."

Atrenta employs 100 engineers in India, compared with 40 in the states. Ghulam Nurie, the company's senior vice president of marketing and business development, said India provides "24/7" customer support, talent and a 60 to 70 percent cost savings, including overhead.

Nonetheless, finding senior people who possess the skills needed to manage projects is challenging, he pointed out.

The claim that offshore hiring steals jobs from Americans, made mostly by U.S. businesses and industry organization, is a "fallacy," Mentor's Rhines noted: "If you're able to get innovative people wherever they exist in the world, they will create technologies and businesses you will capitalize on elsewhere in the world."

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