How do we grow the market for EDA tools? It begins with focus, but ultimately it depends on moving to an ROI-based business model.

The recent downturn was not a time to invest in creating new markets; everything had to be geared toward generating bookings. One of the most important metrics for generating bookings is regional return on investment. In Sequence's case, Japan became our top contributor, and we had to adjust resources accordingly. The current mobile-computing and handheld-device trends drive our R&D focus on low-power design tools. Reading these "tea leaves" will force difficult decisions that result in sacrifices to regional resources and to the breadth of product development.

Cash cows become critical for the short term, and long-term booking visibility must be driven by "marketplace reality," such as when the move to the next technology node actually happens. Most of the companies that are agile enough to respond to those dynamics will have done custom development that can have broad market applications.

But all of those efforts are limited in scale and scope. We need to implement revolutionary changes in how the industry conducts business. The time-based license model seems almost ancient now. Peak licensing, usage-based licensing and WAN licensing have all been pushed as new models, but they merely highlight the buyer power that exists in our industry value chain.

We must move toward an ROI-based-not royalty-based-model. What leads me to believe that such a model is viable? A number of customers have told me that when we slice a month off their time-to-market, we save them $4 million. Prorate that over a year, and imagine the savings.

EDA must get a percentage of the ROI we deliver to our customers, rather than a set licensing fee that continues to get squeezed. This revolutionary change is possible only if we do adopt it as an industry. Higher growth rates will result-as will a larger pie.

Vic Kulkarni, President and Chief Executive Officer, Sequence Design Inc., Santa Clara, Calif.