The model will allow companies to use Sequence's entire power and timing closure tool suite for design-services engagements for a $100,000 up-front fee, after which they will typically pay Sequence $25,000 to $35,000 for each successful design tapeout.

"In the past, other EDA companies have offered services and IP [intellectual property] and have been seen as competing with customers," said Alain Labat, president and CEO of Sequence. "This pay-for-success model really allows us to help our customers and gives us greater motivation to ensure they will succeed."

The licensing model furthers an industrywide effort to tie the contributions of EDA companies closer to successes in the semiconductor and systems sectors, in the hope that it will raise investor interest in the EDA industry.

Sequence is the third company to try this licensing scheme in an effort to get the maximum value out of EDA's contributions to the booming chip and electronics market.

For its part, Synopsys Inc. (Mountain View, Calif.) announced it is phasing out time-based licenses in favor of a conservative subscription-based model to get the maximum value for its new generation of tools.

Early this year, startup Monterey Design Systems Inc. (Sunnyvale, Calif.) announced access to its physical design tool through an application service provider business model and new licensing schemes. One of these schemes, the Global Access model, gives customers unlimited tool access and support for a nominal up-front fee and then a fee for each tapeout successfully produced with Monterey's eDolphin.

Gary Smith, chief EDA analyst with research firm Dataquest, doesn't seem too impressed with Sequence's and others' new licensing schemes. "I think the EDA industry is trying all the business models the ASIC industry tried in the '80s, most of which didn't work," said Smith.

Joseph Hong, chief operating officer of Virtual IP Group, the first company to use Sequence's new license, thinks it is a great model for his six-year-old company, which boasts 28 employees in its Sunnyvale offices and another 120 in its office in Hyderabad, India.

"We like it because we don't have to purchase a traditional 99-year license," said Hong. "We are a small design house and we don't have a real tool budget. If we had a lot of up-front expenses, it would put a lot of strain on the organization and our ability to expand. A license like this allows us to pay a little up front to use the best tools, and then we pay Sequence for each successful design."

Hong said there is a worldwide shortage of deep-submicron experts and that his company's services are in great demand. He said the licensing model will allow his engineers to bring to each design engagement the tools they need to do their jobs correctly and not depend on their customers securing tool licenses.

Vic Kulkarni, chief operating officer at Sequence, said the company will still offer its tools through the traditional 99-year perpetual license, one- to three-year time-based licenses and through monthly leasing. And as with other models offered by Sequence, the pay-for-success license comes with full support and tool maintenance at no extra charge.

A perpetual license for Sequence tools would typically run $ 300,000, plus 15 percent maintenance per year for three years, bringing in about $435,000 to Sequence. A three-year time-based license, which includes maintenance, runs about $450,000 a year.

In the pay-for-success model, the user pays a $100,000 technology access fee, which — assuming they use the tool for 30 tapeouts over three years, with an average tapeout fee of $25,000 — would bring in $850,000.

Labat said the model is not strictly targeted at design houses or small companies but would likely be used by those companies first.

"A large semiconductor house could also use this model," said Labat. "And at $25,000 that could mean a whole lot of revenues." Whether a large semiconductor house would want that type of license remains to be seen.

Labat: Small companies likely to use scheme first.

Labat hopes licensing the tool to Virtual IP and other design houses will increase the visibility of the company's tools.