SAN JOSE, Calif. — Debate over the need for vendor consolidation in the design automation industry tested the tempers of EDA chief executives at the Design and Verification Conference here last week, or at least those who dared attend.
Analyst Erach Desai of American Technology Research Inc. cited a "chronic need for consolidation" in EDA, prompting disagreement among participants in a CEO panel discussion.
Rajeev Madhavan, CEO at Magma Design Automation Inc., said the 20 or so companies offering assertion-based verification solutions are far too many. "Nobody is going to do very well," he said. "A lot of them need to get together."
But Lucio Lanza, managing director of venture capital firm Lanza TechVentures, countered that "EDA historically brings fragmentation and consolidation at the same time. . . . Innovation comes from fragmentation."
Displaying the candor that makes him unpopular with some EDA vendors, Desai pointed to the high margins available from EDA software but said the industry has basically not been growing since 2001. He accused EDA vendors of "cutthroat and immature pricing wars" and of causing confusion by changing their licensing models.
"It's the hardest sector to understand, and then they all sue each other," he said.
Desai's presence on the panel was reason enough for two of the EDA industry's three leading providers — Cadence Design Systems Inc. and Mentor Graphics Corp. — not to participate, according to panel moderator John Cooley, founder of the E-Mail Synopsys User's Group. And without their participation, Synopsys Inc. declined as well, Cooley said.
Show me the money
An audience member's complaint about his inability to find funding for his idea prompted a debate on venture capital availability. "There's a lot more VC money coming into EDA now than two years ago," said David Evans, chairman of Forte Design Systems. Smaller and newer VC companies, especially, are going into EDA, Evans said.
Magma's Madhavan agreed things have changed, but not necessarily for the better. When he started Ambit, he noted, 31 VCs turned him down. But in 2002, a lot of money went into EDA from "VCs who have no clue what EDA is about," he said.
Cooley stirred up a hornet's nest by asking how small companies can compete against the "all you can eat" pricing practices of the big three EDA vendors, where deals are so large that some tools are effectively thrown in free. That business model "makes it very difficult to build large companies," said Lanza. "Long term we will all suffer from it."
"As deals get bigger, they are negotiated at a higher level by people who probably have no clue what they're buying," said Jacques Benkoski, CEO of Monterey Design Systems. "They're buying a good deal, not necessarily something engineers can use."
