The downturn has resulted in an extended cycle for the high-tech industry, and because of that cycle there is a fundamental shift in the overall business model of the electronics industry. Focusing on the more specific sector of EDA, the downturn is creating some unique dynamics that will truly test the staying power of both large and small EDA vendors. At the center of those dynamics is the need for the EDA industry to move to a much more customer-centric view so that the customer is regarded not just as a buyer of tool sets, but as a true business partner who plays a significant role in shaping the near- and long-term success of the EDA supplier.

One key aspect of the extended cycle and business model shift is a fundamental change in what is driving business. Up until the current downturn, the primary customer concern was always the market window. Any EDA vendor that could specifically address the customer's ability to meet or beat target market windows could effectively make a business case for a tool purchase.

Today, the driving factors are much more cut and dried. Customers want to know how they can reduce costs. For EDA vendors, the answer cannot be found by just addressing design and NRE costs; customers want the EDA vendor to address the broad spectrum of product development costs, including those for packaging, tapeout and manufacturing. Customers also look to EDA vendors to improve the overall quality of their products so that designs work right the first time and yields will be high.

Thus, for an industry that has been traditionally driven by technology, EDA is having to evolve to a more "nuts and bolts" focus of helping customers achieve gains in their overall profit margins, even if just by a few pennies.

At Innologic Systems, our response to the foregoing dynamics has resulted in our assuming a business model that is "customer-driven and customer-proven." Our market space-functional verification of custom silicon-is highly design-specific, and each new design project brings a new set of verification challenges.

As a result, we dedicate as much of our company time and engineering resources to addressing our customers' specific design project needs and costs as we do to developing tool sets.

It's true that the current tentativeness of the high-tech sector is somewhat of an overreaction in terms of what is really happening in the market. Nonetheless, for the EDA industry going forward, we believe the ability to address customer needs and engage with the customer as a long-term business partner will be equal to producing new technology innovations.