Sounding a New Cadence

By Suzanne Deffree -- Electronic News, 5/19/2006

Two years into his president and CEO position at Cadence Design Systems Inc. Mike Fister sat down with Electronic News to discuss the EDA market’s history of acquisitions and its future. What follows are excerpts of that conversation.
 
Electronic News: From the business side, what’s the future look like for EDA?
Fister: We are optimistic about it. We’re optimistic about showing value to our customers. It sounds like a cliché, but when we show more value to our customers we will expand the relationships that we have and therefore our ability to not only impact them, but make money for our shareholders.
 
Electronic News: What’s been holding back the growth?
Fister: The industry has been in kind of a no growth fashion for years now, maybe almost five years. Some of that in my mind has been rooted in niches or nuances of technology with little demonstration of how to help customers be more productive, get their products to market faster, and deal with the incredible complexities that they have. Those three mantras, productivity, time to market and managing complexity, have been there ever since I came into the industry, and we showed people ‘what’ they were trying to do and how to accomplish it, opposed to concentrating on ‘how’ they do it. Sometimes I use those what and how words as a demonstrable of how the EDA industry got so stagnant. We got rooted into a commodity fashion, niched into places where we couldn’t demonstrate a lot more value. It was about sheer replacing somebody else. We’ve really taken that as the primed to-do. The demonstrables are good to our customers because those are their three big problems. And I think in some respects we really have resonated with the sentiment for them and it’s one of the reasons that as we added added some people that have chip experience to our company. Those are people who really understand the what, not just the how. Tools are a means to an end, not necessarily the end itself. Sometimes when you are in a business you can get so focused on what you do, you can miss the forest for the trees. That point of resonance, that admission, I think has done a lot for our creditability.
 
Electronic News: EDA historically has had a very big focus on the tools, on the ‘how.’ Part of that is the EDA model of innovating through acquisitions to gain other companies’ technologies. Will that continue?
Fister: As companies were very deeply niched, there was almost a kind of revolving door of talent that would create something then leave, start a new company, then get acquired again. That might happen multiple times. I think that was in many respects a fault of the industry to be able to keep those talented technology people innovating in a direction that was for the growth of the company. That’s not a selfish response for the big companies get bigger. It’s a practical response because when I was a big customer of EDA, it’s very difficult to bet your next product cycles on very, very small companies, especially when you are ramping microprocessors, and that was my life. The financial stability that a company like Cadence offers, being globally diverse, those are things that are very difficult to do in the current environment. We’ve done things to demonstrate that companies the size of Cadence can persist and grow. It’s much more efficient for us, too. There is a lot of redundancy that gets built into elements of the tool or method. Why do you want to do it over and over again? It just costs money and wastes time and effort. Those are a couple of things to think about. That doesn’t mean we will never do another acquisition. Certainly, there’s innovation in all parts of the industry. We openly support that with our open data initiative that we call Open Access that allows customers to innovate and competitors to innovate and interoperate with our tools and methods. In that respect, I think we dare ourselves to be very good. Where we are not, or a customer has a peculiar thing they want to do themselves, or a particular technology startup that does something interesting, we welcome that.
 
Electronic News: How are you keeping the people you want in your company from going through that revolving door?
Fister: A lot of it is building a culture. There are cultural examples in EDA that were much richer in the 1990s than they are today. Some of that was a common passion, an appreciation of the people. It doesn’t just have to be monetary, either. People love to be recognized when they do something. They love to see their ideas realized. We’ve done it with financial incentive; we’ve done it with attention. The recognition by peers is such a cool thing. An awful lot of it is setting the targets that we do, achieving them together and rewarding that in all localities. And it doesn’t hurt that we are a growing company in a field where a lot of the companies aren’t growing. Some people are better thinkers, some are better intuitives, some a great starters, some are great finishers. We actually have fostered incubation environments inside the company where a person or small group of people can go out and test an idea without a lot of worry. It’s just a practical way of walking the talk that we value the people in our company.
 
Electronic News: On the incubator point, do you see the EDA market changing from an acquisition and merger environment to a parent company relationship, more in-line with spin-offs?
Fister: I don’t know. I suppose it’s possible. I think one of the ways to demonstrate real value and partnerability, opposed to just being a supplier, is by the breath of what you offer. I think of problems from the beginning to the end, the end-to-end. That kind of a holistic view is a way to incorporate lots of elements of technology, through utilization of the targets. I think companies that either didn’t have clear incubation goals and/or were very acquisitive never really had as much of a total plan of that end-to-end dynamic. I’m not being critical of anybody, I’m just observing. The IT industry went through the same kind of transition. In that way, I would tell you that I am absolutely thoughtful of the roadmaps we perpetrate. We consider the roadmap to be the end-to-end. It gives us a path to identify and develop technology inside and work with partnering elements of the world, whether they be inside efforts inside our customers, maybe smaller companies or new companies, even if we should consider OEM collaboration, distribution agreements, and even ultimately I suppose acquisition. I believe the most successful companies have that total goal in mind and then have a very big attitude that it’s not just about owning something. We partner with companies, we collaborate, and ultimately maybe there are some that we choose to partner even more with and integrate together. There are all those elements to deal with. It’s what the biggest and best companies in the world do and it’s what we do.
 
Electronic News: So less buying of companies, more holistic innovation?
Fister: Yes, and I think the consequence of less buying of companies is a byproduct of demonstrating internal innovation and that compliment to a customer has a net affect. That’s certainly incumbent that that will happen because it’s just too difficult for companies to start and really gain a lot of momentum. As I said, the bets are bigger with customers. They can’t afford to bet a lot of their success on very small entities. The stakes are very high. I think you see a lot more early innovations and companies will continue to flourish, or maybe you’ll never even hear of them and they’ll be integrating faster. Maybe people will never leave and the innovations will happen and that would be as if they virtually started on their own. It’s a whole kind of a different environment.