Off-shoring of Electronic Design Automation [EDA] software development is still largely an unexplored opportunity for EDA companies and EDA groups within semiconductor companies worldwide. While several other IT / software domains have seen offshoring to India, EDA has not seen much growth in this trend. And there are very few services companies in India too who are focused on serving the semiconductor industry.
India has been a preferred destination for offshoring for many reasons, in addition to the benefits of cost effectiveness that is the most visible. An ecosystem has developed in India over the past few years which make it an attractive destination for offshoring EDA tool development. These include:
Talented and Experienced man-power who have experience in working abroad in the Silicon valley or in the semiconductor MNC design centers in India is available
Fundamental strength in education imparted by Indian academic institutes and universities
Established services industry with a high degree of maturity in processes and service delivery experience.
Government support and investment for promotion of the IT and semiconductor industry in India
We believe there are two key reasons for offshoring EDA software development to India. These are:
Access to talent - EDA software development is a technically intensive exercise and requires skilled engineers with background in both computer science and VLSI Design. The availability of skilled engineers in India along with the requisite experience in undertaking large software projects is one of the key drivers for off-shoring EDA development.
Cost benefits - At the same time, there is a significant cost advantage in off-shoring as the cost of living in these countries is lower. Even with the increased communication and transportation related expenses, the loaded cost of EDA software development in countries such as India can turn out to be about 50% to 60% of the loaded cost in countries such as US.
Offshoring modelsBroadly, there are two ways to go about off-shoring EDA tool development, as in the case of other product development efforts. One is to directly build your own off-shore development center and the second is by outsourcing portions of EDA software development to an external off-shore development partner. Both of these approaches have their pros and cons and need to be evaluated by a company planning to offshore EDA software development.
Whereas establishing own captive off-shore development center may be suitable for large companies who foresee a steady growth in head count, this may not be the right model to follow for small to mid sized companies. This is because providing growth opportunities for employees in an offshore arm is a key issue in the sustainability of the venture.
However, building your own off-shore development center has the clear advantage in terms of control over the off-shore operations and lower operating costs in the longer run. However, there are some very clear drawbacks too, such as higher initial set up costs and management bandwidth involved in initial and ongoing administrative, legal and facility related issues.
Thus we believe that setting up a captive offshore development center is the right strategy for a large firm which has management bandwidth to spare for the initial effort as well as plans to significantly increase the activities in the center in the long run, however, might not be a good strategy for a smaller firm with limited visibility.
The most viable alternative for a small to mid-sized companies is to partner with an off-shore software development service provider for starting their offshore operations.
Even a larger firm could consider partnering with an offshore vendor; In this model, the off-shore vendor kick-starts and incubates the operations which are then transferred to the company in a Build-Operate-Transfer model.
Outsourcing to an off-shore vendor brings in the benefits of outsourcing in addition to those of offshoring. To note, these are:
1. An offshore vendor would have proven best practices in managing distributed software development efforts.
2. By selecting the right vendor, one can acquire additional capability, best practices in relevant skill areas and the ability to attract talent is increased.
3. Rather than hiring permanent employees for temporary or varying resource requirements, outsourcing to an off-shore vendor helps a company maintain a flexible engineering capacity in the offshore location.
4. Outsourcing EDA software development to a partner can enable in-house EDA groups of semiconductor to focus on core activities like developing design methodologies while most of the activities related to automating these methodologies could be outsourced. Similarly, outsourcing peripheral but effort intensive development tasks to a vendor can enable an EDA product company focus on its core tool development.
Choosing an offshore EDA partnerThe choice of the offshore partner is a critical decision to be made in the offshoring process. We believe that the following are key factors to keep in mind while choosing an off shore EDA partner.
1. In case the offshore requirements are likely to remain in a particular domain, choosing a partner with deep expertise that domain rather than one with broad horizontal experience might be a good strategy.
2. EDA being a complex domain, emphasis should be given to evaluating the quality of the workforce and the technology culture of the partner while deciding to choose an offshore software development partner.
3. With a large sized offshore software partner, the company risk is lower and a quicker ramp up to large offshore team sizes could be easier. However, companies would get more attention and better response time from smaller offshore partners, to whom they represent major accounts.
4. Another common measure used to evaluate offshore partners is the charge –out rates for the offshore engineer’s time quoted by the prospective partners. This charge out rate, unless compared with diligence, is deceptive and provides only a partial picture of the final cost, as the productivity of teams can vary across companies. A common mistake most companies make is to target the lowest person month charge-out rate provider. However, the productivity of that offshore partner might be quite low, leading to project delays and cost overruns which more than compensate the lower charge out rate.
5. Another key criterion for making the choice between prospective offshore partners is their project management and service delivery processes. Typically, vendors would provide previous reference customers with whom the company could discuss the past performance of the offshore partner.
It is recommended that the company should evaluate the various processes of the vendor to ensure that preventive and corrective risk management processes are in place. This is because outsourcing engagements face many forms of risk, including Confidentiality, IP, Quality and Delivery related risks. In the area of EDA software development outsourcing, some of these risks are more significant than others. Since EDA is a high technology activity and is an industry marked by aggressive IP protection and litigation, IP and confidentiality related risks need to be addressed specifically by the offshore partner.
Vendors who have previous experience in working on high technology projects are more likely to appreciate the sensitivities of EDA industry and are also most likely to have codified best practices as processes to minimize IP risks such as license violations, patent infringement, IP leakage etc., These processes could include:
• Sensitivity and experience in patenting related activities such as patent searches, filing and ideation process.
• Contractual agreements with the vendor and each of the vendor’s employees working on the project ensuring the confidentiality of sensitive information
In the initial stages, pilot projects with the vendor can help build confidence and smoothen the process of working together for the longer term.
There are benefits to be had by offshoring EDA software development if challenges are to be managed well. Offshoring EDA tool development is already happening in a significant way with several EDA product companies and in-house EDA groups of semiconductor companies having set up either a captive offshore development center or having tied up with offshore partners to achieve the benefits of offshoring and is set to grow.
