'I would say India is in the lead as compared to other developing countries' - Ramon Nunez, President and CEO, IKOS Systems

From picking strawberries to selling electronic design
software, Ramon Nunez, President and CEO, IKOS, has come a long way. A typical example of
rags-to-riches story, it was Nunez's sheer hard work and persistence that helped him
complete his education and enter the field of marketing. But his desire to be involved
with computer systems led him into EDA. He worked with Cadnetix and Zyncad before he
joined IKOS in 1990. Today, he is involved in establishing his company firmly in the EDA
market across the world. The company, which is addressing the growing needs of the
electronic industry through design verification solutions, entered the Indian market in
May 1998. In an interview to DATAQUEST, Nunez discusses the plans and positioning of IKOS.
Excerpts:

- How would you
describe the business of your organization?

The company is fundamentally positioned to address the toughest challenge in developing
complex ICs in electronic systems, that is, design verification. The way we are doing that
is by delivering software, hardware and services. In the area of products, we have two
basic product families: simulation acceleration and emulation. They solve two different
functions of design verification. We complement those product solutions with services. And
the services organization is entrusted with delivering know-how, training our customers
and delivering optimization or design services, so that our customers can use our products
effectively.

- The two
product families you mentioned are simulation and verification. How do you develop
products for these areas without being a part of the actual product development process?

We are actually one of the best users of our own tools. Our solution is a combination of
hardware and software. We develop the hardware component and it requires custom shifts for
the acceleration portion and FPGAs for the emulation portion. So, we develop hardware that
not only allows us to use our tools, but also keeps us up to date with design
methodologies and the verification issues that our customers face.

- What do you
think is the singlular factor that decides the competitiveness of processor manufacturers
like Intel and Cyrix? Would it be your tools or would it be some other skills which they
possess?

I can only tell you that the fundamental enabling technology that allows companies to
deliver high-performance processors is the advances in silicon or IC technologies.
Verification is also a very important issue that I would consider as an enabler, because
the development of every single chip or any other such complex device requires a design
verification process. And that can be done with software tools. However, when you talk
about a complex device such as a processor or a graphics chip or a communications chip or
system, the need for higher-performance verification solutions is growing. But the
software-only tools are not able to address the verification problem. That's what opens
market opportunities for IKOS.

- If one looks
at the EDA tools market, which also includes low-end products, how would you position your
products?

Well, if you look at the EDA industry in general, all large EDA companies provide
verification tools. So, if you're talking about Cadence, Mentor and Synopsis, they all
provide simulation products or almost all sorts of verification products. What we provide
is a combination of software and hardware that gives the user a higher performance. The
solution that we have for simulation acceleration is a product that integrates the
software simulation environment with the hardware solution. So, the software is able to
integrate with the design methodology that the engineer uses, whether the engineer uses a
VHDL or a verilog environment, we support both. Our software allows us to integrate our
hardware into that environment.

- Who are the
major players in the EDA market?

If you look at the high-performance verification space, there are only two major
companies: Quickturn and IKOS Systems. Quickturn has about two-third of the market space,
IKOS has about 25% of market space. The growth of the higher performance verification
tools should be higher than the overall EDA growth. The EDA growth is about 20% today. So,
we certainly anticipate to grow at a higher rate in 1999 and beyond.

- How would you
compare EDA in India with other developing countries?

Our customers primarily fall in three-to-four categories. The largest user-base continues
to be in graphics and multimedia chips. The second is telecom chips, and the third is
processors or computer-related systems. To a lesser extent, we have ASIC companies like
Toshiba and Lucent. They are also very important customers, but they use our products
differently. They use the products to verify their customers' designs.

I would say India is in the lead as compared to other
developing countries. There are a lot of talented, highly-skilled technical people here
who can be tapped for product development. The country, probably, has the largest
installed base of IKOS systems. Of course, when you consider developed nations like Japan,
US or Europe, clearly they are the larger market opportunities for IKOS.

The top five global customers would include Lucent, Siemens
and Philips, and some other Japanese companies like Toshiba and NEC. Motorola would
certainly rank in the high-end of our customer base.

- The processor
manufacturing companies are absent from this list. Is there any particular reason for
this?

AMD was our customer till a few years ago. But then the methodology for processor design
shifted towards the use of cycle-based tools. Our products don't provide a significant
advantage for such designs and processors happen to use those kinds of designs. Intel, AMD
and Cyrix continue to use our products. However, they don't use as much as we'd like them
to. These techniques are basically software simulators that approach the verification
problem in a more simplistic way. And when they do this, they are able to use verification
more effectively or do it as a compromise in terms of the kinds of things they can test.

- Once a
company has already invested in a certain number of seats, how do you see it coming back
again and again? What exactly drives the product purchase?

We go back to the fundamental driver in our whole industry-the IC technology. As the
technology evolves, you are able to deliver more and more functionality on a single chip.
The way that happens is that the density, the number of gates or transistors per chip,
doubles every 18 months. Under this case, customers need to handle larger-and-larger
designs. Our systems are scalable. So, for example, today, our customer may be dealing
with a two million gate designs. A year from now, the same customer may be dealing with a
four million gate designs. This means that he needs to upgrade to a larger solution.
Eighty percent of our business comes from our existing customers' upgrading, moving up the
scale of capability that our systems can offer.

- How
frequently does a company come for an upgrade?

It probably tracks the Moore's Law more than anything else. It's more like every 18
months. However, many of our bigger customers are not only extending the complexity of
their tools or technology, but also adding more design teams. That offers another
opportunity to sell more products to those customers.

• Is there
potential for such high-end products in the market?

There is no question whether the market for our products is there or not. It's there. If
you go back prior to 1998, we had 18 consecutive quarters of growth and profitability. The
Asian Economic Crisis is probably on the upswing now. But I think in 1999, we'll see a
recovery and those markets will come back. Europe and North America will continue to be
strong. So, 1999 will see an upsurge in growth, especially in the second half. I think the
market for technology, in general, is a big market.

• There is a
current trend of 'systems on chip'. Can you describe that?

Well, there's a huge shift in the way chips are developed and, therefore, in the way
verification is going to be done. The fundamental shift impacts everything. 'Systems on
chip' requires a change in the overall architecture of how you approach the design of that
chip and the people in the development team. You will not have a separate software and
hardware team. It needs to be integrated. Such a software and hardware integration is the
direct impact of 'systems on chip'. It means that there's going to be more and more
verification requirement placed on the design team.

• What are your
plans for the Indian market?

The bulk of what we do in India is going to be product development, specifically software
development. We look at the Indian operation as a key component of our plans. Apart from
that, we see an opportunity to develop a services organization that can allow us to deploy
highly-skilled engineers. So, when a customer needs the training or know-how to optimize
the use of our tools, we'll be able to deliver that resource from India. A very important
part of our presence in India is our end-user customer who will continue to buy more
products from us. As more and more companies look at product development as a global
resource, India would become a very important place to tap highly-skilled engineering
resources. Motorola, Lucent and all other large companies will continue to invest and
you'll see that investment grow. That will also create more opportunities to expand the
use of our products.

In India, we have a development center with approximately
55 people, mostly software engineers. A consulting services organization is also coming
up. Our end-user customers include Texas Instruments, Transwitch, ST Microelectronics and
Lucent among others.

• What kind of
a marketing strategy do you have for the country?

We have a distributor network that allows us to have the sales and support presence here
in India. Eventually, we'd like to have our own direct operations here. But that will
probably take two to three years. In the short term, I think we'll continue to rely on our
distributors here. As we expand our consulting services, we'll first add more and more
technical resources. That will help us build a base which is very important to support our
customers before we add the sales and marketing staff.

• While
recruiting people in India, do you look at the VLSI engineers or just programmers? Are
there sufficient resources available?

Our primary emphasis has been on software development engineers, the programmers. But we
are also in need of VLSI engineers, specifically verification engineers. Ideally, we would
like to have experienced people, but they are hard to come by. I think the market for
engineers, in general, will continue to be very competitive like it is in the US and in
Europe. I don't see any reason why it wouldn't be competitive here. As you can see,
companies like Microsoft, IBM and others are coming here to establish development centers.
That will continue to fuel the competitive environment.

• Are there any
plans for university programs because that is where the VLSI engineers get hooked on to
the tools?

The company does have a program where we work with the universities. We either sell very
low cost products or donate software to train engineers. So far, we've done that in the
US, Germany and UK, but not in India.

• What are the
problems that you're facing while establishing yourself in India?

I think the infrastructure is probably the biggest problem. When you talk about the
infrastructure in telecommunications and other things it's a challenge to create a
high-tech environment. We are in the process of finishing our new facility here. Its
inauguration is coming up in a couple of weeks. It is a very high-class work environment
for engineers, with all the latest telecom equipment. So, I think we'll have the
infrastructure in place.

We'll provide consulting services for supporting the
customers, but not just Indian customers. This facility will provide resources that we can
deploy in Europe and the Asia-Pacific region as well. So, that's going to be a good center
to have in India. Although we have technical engineers in Japan, there are never enough
engineers.