One of these days, as I was reading on the Ford-Firestone feud, I got to thinking on how the tyre industry is similar (and different) from the EDA industry.
As this page of JSTOR(as part of the Journal of Marketing) illustrates, :
- The history of the tire industry has been of exit, rather than entry - so has been the case with the EDA industry, though unlike the tire industry, you have to account for startup behavior. Surprisingly, an EDA company is unable to sustain itself over the long term by itself. It has to either die out or merge itself into the big three. Very unlike small software product houses, which go on for many many years, doing good for its founders (Joel Spolsky anyone?)
- The rubber tire does not face competition in any functional sense - is this similar or dissimilar? One can argue that the myriad perl scripts that used to help one do iterative synthesis, etc. are a competition to placement-aware synthesis tool suites, but I can argue that it does not face competition from an equally ambitious project (e.g. MS Word and Google Word)
- Most importantly, tire production and distribution require a plant in which fixed costs are moderately heavy, to necessitate volume selling - I know that one. Cost of labor in the EDA industry is so high (them Ph.D’s dont come cheap), that it necessitates volume selling.
I think for a small EDA company to continue existing, it must work on a profit-sharing mechanism and actually focus on a market niche which is small (can be handled by <10 developers) , but profitable enough to pay the bills.