San Jose-based GDA Technologies is hoping that more and more companies choose to outsource their entire product development process in the fields of ASIC design, board design, embedded software and system design. By offering a portfolio of available intellectual property and core competencies, GDA markets itself as a full service concept-to-product design shop that’s making its way in the evolving “electronic product development services,” or “electronic design services” sector. Industry leader Tality (a subsidiary of Cadence) books around $200 million in revenue annually, offering a portfolio of capabilities, and building products for companies all over the world — everything from a Gigabit Ethernet networking product to a digital TV set top box.
GDA is a small fish in the ocean compared to Tality, but it offers a similar type of value proposition, and is intent on taking advantage of the potential market. It has undertaken projects that range from doing ASIC design work for NEC to developing a cash register product targeted at the Indian market.
The company develops solutions globally in a variety of verticals. From an engineering standpoint, GDA is like a product company that doesn’t want to do sales and marketing or manufacturing, and therefore sells its intellectual property into existing channels as an outsourced service.
“The way to view this market is as a percentage of R&D spending,” says GDA President A.G. Karunakaran. Obviously the total amount of money spent on technology R&D is huge. But the bulk of it is internal R&D work done by companies. The challenge for Karunakaran is to get customers to buy into the concept of completely outsourcing their product development on a particular project.
Karunakaran co-founded the company in 1996 and built it as an independent consulting company with early clients Nexar Technologies, NEC and Sony. GDA was able to ride the communications and networking wave and grew in size and breadth of expertise from a little over $1 million in revenue in 1997 to current revenue approaching $10 million.
Customer reasons for using a services provider like GDA might vary. Either a customer wants to focus on a core competency — for example a company developing a software-based product doesn’t what to hire people to do chip and board design. Or a customer doesn’t have either the intellectual property or the specific resources (tools or facilities) to get a project executed in a timely and cost-effective fashion.
“It’s like having an engineering team away from home,” says Karunakaran. Of course looking outside your own company to execute specific projects is nothing new. Companies hire independent consultants all the time, or bring in consulting firms to provide bodies with general engineering expertise. But GDA and other companies operating this model take ownership of the whole project. Karunakaran is confident that companies will increasingly outsource complete product development.
Naturally there are privacy and intellectual property issues involved. GDA could execute projects for competing companies at the same time. Karunakaran doesn’t see this as a major problem. “You have to educate your internal workforce on intellectual property issues and confidentially issues, and create a firewall within teams that are working with cross border companies,” he says. GDA has design centers in San Jose, Sacramento, Chennai, Bangalore, and Boston — in what Karunakaran calls “design hubs.”
It’s a completely global model. Much of the company’s all-important R&D happens in India. Karunakaran finds it much more cost-effective to spend R&D money in India, and all projects in Asia are executed in India.
Of course high growth for firms like GDA or even Tality is not a sure thing. Current economic conditions make key decision-makers at potential clients tight fisted with resources. A December 2001 Merrill Lynch research report projects that Tality’s revenue will decrease almost 25 percent this year.
Karunakaran admits, “The visibility projection is difficult these days. The decision makers are not one person.” It’s a services model that will likely gain favor with time, as electronic design services firms develop more and more proprietary and advanced intellectual property. The immediate future for GDA, however, will not be without its challenges. si
