Businessmodel of Cadence Design Systems

Customer Segments

Cadence has a niche market business model, with a specialized customer segment. The company targets its offerings at semiconductor and electronics systems companies, Internet service and infrastructure companies, and other tech firms that develop electronics in various market segments, including communications, consumer devices, automotive systems, and medical systems.

Value Proposition

Cadence offers two primary value propositions: performance and brand/status.

The company has demonstrated strong performance. Examples of customer successes are as follows:

• IN2P3 reduced errors and saved time through automated updates of schematics and symbols
• NetSpeed increased validation speed hundreds of times faster compared to simulation
• Altair developed top product offerings at a lower cost in terms of engineering, time, and tapeout
• Tait Communications experienced 25% more schematic capture productivity

• LNK experienced a more than 50% faster time-to-market for its SLIMbus audio bridge product The company has established a strong brand as a result of its performance. It has won numerous honors, including the following:

• Placement on Fortune’s list of “100 Best Companies to Work For” (2016)
• Two “Partner of the Year“ Awards from TSMC (2015)
• Recognition as one of the “Top 25 Industry-Driving Companies“ by the City of San Jose (2014)
• Placement on the EDN Hot 100 List for its Protium product (2014)
• Two “Customers’ Choice“ Awards for Papers Presented at TSMC OIP Ecosystem Forum (2013) ### Channels

Cadence’s main channel is its direct sales team, which includes sales employees and applications engineers. It also utilizes value-added resellers on a selective basis and third-party distributors for certain Japanese customers. The company promotes its offerings through its website, social media pages, marketing automation, online advertising, and attendance of trade shows and conferences.

Customer Relationships

Cadence’s customer relationship is primarily of a self-service, automated nature. Customers utilize its products and services while having limited interaction with employees. The company’s website features several self-help resources, including adoption and application briefs, articles, books, brochures, conference papers, data sheets, demos, downloads, eBooks, financial reports, newsletters, presentations, technical briefs/papers, videos, webinars, and white papers. It also offers self-paced online learning (basic to advanced) through its Internet Learning Series (ILS).

Despite this orientation, there is also a personal assistance component. The company provides phone and e-mail support. It also provides a number of instructor-led training options, including classes at its training centers, at the client’s site, and through its virtual classroom.

Key Activities

Cadence’s business model entails designing and developing software and hardware products for its customers, as well as related services. It relies on contract manufacturers to produce its hardware.

Key Partners

Cadence maintains the following key partnerships:

Channel Partners - The company maintains a worldwide network of channel partners, including resellers and distributors, to sell its products to a broader group of customers.

Foundry Partners – Cadence collaborates with top pure-play foundries to develop design kits and reference flows for advanced and mainstream process technologies. It works with the partners to ensure that engineers who use its platforms are given an efficient instructional path from design to verification to physical implementation. Specific partners include ams, Dongbu HiTek, Fujitsu, IBM, Intel Custom Foundry, Magnachip, Samsung, SMIC, TowerJazz, TSMC, UMC, and X-FAB.

Cadence Academic Network – Cadence works with a network of universities known for their design and engineering expertise to promote cutting-edge methodologies and technologies. It exchanges technology knowledge on the design and implementation of microelectronic systems. Specific partners include the University of Frieburg and the lmenau University of Technology.

Key Resources

Cadence’s main resource is its proprietary technology, which it protects through patents, copyrights, and trademarks. It also depends heavily on its physical resources, which include 54 design centers, sales offices, and research and development facilities - 70% of which are located outside the U.S. The company also relies on its experienced training staff to oversee its variety of learning programs.

Cost Structure

Cadence has a cost-driven structure, aiming to minimize expenses through significant automation and low-price value propositions. Its biggest cost driver is research and development expenses, a fixed cost. Other major drivers are in the areas of sales/marketing and administration, also fixed costs.

Revenue Streams

Cadence has two revenue streams:

Product Revenues – Revenues generated through the sales of perpetual software and IP licenses, and emulation/prototyping hardware

Services Revenues – Revenues generated through training and engineering services

Approximately 90% of the company’s revenue is recurring in nature.