The Evolution of Altium: Road to a Record-Breaking Year
September 14, 2016 | Judy Warner, I-Connect007
Chris Donato, VP of sales for Altium Americas, sat down with me recently to discuss what he and Altium have been up to lately, where they came from (Australia) and what the future holds for Altium. This company has evolved from flying well under the radar during the acquisition frenzy of the ‘80s, to achieving a record $100 million in sales for fiscal year 2016.
Judy Warner: Chris, it's great to speak with you. I'm excited to hear about Altium and what you're doing. Let’s start by telling our readers about yourself, your background, and how you came to be the vice president of sales for Altium.
Chris Donato: I appreciate you taking the opportunity to have a discussion and I'm excited to share with you about what Altium has been up to. I've been here for about 13 years now and I almost don’t remember what I was doing before I came here [laughs], but it has been a really great experience. I came to the company from Boston, where we now have our main US sales and support office. My journey began 13 years ago when I moved to California. I needed a job at the time and happened to stumble into Altium in an inside sales role. I didn't know much about the industry and certainly didn't know anything about Altium, having come from a background in telecommunications.
We started off in Tasmania, with a headquarters in Sydney and this was my first step into an international company. There has been a lot of change in 13 years and I have had the unique opportunity to progress in my career from the ground up. The company has a great culture of people and performance and we run a lean and mean machine here. It’s always been a place for people who have great ideas to be heard and implemented.
When I first started, nobody in the industry knew who Altium was. We started out in 1985, and our name was Protel at the time. We did a name change in 1999 when we went public, so I'd always have to mention Protel and people would say, "Oh, that's right. You're that company from Australia." That was always the start of the conversation about Altium.
Fast-forward to today, and PCB software is synonymous with Altium. We have a really great brand and a great mix of energy, culture and technology. We're 100% focused on PCB design and you could say we're the only company that really focuses on just that. There are a lot of other aspects of the EDA industry that we don't focus on, like IC design and ASIC design. Those are some of the things that the other guys do very well.
Our brand recognition has consistently improved, and seeing the number of customers that we have today is quite amazing. We get to interact with every customer, connecting with people on the makers’ side, at startups, green field companies, and all the household names. We work with them, and we want to be easy to work with. We want it to be easy to access our software, easy to check it out, easy to know its pricing. We don't hide any of these details. We want to be easy to do business with, and I think our products follow that mantra. It's exciting to see customers like Google and Tesla really champion our software in products they've created.
Warner: When Altium made that official name change around 2000 and went public, what drove the decision to focus exclusively on PCB design?
Donato: In the '80s and ‘90s, there was a consolidation of the PCB design tool market. There were a lot of different schematic, PCB, simulation, and signal integrity products that were acquired mainly by Mentor and Cadence. Their main focus was and still is IC design and verification. Having PCB tools in their portfolio allowed them to have more of the design ecosystem in their software portfolios.
Meanwhile, we were way down in Tasmania, Australia. We weren't that big and no one really paid much attention to us, which actually turned out to be a blessing because we could have been gobbled up during that period, but no one wanted to bother with those crazy Australians down under! We flew under the radar while they all consolidated and our CEO and founder at that time, Nick Martin, wasn't an entrepreneurial businessman. He was an engineer, and his goal and passion was really about making a product that could be used on the desktop of every engineer.
We were the first company to do a few innovative things in the PCB design industry. We were the first to move PCB design to Windows in ‘91, so that was a big step when everyone said, “Oh that’s silly, what’s Windows?” We’ve grown up on that platform, which is one of the foundations of our platform and our easy-to-use ideology, because everyone is growing up with Windows. We were also the first to unify a PCB software product. When everyone did their consolidation, a lot of competitors bought all the pieces to their tool. They bought a schematic product, a PCB product and so on. They were a bunch of disconnected tools that were then put them under a new name, but there was still different GUIs, different architectures, and different databases. We focused just on making what we call a unified design tool. One GUI, one database, and today that is still our biggest differentiator.
When you open up an Altium Designer product, it's just one GUI, and within the GUI there's one database that can do all of the functions. You can design a schematic, you can simulate it, you can do a circuit board, and you can do your documentation, whereas the other guys, who make great products, are all individual products, with no unified connection between them.
Warner: Let's talk about the market conditions for a moment. What do you see as major challenges in the industry for designers, customers, and OEMs that are interacting with various design platforms?
Donato: There's a lot that we see. According to an Aberdeen survey, 66% of an engineer's time is spent researching data. Engineers get out of college with all these grand visions of designing the next great thing—an Oculus virtual reality headset or an electric car. But sometimes reality sets in when they get into the companies and they realize that, again, 66% of their day is spent searching, managing, and trying to find data such as parts, datasheets for parametric information, and the right symbols and footprints.
To us, the biggest barrier to innovation at these companies is all of the non-design tasks that they have to do. We see that as the biggest bottleneck and barrier to innovation, where engineers are not spending time innovating and doing what they love. Instead, they’re spending time doing these non-design tasks. A core philosophy of our company and of our products is that we develop, automate and streamline our products and processes so that engineers can have access to this information at their fingertips. They don't have to stop what they're doing, go to Google, search for an oscillator, find it, and then redraw it. That really eats up a lot of time. To us, the biggest design challenge that we see is the ability to collaborate and share data and get access to data in real time to make better design decisions.
Warner: That totally makes sense with the disparity of component libraries. It seems like they're scattered all over the place.
Donato: That is a nonstop challenge. The number one pain point when we go to any company is when we talk about libraries. It's still the number one challenge and it gets out of control when everybody starts with good intentions, but as soon as you start having your own data and you don't share data, you replicate, and that's a challenge.
Another challenge that is in our wheelhouse and where we've seen extremely great growth, especially in the startup area, is the need to make everything “smart.” Everyone has the given their predictions of how many connected devices there will be in 10 years and we're seeing products that need electronics that never needed them 50 years ago, and they’re from these startups or older SMB (small and medium business) companies that don't have the expertise to develop these technologies.
These are different engineers than the engineers of 20 years ago. Engineers 20 years ago had specialties. There were guys and girls that were PCB experts or simulation experts. Nowadays people are more systems experts. They come out of school, they have to design a product, but they don't really have a specific expertise. They have to put electronics in a coffee cup, let's say, to make it a smart coffee cup, but they don't know how to do that. We see that as a big challenge to enable today’s engineers to design these connected systems.
The purpose of our software is to make this level of design easy where you don't have to be an expert in a certain field to get the job done. Our easy-to-use, Unified Design platform makes it possible for these startups bring their ideas to life. Similar to this concept of design accessibility, we recently released a product called PDN Analyzer. It's an extension for our Altium Designer platform, and it enables power distribution analysis for every engineer. You don't have to be an expert in power field analysis simulation technology to use it. We want to make it available and easy-to-use for every engineer.
Warner: Looking ahead, where do you see the market going and where do software companies like Altium need to focus?
Donato: Our goal as a company is to be the number one PCB design software company in the world. If you asked me that six or seven years ago, as optimistic and as committed to winning as I am, I might have questioned it. Today, I can say that it's not an if, but just a matter of when, and we have a plan to do it by 2020. I keep reading about how things in the EDA market and semiconductor industries are not looking good. From my point-of-view, I still see a lot of growth in the EDA market. As I mentioned before, with the need to make smart products, each smart product will need a printed circuit board.
There’s just ourselves, Mentor, Cadence, Zuken, and a few others that do it. We're in a very small niche market. It’s only a $500 million market, if that, but the surrounding ecosystem that surrounds this market is massive. I can see there's going to be an explosion. We're also in the age where the experts in this industry are at retirement age and we're seeing the next generation of engineers, the millennials, rising up. They don't have allegiance to companies, but they want to be able to do their job, use the best, most innovative products to get their job done. They're not experts; they are more generalists, and I see them, coupled with the smart devices coming in, creating a lot of market growth.
Warner: I’ve noticed in recent years that a lot of RF/microwave engineers are being asked to design their own PCBs—have you seen that also?
Donato: Absolutely, we see that. If you just think about the way that the EDA industry runs, there used to be experts and there used to be CAD librarians. There are no CAD librarians anymore. Some of the old oligarchy types of companies still have them because they might have 30 years of processes to untangle. Most companies, minus those big few, don't have separate schematic and PCB teams. They're asking people to do more and to learn both of those skills. People that, like you said, don't have the expertise. They're starting to do things that they used to just outsource.
We’ve seen a lot of our growth and brand recognition come from our user-centric approach. We market to, sell to, and talk to the user base, where the other guys do these large multimillion-dollar deals and it's a very top-down relationship approach. We've always had the goal of putting software on the desktop of every engineer and working from the bottom up.
That's the approach we've taken and I think that's what the engineering community wants. They want to be listened to, talked to, and we've seen that the buying power has actually shifted to the engineers, where the days of budgets are really gone. Not many companies have a CAD budget.
Warner: I also wanted to ask you about a recent press release announcing that, at the end of your fiscal year on June 30, 2016, Altium posted record numbers. Tell us about those numbers and a little bit about the recent press release.
Donato: Yeah, it's very exciting that we've had a record year over the year prior, but this one's special. As a company, it's the first time that we've hit $100 million in sales, which is a 22% growth over last year. We're very excited to see that. It's a really great time at Altium, and now it puts the pressure on us to continue this amazing double-digit growth in an industry that, as you know, is very slow, we’re talking single-digit growth at other companies
Warner: Congratulations; as the VP of sales, you must be very excited and pleased with your team.
Donato: We are, and it's great. A lot of the team is new; many people I'd say haven't even been here two years. As I mentioned, we went through a transition from a reseller model to a direct sales model three years ago, and that was sort of a turning point. We've taken this transactional selling model that differentiates us from our competition. We're taking the success that we've done here in the US and we're optimizing it and looking to improve it by taking some key markets in Europe and moving those to a direct selling model as well.
One of the really exciting things if you look at the revenue breakdown is that we sold 5,180 new licenses of Altium Designer full board package and that raises our active subscriber count, which is anyone that has an active Altium license, to over 31,000 globally.
Warner: That's a heck of a number.
Donato: It is, and you know, it puts the pressure on the sales guys because now we have to do more than that this year.
Warner: That’s how it always is in sales, right? You break records, but you have to turn around and do it all over again. You get to celebrate and be in your glory—for about five minutes, before you start again at zero! At least that's how it always seemed to me when I was in sales. (laughs)
Donato: It hasn't changed. We had an annual sales kickoff global event in Boston in August, and that's exactly what we did. We congratulated each other, turned the corner, and then rolled out some new initiatives and got everybody excited and rowing the same direction, and we're off again.
Warner: There was also mention of some M&A activity at Altium. In that growth. What's the breakdown as far as organic growth versus acquisition?
Donato: That's a great question. If you look at the metrics and the underlying numbers, we have Octopart, which is an acquisition bringing us a little bit over $4 million, and Perception Software, which we got towards the end of the fiscal year that didn't contribute as much in this fiscal year. We do divisional reporting now, so we have our makers and content division, which is Octopart and Ciiva. We have Perception Software, which again we just purchased, so that’s very small. Then, we have a microcontroller and embedded systems division, which is TASKING. The majority of our revenue is from the board and systems division, which is PCBs, and that revenue was up 17% over the year. Again, we're looking to expand that by some of this M&A activity, but that is our main focus and our mainstay, at least it is for me, being part of the board and systems division.
Warner: Where is Altium positioning itself as you head towards the end of 2016 into 2017 and beyond, both fiscally and strategically?
Donato: We've made this statement, and I think it's a bold one, where we're confidently projecting and pursuing the goal of reaching $150 million in PCB design software revenue, and $200 million in total revenue, with our other divisions, by 2020. That is not that far away. When we do that, we will be able to claim market leadership in PCB design. I think we've executed on the strategy and we have the needed revenue in place. We're already the leader in a number of active seats out there, and now it's just time to fiscally become the leader.
Warner: Again, congratulations. It's impressive news. Thanks for sharing it with our readers. We'll definitely keep in touch and you can keep us posted on your progress.
Donato: You're welcome, Judy.
911EDA, Inc. provides Altium PCB Layout Services. We are an Official Altium Design Firm.