SYDNEY – At some point this year, a flight attendant will shut the doors of a plane in Sydney Airport, the jet will push back and taxi down the runway. Liftoff will soon follow, and with that, Altium will be an Australian company in name only.

The ECAD software developer announced yesterday it would move all its core R&D, marketing and executive personnel and functions to Shanghai by year-end. It was a decision that took most by surprise, including some in the company, for the firm had only made up its mind within the past four weeks.

In an interview with PCD&F last night, associate director corporate communications Alan Smith explained the rationale behind the sudden announcement, and made a compelling case for why it is not only the right decision, but in retrospect, also the obvious one.

Clearly Altium sees huge opportunity in China. But others have effectively capitalized on China’s market without moving the farm. So why bolt now?* Smith concedes it’s an unusual approach. “Most would have expected us to outsource the R&D or try to grow the sales there,” he told PCD&F last night. “The management and the spirit of the company are shifting. [But given] the opportunity coming out of China, to do anything else there would be like being partially pregnant.

“We think as a result the software will be created faster. The expansion of AltiumLive will be accelerated. All the IP will be accelerated.”

In fact, Smith says, the company sees the day coming when China will be home not just to consumers and manufacturers but also designers, perhaps even the next Apple. Coupled with unprecedented government investment in the design sector, the decision makes perfect sense, he asserts.

“We need to be in the market where the biggest opportunity is,” he says, adding the decision goes beyond the potential local market. The day will come, he continues, when “China will not just be building products for others, but will be creating its own products for export. The Chinese government is investing $1 trillion or so over the next 10 years to define a homegrown electronics design sector, and we want to be part of that. This is part of the national initiative to move from Made in China to Grown in China.”

The decision has been relatively quick in the making. “This has not been three years in the gestation,” Smith said. “The opportunity as we see it in China has been relatively quick. And we tend to act quickly. The first signals internally were perhaps four weeks ago. But once it becomes an obvious notion, there’s no special advantage in hanging back.

The future of electronics design will change quickly. The thought process of connecting electronic devices has been part of our strategy for several years.”
It’s too early to gauge the reaction from Altium’s customers, particularly ones in the defense sector. (Just last week, Altium announced the Applied Research Laboratory, an affiliate of the US Navy, would standardize on its AltiumDesigner platform.) Smith acknowledges not all parties will necessarily be on-board, and that predicting the outcomes would be impossible. However, he dispelled the notion that the company’s financial success was in some way tied to the Australian government. “We never built the business on any type of support. It always has been a commercial venture.” The decision to move was strictly the company’s, he insists, and not borne of financial inducement from China.

Furthermore, Smith cautioned against drawing conclusions the move would put Altium’s IP at risk. The same employees who have been responsible for the programming in Sydney will remain in charge in Shanghai, he said. “We haven’t handed the software source over to a new group of employees or outsourcing. The people who do the actual work are going to a different location, but they are not changing. And what we have put into that code is 10 years of work. It wouldn’t be easy for someone to duplicate, even if they took pieces of it.”

To an extent, Altium has been moving toward this since its November 2010 acquisition of Morfik Technology, which propelled the company toward a cloud-based platform. In fact, Smith says, the servers on which the company’s databases reside probably won’t be in China anyway. “We’ve heard a lot of noise in the past few months about CAD data sitting in the ‘cloud.’ We talk a lot about sharing the design files and component libraries. We currently use Amazon as our cloud host partner, but who knows where the actual boxes are. That’s the point of being in the cloud. As with anyone who does their banking on the Internet, we accept some risk.”

This isn’t the first time Altium has made such a move. CEO Nick Martin took the company (then known as Protel) to the Silicon Valley in the early 1990s, reasoning that a startup ECAD company needed to be where the action was. While noting the scale today is different, Smith draws a parallel to those days.

In all, the decision came down to positioning Altium to work in the market it sees as the fastest-growing and with the most potential, Smith said. “Who knows who the next Apple will be? It is as likely to be a Chinese company as any other.” If he's right, Altium may be ahead of its time.

*As a matter of governance, Altium will remain an Australian company traded on the Australian Stock Exchange.