Around the globe, new 'Silicon Valleys' emerge

As software jobs move to India and beyond, California could lose its footing as tech startup capital of the world.

Every so often, Walter Wilson wonders if he should become a plumber.

It's not that he is repressing a deep affection for S-traps or porcelain fixtures. Rather, it's the fact that, to him, the Silicon Valley of old is dead.

Just a few years ago, he was a star of the silicon revolution. As a software developer, Mr. Wilson was such a precious commodity that tech companies pleaded for Congress to let in more of his foreign colleagues to meet what seemed a bottomless demand. Now, however, Wilson can't find a steady job.

The collapse of the tech economy hurt, to be sure. But that's not what has him daydreaming of sink snakes. He's been pushed to his financial edge because, increasingly, jobs like his are being sent to India.

For years, companies from carmakers to telemarketers have cut costs by replacing American workers with cheaper employees based abroad - and tech companies have been no different. But Silicon Valley had always stopped short of sending its high-skill research and design jobs abroad.

Now that it, too, has joined the trend toward outsourcing, Silicon Valley's future as the lodestar of the tech universe is at stake. For the moment it means that many workers will need to reinvent themselves or relocate.

More deeply, though, it points toward a new kaleidoscope of "Silicon Valleys" worldwide, as foreign engineers now doing the work of Silicon Valley corporations spin off to form their own startups.

It is the same pattern that helped create Silicon Valley's unique startup culture, as young designers at firms such as Hewlett-Packard and IBM broke away to set up their own businesses. Now, the tech industry's desire for cheaper labor is sowing these seeds around the globe.

"We're seeing a fundamental shift," says Jim Koch, director of the Center for Science, Technology, and Society at Santa Clara University. "Innovation is becoming a truly global phenomenon."

That is partly the result of economic necessity. The legendary excess of the late 1990s has been followed by a new frugality in which investors and venture capitalists actually expect a profit.

One of the surest responses has been to cut payroll costs by hiring overseas workers - even in high-skill, high-paying jobs like software design.

Ironically, though, the shift is possible because of the success of Silicon Valley's Internet revolution. Many of the foreign workers brought in during the boom have returned to their home countries with a new level of expertise. And perhaps more important, the advances of recent years have reshaped the global communication network through the Internet, telecommunications, and wireless net- works.

Indeed, in typical Silicon Valley fashion, when Vic Kulkarni considers the fate of the cradle of the tech world, he takes the idea a step further and suggests that the very notion of Silicon Valley is becoming outdated.

"Wherever there is talent, we want to go," says the president of Sequence Design, a company that produces software to design computer chips. "Only time zones are boundaries in my head anymore. There are no geographical boundaries."

Design teams schedule meetings across countries, simultaneously involving employees in India, Japan, Boston, London, and here. "We don't have a headquarters," he says. "If I'm traveling to Japan, that's where the headquarters is."

With his new 20-person research and design bureau in Delhi, his company can work 24 hours a day, splitting tasks between the US and India. Moreover, the Delhi bureau costs him about one-third of what it would cost him to set up a similar operation in Silicon Valley.

The consequence for Americans

That math, however, has sent American software engineers into unemployment lines. "We have definitely felt it," says Fadi Bishara of TechVenture, an outplacement firm in Menlo Park, Calif. "Three or four years ago, there was a tremendous demand on all levels of software developers... Now, 20 percent of the work that would normally be done by local people has been shifted [overseas]."

Software developer Wilson has had to refinance his house, put off buying a new car, and scale back the plans for his kids' education from pricey private colleges to state schools. Fortunately, he says, he has other skills to fall back on, or else he might have been truly tempted to pick up a plumber's wrench. "The plumbing hourly wage is about the same as a software engineer now, and they can't send plumbers overseas."

Yet Wilson also sees a change in Silicon Valley beyond his own situation.

He came here in 1995 because, as a techie, Silicon Valley was to him what Paris was to impressionists or Milan is to fashion design. For a half-century, Silicon Valley has been unique - a cauldron of pure capitalism.

Now, however, Silicon Valley's outsourcing is feeding an emerging class of tech hubs worldwide. In the not-too-distant future, he worries, Silicon Valley could lose its preeminent place.

"That sort of fantasy and luster will be gone," says Wilson. "The way it was, the

creative stuff was done here... But we're going to see more and more of that sent overseas. Why would you keep it here?"

A unique confluence

Entrepreneurs and venture capitalists don't deny that outsourcing will probably gather speed.

But many maintain that even in a world of truly global innovation, Silicon Valley remains a unique brew - bringing together world-class universities, massive quantities of money, perfect weather, and an almost kamikaze approach to capitalism that doesn't fear failure.

Bangalore, India's nascent Silicon Valley, "is a much more risk-averse culture," says Ravi Chirevolu, who travels to India for his job with Charter and Venture Capital in Palo Alto, Calif. "In Silicon Valley, it's sexy to be in a startup; In Bangalore it's always better to work at some company you've heard of."

The culture of taking risks in order to be at the forefront of innovation, he and others say, is central to what Silicon Valley is, and crucial to it remaining relevant in the future.

"Silicon Valley has some very unique aspects that make it the center of the high-value part of the entrepreneurial process," says Steve Bird of Focus Ventures in Palo Alto. "The real innovation is still happening here, and I expect that to continue."

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