The accelerated and amplified business cycle of Silicon Valley is a proxy for what globalization is doing -- or will be doing -- throughout the rest of the country. In just a few short years, the Valley has significantly shifted from being a hub of technological innovation to being a center for corporate headquarters, deal-making, and project management.
Over the past few years, more than 400,000 jobs have evaporated or moved out of the six counties surrounding San Francisco. Some 20% of the jobs in San Jose -- the "Capital of Silicon Valley" -- were lost. That's the highest percentage of jobs lost in a major metropolitan area since World War II.
Silicon Valley is home to some of the largest technology companies in the world, including such stalwarts as Hewlett-Packard (NYSE:HPQ), Apple Computer (NASDAQ:AAPL), Adobe Systems (NASDAQ:ADBE), Cisco Systems (NASDAQ:CSCO), Oracle (NASDAQ:ORCL), and National Semiconductor (NYSE:NSM). Nowhere else has the outsourcing of technical jobs to countries overseas been more prevalent than in the Valley. As the economy sputters back to life, technology companies have resumed hiring. Only this time, many of the jobs are located in places like India, China, and Romania.
While the number of technical jobs lost nationwide to overseas outsourcing is relatively small compared with the jobs lost because of the weak economy, the Valley is a different story. But not the story you might imagine. Though many jobs have no doubt been relocated overseas, that's not the only trend at work. Brand-new jobs are being created overseas as well. That might not seem like a good thing (losing out on new jobs), but it's hardly that simple.
Venture capital is back, albeit rather restrained. Start-ups that can prove their potential for profit may be able to get minimal funding. With limited access to capital, why would a start-up hire an American programmer when 10 can be hired overseas for the same price? There are new companies that might not otherwise exist if it weren't for the money saved by outsourcing programming work. And those companies employ significant numbers of professionals in the Valley to manage the business, market products, etc. Additionally, there are companies that may have otherwise failed, eliminating even more jobs.
The new and salvaged jobs may or may not be enough to offset the number of jobs relocated by healthy and prosperous companies, but it illustrates the logic by which such organizational decisions are made. And, for better or for worse, it foreshadows a trend that is likely to spread like a virus.
What is your opinion on the hot-button topic of outsourcing jobs overseas? Share your thoughts on the Foolish Globalization discussion board.
Fool contributor Mark Mahorney doesn't own shares of any companies mentioned.
