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Entrepreneurship and Workforce Issues*. Martin Kenney Dept. of Human and Community Development UC Davis & BRIE with Rafiq Dossani Stanford University & Martin Haemmig University of Munich. * Presentation prepared for the President’s Council of Advisors on Science and Technology,

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Entrepreneurship and workforce issues

Entrepreneurship and Workforce Issues*

Martin Kenney

Dept. of Human and Community Development

UC Davis

&

BRIE

with

Rafiq Dossani

Stanford University

&

Martin Haemmig

University of Munich

* Presentation prepared for the President’s Council of Advisors on Science and Technology,

Subcommittee on Networking and Information Technology



Outline
Outline

  • China

  • India

  • Entrepreneurship

  • Conclusion



Chinese challenge
Chinese Challenge

  • IT equipment manufacturing

  • Western VC flowing in massively

    • Some excellent exits

  • Enormous and growing domestic market for IT products

  • Chinese attempts to create global standards

  • Massive increases in R&D investment by govt. and Chinese industry

  • Large # competent engineers


Chinese tech firms generalizations
Chinese Tech Firms (Generalizations)

  • With the exception of Huawei and Lenovo -- technology is not yet global standard

  • VC funded firms show little global-class tech

    • U.S. business model clones (good returns because MNCs need to purchase access)

    • Firms providing solutions for the underserved domestic market (not IT)

  • Generally not competitive with India for IT offshoring (though govt. is interested)


Top Venture Capital Firms in China

in 2004 and 2005

Source: Zero2IPO various years



2005 india it related employment growth
2005 -- India IT-Related Employment Growth

CAGR 29.8%

18.5%

37.0%

Source: NASSCOM 2005

Employee numbers ‘000s

Remember US Work Force is 130 million


The indian it services landscape

Processing

Services (80Bn)

IS Outsourcing (110 Bn)

Future growth Focus

The Indian IT Services Landscape

Direction of Evolution

High Value

High Volume

Network Infrastructure

Management

R&D Services

IS consulting

Packaged S/W support &

Integration

Application development,

maintenance and outsourcing (60Bn)

Technology & Domain IP

Current Strength

Training& Education ($50Bn)

System Integration

H/w support and

Network Consulting and

Installation (120Bn)

Implementation

Leveraging current strengths to grow and move up the value chain

Source: Indian IT Firm


Employment in India by Selected Large

Non-Indian Software Firms

Author’s compilation


Infosys, TCS and IBM GS Revenues, 2001-2005

31.6% CAGR

23.4% CAGR

6.3% CAGR

Source: Various Annual Reports


Infosys, TCS, and IBM Net Profits, 2003-2005

27.5% CAGR

15.3% CAGR

6.6% CAGR

Source: Various Annual Reports


R d as percent of revenue for ibm ms accenture and tcs 2005
R&D as Percent of Revenue for IBM, MS, Accenture, and TCS, 2005

Compiled by author from annual reports


The Educational Levels of Web Posted Job Descriptions 2005

for Intel, HP and Oracle, February 2005

Source: Author’s compilation


A job at intel india
A Job at Intel India 2005

  • CAD Engineer: Hardware Engineering is all about finding solutions. As a CAD (Computer Aided Design) Engineer with the Intel Hardware Engineering team, you'll work on teams designing, developing and implementing solutions. As part of Hardware Engineering at Intel, you'll have the opportunity to be involved from start to finish on the development of world-class innovations.ResponsibilitiesAs a CAD Engineer, you will be involved in developing new very large scale integration (VLSI) CAD tools and methodology solutions for design for testability (DFT) and test generation for high volume manufacturing of next generation microprocessor products. You will be responsible for development, deployment and maintenance of in-house fault simulation and test generation tools. This position will be based in Bangalore, India.QualificationsYou must possess a Ph.D. or Master of Science degree in Electrical Engineering or Computer Engineering with five to ten years of related work experience. Additional qualifications include: Extensive knowledge of Digital Design and Design-for-test principles, digital circuit/fault simulation and automatic test pattern generation. Good working knowledge in developing CAD tools using C++ in a UNIX*/Linux* environment. Excellent experience in a related people management role would be an added advantage.

Accessed April 9, 2004

http://appzone.intel.com/jobs/uRequisition.asp?Posting=34339



Entrepreneurship1
Entrepreneurship 2005

  • Venture capital is now globalized (Kenney et al 2006)

    • Foreign VCs invest in U.S.

    • U.S. VCs invest abroad

  • Offshore presence very early in the life-cycle of U.S. startups


Global vc direct investment flow 2003

($3.2B) 2005

($0.6B)

($1.4B)

($1.8B)

Global VC Direct Investment Flow 2003

USA

Europe

Israel

Asia

88%

81%

86%

$6.2b

$24.2b

$0.42b

71%

$2.0b

19%

12%

29%

13%

($5.6B)

($0.8B)

($0.1B)

($0.8B)

Source: Martin Haemmig at www.MartinHaemmig.com

Compiled from data provided by NVCA/Venture Economics, EVCA, AVCJ, IVC)



U s strengths
U.S. Strengths 2005

  • Great research universities

    • Attracting top-notch grad students

    • Cutting-edge research leading to new products

  • Best entrepreneurial regions in world

    • Seasoned VCs, lawyers, executives etc.

  • Many cutting-edge IT and networking users

  • Free flow of ideas and knowledge

  • Strong global connections


Reality
Reality 2005

  • Globalization here to stay

    • VC/entrepreneurship abroad (Skype, Baidu, etc.)

  • Offshoring to continue (and pressure on white-collar worker wages)

    • IT innovation is globalizing

      • India’s importance in SW will continue to grow

  • Open source/innovation systems are becoming reality

    • Ergo, value will be created wherever the bright, capable, driven people are -- capital will be there for them


Policy responses
Policy Responses 2005

  • Redress the imbalance between life science and engineering/physical sci federal R&D funding

  • Improve education at all levels

    • K-12 creates the feedstock for the future

  • In an open source/innovation knowledge economy secrecy is a heavy burden

  • Ease visa red tape for bona fide students, scholarly exchange, and high value contributors


Thank you
Thank You 2005

http://hcd.ucdavis.edu/faculty/kenney/


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