Furthermore, the Economist has argued that the IT industry has evolved from a phase that stressed innovation to one that stresses execution. For instance, software giant Microsoft has found few projects into which it is willing to invest its $50 billion of excess cash. As a result of Microsoft’s innovation down turn, it has announced its plans to offer its first ever dividend payment to stock holders. What this innovation downturn means to IT professionals is that their innovative skills are less valuable. Instead the job market has begun to favor simple programming capabilities and other even more rudimentary and much more teachable skills.

Both large and small firms have felt the pressure of the economic down turn. The dot com boom introduced significant competition in the IT industry, and as a result drove prices and operating margins extremely low. Since the crash, firms have been working hard to drive prices even lower to capture whatever market share they can. As a result of these pricing pressures, firms have been seeking ways to reduce operation costs in order to remain profitable.

Unfortunately, the speculative bubble burst in late 2000 and has since become known as the dot com crash. Following this burst, unemployment in Santa Clara County peaked at just under 9.0 percent while the national rate was at just 5.7 percent. Currently, office space leases for only $1 per square foot.

At the turn of the century, Silicon Valley looked like the ideal location for an information technology (IT) person seeking employment. The IT economy was booming, firms were hiring, and wages, which were linked with stock options and other incentives, were greatly inflated. Encouraged by speculation and to a much lesser extent by the bottom line of annual reports, investors poured money into the IT industry. Office space, generally a good indicator of the overall economy, in Silicon Valley was leasing for $6.50 per square foot. The word “unemployed” in the IT person’s vocabulary was almost nonexistent. Instead it was replaced with the phrase, “I am starting a company.”

The combination of pricing pressures and the industry shift away from innovation has encouraged some companies to look overseas for labor. Offshore labor has proven to be dramatically less expensive. While an average IT worker in the US makes $70,000 per year, an Indian IT worker makes just $8,000 per year. Of course, communication, training and other considerations must be taken into account when a company is contemplating outsourcing labor to offshore facilities.



