Transcript Innovation in Services -

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
Shenzhen 1985, 1995, 2004
Outline
•
•
•
•
China
India
Entrepreneurship
Conclusion
China
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)
• 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
Rank
1
2
3
4
5
6
7
8
9
10
Firm Rank 2005
IDG Technology Ventures
SAIF Partners (Softbank)
Venture TDF
CDH Investments
DFJ ePlanet
Softbank China VC
Granite Global Ventures
Intel Capital China
3i
NewMargin Ventures
Nationality
U.S.
Japan
China
Singapore/U.S.
U.S.
Japan
U.S.
U.S. (corporate)
U.K.
China
Source: Zero2IPO various years
Firm Rank 2004
SAIF Partners (Softbank)
IDG Technology Ventures
Doll Capital Management
CDH Investments
NewMargin Ventures
Carlyle Group Asia
Warburg Pincus Asia LLC
Legend Capital Limited
Acer Technology Ventures
Shandong High Technology
Nationality
Japan
U.S.
U.S.
Singapore/U.S.
China
U.S.
U.S.
China (corporate)
Taiwan (corporate)
China (government)
India
2005 -- India IT-Related Employment
Growth
CAGR
29.8%
IT Software and Services
ITES-BPO
697
588
18.5%
490
416
360
348
37.0%
254
242
180
70
42
FY00
FY01
Source: NASSCOM 2005
106
FY02
FY03
FY04
FY05
Employee numbers ‘000s
Remember US Work Force is 130 million
The Indian IT Services Landscape
Direction of Evolution
High Value
High Volume
Network Infrastructure
Management
R&D Services
Processing
Services (80Bn)
IS consultingPackaged S/W support &
Integration
Application development,
maintenance and outsourcing (60Bn)
Technology & Domain IP
Current Strength
System Integration
Network Consulting and
Implementation
IS Outsourcing (110 Bn)
Training & Education ($50Bn)
H/w support and
Installation (120Bn)
Future growth Focus
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
Nationality Employment in
India (date)
Oracle
U.S.
6,900 (2005)
Microsoft
U.S.
2,500 (2005)
SAP
Germany 3,500 (2006)
IBM
U.S.
53,000 (2006)
Veritas
U.S.
900 (2004)
Adobe
U.S.
500 (2005)
EDS
U.S.
5,000 (2005)
Cap Gemini France
2,000 (2004)
Comp Assoc US
1,000 (2006)
Author’s compilation
Global
% in India Locations
Employment*
41,658
16 Bangalore, Hyderabad
57,000
4 Bangalore, Hyderabad
38,802
9 Bangalore
369,277
14 Bangalore, Delhi, Chennai
17,250
5 Pune
3,142
16 Delhi
117,000
4 Chennai, Delhi, Mumbai
59,324
4 Mumbai, Bangalore
16,000
6 Hyderabad
Infosys, TCS and IBM GS Revenues, 2001-2005
50000
45000
40000
35000
30000
25000
20000
15000
10000
5000
0
Infosys (+1yr)
TCS (+1yr)
IBM GS Sales
31.6% CAGR
23.4% CAGR
2001 2002 2003 2004 2005
6.3% CAGR
Source: Various Annual Reports
Infosys, TCS, and IBM Net Profits, 2003-2005
8000
7000
6000
Infosys profit
(+1yr)
TCS profit (+1yr)
5000
4000
3000
IBM profit
2000
1000
0
2003
2004
2005
Source: Various Annual Reports
27.5% CAGR
15.3% CAGR
6.6% CAGR
R&D as Percent of Revenue for IBM,
MS, Accenture, and TCS, 2005
Infosys
TCS
Accenture
Microsoft
R&D as Percent
of Revenue
IBM
16
14
12
10
8
6
4
2
0
Compiled by author from annual reports
The Educational Levels of Web Posted Job Descriptions
for Intel, HP and Oracle, February 2005
INTEL
None
Shanghai
Beijing
Bangalore
Technical Bachelors Masters PhD
10
9
61
55
1
0
7
6
11
7
39
112
Total
9
1
10
144
15
179
HP
None
Shanghai
Beijing
Bangalore
Technical Bachelors Masters PhD
6
2
7
29
5
0
25
28
15
3
62
42
Total
1
0
34
45
58
156
ORACLE
None
Beijing
Bangalore
Technical Bachelors Masters PhD
0
0
0
2
9
1
63
16
Source: Author’s compilation
Total
0
0
2
89
A Job at Intel India
•
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.
Responsibilities
As 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.
Qualifications
You 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
Entrepreneurship
Entrepreneurship
• 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 lifecycle of U.S. startups
Global VC Direct Investment Flow 2003
USA
Europe
($1.4B)
81%
Israel
($3.2B)
($0.6B)
Asia
($1.8B)
88%
$6.2b
$24.2b
86%
$0.42b
71%
$2.0b
19%
12%
13%
29%
($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)
Conclusions
U.S. Strengths
• 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
• 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
• 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
http://hcd.ucdavis.edu/faculty/kenney/