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More than half of Silicon Valley firms are outsourcing
But can India keep pole position?

By Dawn Kawamoto

Published: Friday 30 September 2005

More than half of Silicon Valley companies are outsourcing, and roughly half of those outsourced jobs are going to India, according to a survey released on Thursday by Santa Clara University.

More than 53 per cent of Silicon Valley companies surveyed this month reported that they outsource a portion, or all, of their operations, according to the survey. And India is benefiting.

Mario Belotti, an economics professor at the university's Leavey School of Business, said: "India has an educated workforce, and its people speak English, so it makes it an attractive place for outsourcing."

IT leaders in India, however, remain watchful of other nations that may take their lead away. China, the Philippines and Russia are regions that also receive their fair share of outsourcing.

China, for example, captured eight per cent of the outsourced jobs, and other Asian nations nabbed 11 per cent, according to the survey.

While outsourcing remains a large component of how businesses operate in Silicon Valley, a couple of sectors have been scaling back on their use. Manufacturing has seen a notable decline, Belotti said.

In August, 39 per cent of companies surveyed reported that they outsourced their manufacturing operations during the past three months. That was down from 48 per cent two years earlier.

Belotti said: "Much of this drop was in the semiconductor and electronics area."

He noted that the pullback may stem from more Silicon Valley companies hiring locally for manufacturing jobs, especially in the computing and electronics areas. In August, the region posted a seven per cent year-over-year increase in computing and electronics manufacturing jobs.

Dawn Kawamoto writes for CNET News.com