The High-Tech Industry in Different Countries
The High-Tech Industry in Different Countries
This section examines the high-tech industry from the country-level perspective and looks at some interconnections between the high-tech industry in different places.
In the last decade of the twentieth century the high-tech sector flourished. Advertisements for IT workers were published all over the world, and headhunters could not fill the huge demand for these workers. Thus, not only were products spread worldwide, development itself also became an international process. This trend dramatically increased the interconnections among countries with respect to software development.
The huge demand for IT workers characterized both developed and developing countries. The former needed IT workers for research and development and for maintaining the growing high-tech sector; the latter needed IT workers for the creation of their IT infrastructure. In general, the number of IT workers did not answer the demand, and even new education programs could not cope with this challenge. As with other sectors, where the demand increases the supply, this competition led to an increase in salaries, work conditions, and Visa permissions (in the case of the US H1B visas). Immigration to countries such as the United States, the United Kingdom, Canada, Japan, Ireland, and Australia was encouraged.
| Task | At the beginning of the 1990s, Edward Yourdon wrote Decline and Fall of the American Programmer [Yourdon92]. The book assesses the way the American software industry behaves in the global marketplace . Based on this book and other resources, explore similarities among the phenomenon described in the book with respect to the software industry and the processes through which the U.S. automobile industry went several decades ago. |
Two main factors determined why IT experts preferred moving to the United States in the 1990s. The first is the huge salary gap between the United States and other (western as well as not western) countries. These salaries enabled many IT workers to move to the United States and support families who stayed in the homeland. The second factor was the attractive cutting-edge technology that the IT experts had an opportunity to work with in the United States.
During the high-tech flowering of the 1990s the press and other media channels kept reporting about amazing high-tech stories in the technology market. Many young people without any business experience entered the area hoping to earn money quickly. Many investors were willing to invest money in these adventures . That new atmosphere changed traditional work relationships. Innovators and skilled programmers were sought out, and spoiled with good benefits. These benefits caused people to move from one software house to another according to who paid more. When this happens to young people, it is not a healthy phenomenon.
The year 2000 was a turning point in the high-tech market. When it became clear that some companies did not have any revenues , the investors stopped the money stream and those companies failed. The exaggerated expectations of IT products were misleading and a surplus emerged. This led naturally to a crisis and the stock exchange rate decreased dramatically.
| Tasks | These tasks examine the NASDAQ (National Association of Securities Dealers Automated Quotation) during the 10-year period from 1993 through 2003. |
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Select five years during this period. For each year, find what countries had companies listed on the NASDAQ. What does this list of countries say about the NASDAQ and about the international market in these years ?
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Conduct a close examination of the years 1999, 2000, 2001, and 2002. Select four months in each year and compare the NASDAQ rate in these months. What trends can you observe? How can you explain them?
The year 2000 economic crisis in the United States spread to the entire world. The demand for IT workers decreased dramatically, yet many IT companies fired their workers and others went out of business. A major part of this economic downturn is known as the dot-com crisis. This crisis refers to the collapse of the many startup companies that dealt with Internet products, their security, e-commerce applications, and so forth. Looking back at these years, that collapse is not surprising at all: the overbudget expenses for the IT workers, the absence of focus on management and vision, neglect of customer satisfaction, and unprofessional development together led very naturally to the crash of the Internet bubble in the spring of 2000.
| Task | Tell a story about a typical dot-com company that eventually collapsed . Focus on how its management led to its collapse together with other dot-com companies. What would you change in its management to avoid its collapse? Think about factors such as lack of a plan and vision, inappropriately high salaries, and high expenses without control. You can look at the Web to find hints about such stories. |
The year 2001 was the worst for the computer industry all over the world. Some people talked about 2002 as the year of the recovery. However, until this writing (2004), these hopes for recovery are still pale. The high-tech market is far behind the market of the 1990s. The extravagant period is over; the world seems to have awakened from the high-tech dream.
In each country, the software industry is tightly connected to other domains. The government decides on foreign policies (such as work visa and import and export policies), legal issues (such as taxes), and budget allocations to different sectors (such as R&D and education). The industrial sector determines what types of products are developed, whether development is emphasized over research, and so forth. Academia sets the education level and the teaching methods and establishes connections with industry. Finally, factors related to the population of each country matter as well: How many people are educated ? What are the average living standards? What are the culture and traditions? How might culture and tradition influence the software industry? What is the age distribution of the population? Is the population aware of the importance of education? These aspects are addressed when we discuss the IT field in two specific countries ”India, a large target of American outsourcing, and Israel, known very well by one of the authors.
| Task | Suppose that you are the person in charge of the budget allocation in your country and you should decide on the priorities among education, local industry, and foreign policy (e.g., attraction of workers from abroad). What percentage of the total budget would you allocate to each sector? Since there is no magic formula to apply in such situations, try to determine the best budget allocation for your country, taking into consideration its specific and unique characteristics and needs. |
India
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India got its independence from Great Britain on August 15, 1947, so it is relatively new as an independent country. Its population is currently thought to be more than 1 billion people (the second most populous in the world after China), and it has the second highest number of English speakers after the United States. This last fact ought to give India a big advantage in the high-tech market. As a result, it became a huge source for high-tech workers. A notable fact is that despite the worldwide recession , India s software and services exports rose by 28 percent to 6.9 billion U.S. dollars in the nine months ended December 2002 ( www.indiatravelogue.com/pass/pass4.html ).
India has 4,500,000 IT workers, and the high-tech industry has become a central factor in the development of the Indian economy. As mentioned previously, India is a huge resource for high-tech workers, and many international companies hire Indian software developers. Sometimes companies open a new site in India, and sometimes the Indian workers move to other countries. The Indian government understands the potential of this sector and encourages both the establishment of new IT schools (to educate the next generations) and the growth of the existing IT educational institutions. Although the many IT schools seem far behind with technology, they are far ahead with students motivation to learn the new high-tech trends and programming languages.
As mentioned before, the government also encourages foreign companies to invest in India and to open new development sites. This is done, for example, by reducing bureaucracy. In addition, the government supports local development by allocating relatively huge budgets for this purpose. This support is also expressed by canceling the taxes on the export of technological products and technological services. All of these actions together increased dramatically the business interest that Western companies found in India. Consequently, during the last decade India became an important player in the global IT economy.
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Israel
| Task | Search the Web for three Israeli high-tech companies. Describe their products and the way in which they present themselves. Is there a difference between their image and the image of American companies? If yes, in what sense? If not, what is common to the profiles. |
Israel got its independence from Great Britain on May 15, 1948, making it slightly younger than India. There the similarities stop. It is a very small country and its population is about 6.5 million people. At its economic peak, Israel was considered a high-tech center and even imported software engineers from India. These differences in size and similarities in the high-tech orientation of India and Israel were two of the reasons we selected these two countries for close examination in this chapter.
As mentioned earlier, in its high-tech peak Israel was one of the leading centers for technology startups and innovations. Despite its small population, Israel had about 3,000 startups ( www.ite.poly.edu/htmls/role_israel0110.htm ). In that era, Israel had the third (after the United States and Canada) highest number of companies listed on the NASDAQ. This situation led naturally to the establishment of many educational programs and, as mentioned before, to the importation of programmers from other countries to Israel.
This blossoming is explained by two main factors. The first is the national security and military needs that led to the development of cutting-edge technologies, in particular, designated army units that specialize in technology innovations. As it turns out, many of the Israeli s high-tech entrepreneurs started their careers in the Israel Defense Forces.
The second factor that explains the Israeli high-tech success in the 1990s is the huge immigration of Russian engineers from the former Soviet Union during the decade of 1990 to 2000. Again, we see how one event, in one place on the globe (in this case, the open gates of the former Soviet Union) influences the high-tech economy elsewhere. This addition of engineers to the Israeli population led Israel to have the highest number of engineers per capita in the world ( www.smartcodecorp.com/about_us/israel_profile.asp ).
The peak of this period was the year 2000. Foreigners invested billions of U.S. dollars in Israeli startups and venture capital funds. In that year, the high-tech exports reached record highs and comprised 57 percent of the entire export of Israel. As in the case of India, the Israeli government had a significant role in this progress. It invested many U.S. dollars in research and development, in the establishment of scientific incubators, and in other enterprises .
Many companies founded in Israel during that period moved their headquarters to the United States, where much of their customer base is located, but often left their research and development operations in Israel. Some of these companies were purchased by American companies. For example, Mirabilis (the inventor of ICQ ”I Seek You) was purchased in June 1998 by AOL for $287 million ( www.ccta.ca/english/ publications /submissions/1999-98/1998-10-01.htm ). In May 2000, Chromatis (which developed optical networking) was purchased by Lucent Technologies for about $4.5 billion US (and was closed by Lucent in August 2001) ( www.lucent.com/press/0500/000531.coa.html ). The strength of the Israeli software firms was and still is innovative and daring R&D. Not surprisingly, IBM, Intel, and Microsoft have research and development centers in Israel.
Because of the globalization process, Israel, together with the entire world, suffers now from a deep recession. To illustrate the huge change in the Israeli high-tech economy before and after year 2000, here is some data taken from the Israeli National Bureau of Statistics: high-tech production in 2001 decreased by 23 percent, after a sharp increase of 26 percent of production in 2000! The demand for high-tech workers in the fourth quarter of 2001 decreased by 83 percent relative to the same quarter a year earlier. Not surprisingly, salaries decreased.
Currently, Israel joins in the worldwide desire for recovery. However, one bright light still exists in the Israeli high-tech economy ”the biotechnology sector. This sector is comprised of 160 biotechnology firms with about 4,000 workers, and is performing relatively well. ( www.mfa.gov.il/mfa/go.asp?MFAH0mun0 ).
| Task | Select two countries and describe their IT industry in the same way we described India and Israel. |
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