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India benefits as half the Valley outsources

By Dawn Kawamoto
CNET.com
Sept.29, 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 Thursday by Santa Clara University.

More than 53 percent 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.

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

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

China, for example, captured 8 percent of the outsourced jobs, and other Asian nations nabbed 11 percent, according to the survey.

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

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

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

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 7 percent year-over-year increase in computing and electronics manufacturing jobs.

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