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To: Sam Citron who wrote (12017)	10/10/2003 1:52:51 PM
From: Sam Citron	Respond to of 95413

Grove warns of software downfall [SJ Merc 10.10.03] [see transcript above] U.S. COULD LOSE JOBS, MARKET SHARE, HE SAYS By Heather Fleming Phillips Mercury News Washington Bureau WASHINGTON - Intel Chairman and tech visionary Andy Grove sent a warning shot across the bow of the federal government Thursday. The U.S. software industry is about to lose jobs and market share to foreign competitors unless the government acts quickly to fight protectionist trade policies and double U.S. productivity, he said. ``I'm here to be the skunk at your garden party,'' Grove began in his afternoon speech beamed via satellite to an otherwise rosy gathering of software executives in Washington. He predicted that the software and services industry is about to travel the well-worn path of the steel and semiconductor industries. Steel's market share dropped from about 50 percent to 10 percent in a few decades. U.S. chip companies saw theirs shrink from 90 percent to about 50 percent today. Now the writing is on the wall that software could suffer the same fate, said Grove, whose 1996 bestseller was titled ``Only the Paranoid Survive.'' ``It would be a miracle if it didn't happen in the software and services industry,'' said Grove, noting that he was speaking on National Depression Day. Political ramifications Grove's speech comes at a sensitive time for the industry and the Bush administration. The industry still is struggling to get out of a three-year slump. And a year before the presidential election, the administration is looking for signs that its economic stimulus programs are benefiting industry and turning the economy around. ``This administration has very high productivity growth but also job losses and they're rightfully nervous about that heading into a presidential election,'' said Bill Whyman, an analyst with independent Washington research firm, Precursor. Why are things looking so grim for software? Grove attributes it to fewer people getting advanced degrees in the United States in science and engineering, the high cost of U.S. labor in comparison to some foreign countries, and the fact that high-bandwidth connections are prevalent and cheaper, making it much easier for U.S. companies to work with developers in countries such as India. The phenomenon is not only affecting software, he noted, but is trickling over into other important sectors such as health care. Grove's speech was viewed at the Global Tech Summit, sponsored by the Business Software Alliance. ``Dr. Grove gave a provocative talk with a frank assessment of what the future might hold if governments and industry aren't aggressive about facing some of our biggest challenges head on,'' said Robert Holleyman, president of the Business Software Alliance. ``But that doesn't mean the future is grim,'' he said, noting that a study the trade association released Thursday shows the industry is set to create more than 1.5 million new high-paying jobs worldwide. He added that software CEOs agree that the United States needs a solid plan for confronting their issues. A group of about 20 executives, including Microsoft's Steve Ballmer, traveled to Washington this week to lobby administration officials and Congress. Grove said he was hard-pressed to find a comprehensive statement on what the government is doing to address the issue. ``We haven't even articulated the problem,'' he said. The Bush administration rebutted Grove's claim that it hasn't worked to battle the problems facing the industry. ``We certainly understand the challenges there,'' said Phil Bond, undersecretary of technology at the Commerce Department. He noted that the government has a policy to make sure that all children are ``technologically literate'' by the eighth grade. Funding for science and math education was also recently boosted by $1 billion. ``In trade, I don't think anybody questions the free trade credentials of this administration,'' he added. All hope not lost But Grove said all hope wasn't lost. The industry in partnership with the U.S. government still could turn things around if it acts quickly. His recommendations: boost funding for research and development at universities; adopt policies that attract the best workers from around the world; better collaboration between companies on pre-competitive technology; and raise the hurdle for intellectual property litigation. ``Time is our enemy,'' he said. After the speech, Grove was questioned on his desire to preserve jobs domestically, while at the same time Intel and the industry as a whole are moving jobs offshore. Grove responded that the industry is facing conflicting goals of serving shareholders and doing ``the right thing for the country.'' In the absence of public policy to help guide us, we have no choice but to export jobs, he said. siliconvalley.com