Trouble At Mill

The latest Silicon Valley unemployment numbers are out and, as might be expected, the news is far from good. The rate has now climbed to 7.8%, with more bad news yet to come as all the post-Christmas layoffs get added-in.

In this part of California, the most recent jobless high-water mark came after the technology bubble burst in 2001 when 9.3% of the Valley workforce was out on its ear. We therefore have a ways to go in order to reach the same mathematical level, but to me things actually seem worse this time around, and here's why.

By the start of 2001, the white-hot demand for technical resources required to meet the "growth by any means" rallying cry pulled hundreds of thousands of workers into the Valley as we all tried hard to create a tech version of the California gold rush. The roads were packed, real estate prices - commercial and residential - went through the roof and in December 2000 the unemployment rate was a quite remarkably minuscule 1.7%.

Of course, when it inevitably came, the bust was lightning fast and incredibly deep. But in this instance, many of those impacted were temporary imports, lured into the Valley by promises of IPO gold cladding the walls of high-tech companies; they came, they saw, they left.

This time around, however, the fast-rising unemployment levels are being borne much more by long-term employees at Valley blue-chips: Yahoo, HP, Microsoft, Intel, Sun, eBay, and even now Google are shedding faster than your aunt's mangy Persian cat does all over your favourite cashmere woolly at Christmas.

With fewer temporary workers to cull, therefore, there's only the long-serving full-timers to let go this time around. With across-the-board growth being a thing of the past, weak performing product lines are getting culled, regardless of how strategic or innovative they once may have looked.

Clearly, we are in the midst of another Valley shift. With quite remarkable speed, the once-lauded shooting stars in fields like software, silicon and even the Internet are now finding themselves transformed into old-style cyclical businesses operating in mature industry segments. In many instances, real market growth has now stalled, with progress coming instead through taking market share from the competition. IT is no longer the "spend at all costs" differentiator it once was; Wall Street has consolidated down to a mere handful of players and have other things to worry about than finding new products to use; the Internet is maturing out and web-vertising is no longer the gift that keeps on promising to give.

Don't get me wrong, I'm not here predicting the end of Silicon Valley, nor am I saying that all of its innovation and disruption are at an end. What I am saying though is that the land grab is over, the rich veins are now being mined by the big boys and that much of the fever-pitch excitement and energy has been spent. Bad for start-ups, good for the blue-chips.

I guess we all just grew up.