As we work our way through the Great Recession a popular conversation topic has been to ponder the “shape” of the eventual recovery. Will it be a U, a V, a W, or?…pick your letter!

No matter what your answer is to this question, we are starting to see some encouraging signs of optimism in the marketplace.

In addition to our financial services and life sciences practice areas, we are seeing good signs in the technology sector.

Many technology companies are beginning to strategize and implement their plans for growth. Even though they may still be operating under austere cost-control programs, the fact that they are thinking ahead signals a shift in mindset from “we must hunker down and ride out the storm” to “lets get going and start growing!”

What are the root causes of this shift in sentiment towards the positive side? There are many plausible reasons:

• The current stock market rally
• The much talked about “green shoots” that the Obama administration is planting and promoting
• Federal stimulus funds
• Mostly positive quarterly earnings reports from technology companies

Or perhaps it is just that management teams realize they must do something to revitalize their company’s fiscal year performance! Regardless, it is nice to see technology companies getting back to their normal pursuit of growth by any means.

Hopeful business executives are looking towards the future and making IT investments accordingly. What are some of the factors driving this behavior?

• Unlike the “dot-com” melt-down that kicked off the decade, this recession was definitely NOT precipitated by the tech sector. Ironically, the very sectors which led us into the economic abyss (real estate, financial services, retail, CPG, manufacturing) can now make very well justified technology investments (yielding solid ROI at low risk) which can help them emerge in a stronger competitive position.
• The software and IT services solutions that have low financial and business risk exposure are growing. For example, SaaS software solutions (like Salesforce.com) and managed hosting solutions (like Rackspace) are doing well.
• The concept and application of Cloud computing is growing. Leading companies such as Google, Amazon, and Microsoft are making massive data center investments, which are also resulting in excess capacity that they are offering to other companies at attractive rates.
• The growth of virtual work and the resulting “flexible workforce.” Work across all functional areas is becoming more project-based (something that has always been true for IT work!) This combined with an increasing desire for work/life balance has led to the growth of the flexible workforce. Technology has become an enabler for this dynamic in that cheap computing power and global communications technology enable consultants and other “virtual” workers to be highly productive regardless of their location. Employers benefit from this trend because they can now bring expert talent to drive specific results more cost effectively than the traditional full-time employee. (NOTE: This trend is something that M Squared Consulting is monitoring very closely, as our business model is predicated on delivering expert talent on-demand to our clients.)
• The Oracle acquisition of Sun. This was a game-changing move (Oracle expanding its footprint from the traditional infrastructure software and business applications by buying into the hardware and systems business) which will have far-reaching strategic implications for all the players in technology sector.

Is it too soon to call an end to the recession? Yes, but that doesn’t mean these encouraging signs from the technology sector can be ignored either.

It would also be foolish to sit idly by and wait for irrefutable proof of the recovery, because history proves that will come well after the fact. One lesson that we can take from past downturns is that major new technologies and truly transformational socio-economic trends are born in market turbulence.

At M Squared Consulting we are dedicated to helping our clients across all business sectors, including technology, to transform their businesses and capitalize on growth opportunities.

The U.S. faces an immigrant “brain drain” that could deeply affect the future of our technology sector.

Multiple forces are encouraging immigrant IT professionals in the U.S. to return to their home countries, raising the question: Will we be able to get them back when we finally realize how much we need them?

Here are the major forces at work in this trend:

The Recession

The current economic downturn is playing a big part in sending skilled workers back home. Many outsourced IT workers are returning to their home locations due to cost pressures faced by their clients. If a client sends more work offshore, then the IT worker who returns home is still engaged. So there is a cost saving and no loss of knowledge. If, however, the client terminates the project altogether, they lose the knowledge of the resource and there’s no saying if the client can re-engage that same resource again when the market picks up.

Lures from Abroad

Thousands of skilled immigrant IT professionals are leaving the U.S. for greener pastures elsewhere. Human resources directors in India and China report that what was a trickle of returnees a decade ago had become a flood. Job applications from the U.S. have increased tenfold over the last few years. A recent Kauffman Foundation study found that:

• The most common professional factor motivating workers to return home is the growing demand for their skills in their home countries.
• Returnees also believe that their home countries provide better career opportunities than they can find in the U.S.

There is another lure for Asian immigrants: both India and China offer skilled workers incentives to return home. In China, for example, a “green passage” project started in 2007 gives returnees guaranteed university educations for their children, along with tax benefits.

Meanwhile, the dynamics of the global war for talent are rapidly changing. The recent unveiling of the EU ‘Blue Card’ program allows high-skilled workers from outside the European Union to work in multiple EU countries. Because they are affected by a more rapidly aging population than the United States, these countries are aggressively working to liberalize their high-skilled immigration laws.

Restrictive U.S. Immigration Policies

Another factor is a provision of the U.S. economic stimulus package that would restrict H-1B hiring at companies that have received funds from the Trouble Assets Relief Program (TARP) and have more than 15 percent of their workers on visas. The political motivation is the suspicion that some U.S. high-tech companies have reduced their workforces, but aren’t necessarily cutting H-1B visa holders or foreign nationals ahead of U.S. citizen employees.

Conclusion

Restricting the immigration of highly skilled workers has a negative impact on innovation. A recent University of Michigan study found that “when the federal government increased the number of people allowed in under the [H-1B] program by 10 percent, total patents increased by around 2 percent in the short run.

In the final analysis the war for talent is a complex workforce issue and there are no easy answers. The United States needs to be aware of the risks with restricting immigration if it hopes to keep up innovation, particularly in technology-related areas. Even if economic conditions force layoffs, companies will need to think ahead to a time when they may badly need extra technical help. Many experts agree that while we may not need all these workers in the U.S. during the recession, we will absolutely need them to help us recover from it.

The Churchill Club recently held their 11th Annual Top Ten Tech Trends event. This event brings together a group of industry panelists who attempt to predict the next big trends in the industry. This year was a bit different from previous years as each of the five panelists outlined one trend of their own choosing and the rest were “crowd-sourced,” whereby the moderators picked them based on criteria like which areas are getting venture funding and the number of press mentions.

After each trend was presented, the panelists voted (a green paddle held up if they agreed, a red one if they disagreed). They then debated the pros/cons, before the audience voted. Here’s a rundown of the 10 trends that were identified:

1. The Millennials are here. Everything is changing. Rapidly! - Joe Schoendorf, Partner, Accel Partners

The Millenial generation is about to graduate from college and enter the workforce. Schoendorf’s observation was that this generation doesn’t remember what it was like not to be online. He feels this generation will advance innovation farther than ever because they grew up with technology and the web. From a workforce perspective it will be very interesting to see how this generation pushes the evolving world of work.

The audience mostly agreed on this trend.

2. Advanced batteries will be the most popular alternative energy investment in ‘09 and’10. But the medium term will provide the best returns - Crowd-sourced Idea

The panel noted that while the press seems to love talking about this trend, it never seems to happen. Battery technology has been very slow to develop, and there isn’t much to suggest that this will change anytime soon. Having said that, if a company can bring an advanced battery to maket, it will be huge.

The crowd was evenly mixed on this trend.

3. The unstructured data deluge will create the next great information leaders - Ann Winblad, Partner, Hummer Winblad Venture Partners

Enterprise data will continue to grow at a huge rate. In five years, 80 percent of that will be unstructured, says Winblad. Some argued that this idea isn’t particularly new - but most agreed think the time is indeed right for addressing this issue.

The crowd mostly agreed with this trend.

4. Wireless broadband will be one of the only IT sectors to see increased funding this year - Crowdsourced Idea

Everyone agreed that this is an old idea. Even with more investment, bandwidth demand will continue to grow.

The crowd almost entirely disagreed with this trend.

5. “Maintech” not “Cleantech” - Increasing carbon efficiency of global GDP - Vinod Khosla, Founder, Khosla Ventures

Khosla thinks that it’s not necessarily the hot “greentech” trend that will thrive in this economy, because it’s still too small a part of the market. Instead, he looks for innovation in more traditional energy technology. A lot of the smartest students in this country are getting into the energy tech field, he noted.

Most agreed with this trend.

6. Power and efficiency management services will see a growing level of investment and innovation - Crowd-sourced Idea

The idea that energy in the future isn’t just going to be about building new power plants, but instead will be about figuring out how better to distribute the power we’re already creating. The smart grid will be increasingly important and a number of companies are working on this.

The crowd mostly agreed with this trend.

7. The triumph of the distributed web - Steve Jurvetson, Managing Director, Draper Fisher Jurvetson

The distributed web is “the aggregate power of all of you,” according to Jurvetson. The theory is that crowds will control most of the interesting things people look for on the web. People are already spending more time in social networks than on email.

The audience was about half and half on trend.

8. Healthcare administration will see the best growth in B2B software in ‘09 and ‘10 - Crowd-sourced Idea

Because they were running short on time, the group skipped this one, which everyone dubbed as old news.

9. Consumption of digital goods on mobile devices is the biggest growth story of the coming decade - Ram Shriram, Managing Partner, Sherpalo Ventures, LLC

Shriram believes the ad-supported model cannot continue to fuel growth in the mobile space. He thinks application building may be the model that succeeds, noting that we’re already seeing it across a variety of platforms in both the mobile and social networking space. He also believes that there’s a trend towards paid applications - especially cheap ones - and that will be enough to grow the industry.

The audience mostly agreed with this trend.

10. Electronic displays will prove the hottest investment in hardware this year and the next - Crowd-sourced Idea

Again, running short on time, the panel barely talked about this one, but suggested there’s no real money to be made here even though the trend is hot.

The audience almost completely disagreed with this trend.

Two More Ideas

The two moderators, Tony Perkins, and Jason Pontin, also put up two trends:

1) DC will prove to be a poor VC

Washington DC trying to get involved in funding new ventures in technology will fail. Entrepreneurs need to be allowed to do what they do best, without government meddling.

The audience completely agreed with this trend.

2) The rumors of the demise of the reporter have been greatly exaggerated

While newspapers and magazines will continue to struggle, there must be a place for real journalism in the world - even if it is online. Bloggers cannot replace trained journalists - it’s a collaborative process between professionals. Some of the panel took exception to the notion that bloggers can’t also do journalism, but all agreed that there needs to be objective reporting on things like the Iraq war.

The audience mostly agreed with this trend.

Summary

Overall, energy, data and the web were the main themes discussed this year. It is worth noting that predictions like these must always be taken with a large grain of salt. While forward-looking views do no always come to fruition they are often directionally correct, and as such provide clues for how companies should strategize and react.

One thing is clear to me from this discussion; the U.S. technology sector addresses a wide range of business challenges and opportunities. As our M Squared Consulting teams are out in the marketplace having conversations with clients and prospects they are finding the need to innovate is still a priority. Companies will continue to need seasoned professionals, like the talent we have in the M Squared Talent Network, who can quickly execute and deliver results.

Editors Note: M Squared Consulting is structured around industry focused practice areas. Today’s post is from Sam Doying who is based in the Silicon Valley and leads our Technology practice area.

Conventional wisdom holds that mergers are good; good for the economy, good for companies, good for shareholders, good for employees, and good for customers. For years Wall Street seemed to say, “The Bigger, the Better!”

And in theory, a merger between two synergetic tech companies is a good thing. Product and service synergy and compatibility give customers a more user-friendly offering and a streamlined sales process. Organizational and system integration increase efficiency, while a wider employee pool offers more talent and innovation. In theory, a merger is a beautiful marriage of two companies each designed to ‘complete’ the other. Everyone involved will reap the benefits.

Oracle and Sun Microsystems

Currently in the works is Oracle’s acquisition of Sun Microsystems. Oracle has a seemingly brilliant case for post-acquisition synergy. They have the capacity to both integrate and align Sun’s and their own preexisting product lines, increase brand exposure, and take advantage of both a larger customer base and a broader pool of employee talent.

Oracle promises its customers that it will be able to deliver serious customer benefits as costs go down while product performance, reliability and security go up. The key is Oracle’s new ownership of two significant Sun software assets, Java and Solaris. Oracle Fusion Middleware is built on top of Sun’s Java language and software, making continued innovation and investment in Java technology a virtual no-brainer. The Sun Solaris operating system is the leading platform for the Oracle database, and by acquiring it Oracle will be able to optimize the Oracle database for some of the unique features of Solaris.

Sounds good for customers but what about employees and shareholders? Sadly, the objectives of these two constituencies are usually at odds when it comes to mergers.

The Talent Impact

Some experts estimate that Oracle will layoff 10,000 to 15,000 employees. Andy Greenberg at Forbes.com writes that Sun’s hardware divisions could also see major cuts, as analyst Patrick Walravens of JMP Securities wrote in a recent note to investors. “To make the deal accretive out of the box, we expect Oracle to very rapidly right size Sun’s hardware business, which is likely to have a fairly dramatic impact on Sun’s roughly 30,000 employees.”

Of course, layoffs are necessary to help produce the ROI that Wall Street is waiting for, and layoffs are unavoidable in the process of creating and guarding efficiency. Management and corporate support organizations, such as finance, HR, marketing, legal, etc. are commonly targeted to eliminate redundancy, although no department or organization is exempt.

Unfortunately, this is the area where the best laid merger plans often go awry. When dramatic employee reductions occur without proper insight and planning, the promised financial returns will not materialize. Simply put, if there are fewer employees, but the required work hasn’t changed to reflect it, quality will plummet and/or costs will rise as both fulltime and contingent workers are brought back to help get the job done.

Employee cut-backs may be necessary, but the integration and reengineering of processes and positions are requisite first steps to creating a successful merger. If jobs are changed and energies shifted to better handle the workload, the reduction in labor will optimize efficiency permanently and make use of that broad employee talent pool that was so recently acquired. If this can be done the long term rewards are endless.

So why don’t all synergetic mergers and acquisitions succeed, in light of this knowledge? Because I’m a genius and the first human being to effectively outline the keys to post-merger integration success? No. Because executing the integration process is tough. Most companies don’t view mergers and acquisitions as an annual expense. There is no reason, then, to train or retain a highly specialized team to handle post-merger integration. It wouldn’t be cost effective.

Enter M Squared Consulting

Where most people experience only one or two major mergers in their careers, we have consultants with multiple integrations under their belts. Supplementing the merging companies’ existing staffs with M Squared teams on a temporary basis, can help ensure that not only is the Return on Investment realized quickly (which makes Wall Street happy!), but also that the process runs smoothly and in a way that optimizes efficiency and productivity, ensuring long-term success.

Cutting costs is important to every business, especially in our current economic climate. In a post-merger situation, the most important move you can make is to invest in integration. Bringing in an experienced team of M Squared consultants can fast-track your company into the black, and help it stay there.

Contributor: Jillian Doying

The semiconductor industry has undergone many boom and bust cycles. Yet regardless of whether times are good or bad, chip-makers have managed to deliver higher levels of product sophistication and processing power in shorter product cycles.

Decades of brutal market competition have forced perennial leaders like Intel, Qualcomm, and Texas Instruments to learn not just how to survive, but how to thrive under the harshest of business conditions.

How have they done it? There is no single answer.

However, there are a number of management tools and philosophies that the industry shares. These are techniques that can transfer across industries and smart management teams should carefully consider how they might apply in today’s tumultuous business environment.

The Semiconductor Industry Survival Model

1. Zero-Based Budgeting. This proven method of budgeting forces management to prioritize and justify projects based on projected costs and return-on-investment. The discipline here is that every budget is set at zero and built from the ground up based on a forecast return.
2. Product (or service) focus and execution. Periodic reviews between development, marketing, sales and operations keep projects on track and on budget. Disciplined companies always pull sales into the discussion to make sure they’re getting a true market view and have the customer perspective.
3. Product (and service) diversification. Markets naturally cycle at different times and rates. Diversification provides a buffer from the marketplace dynamics of supply and demand.
4. Forecast end-user markets. Monitoring and forecasting end-user markets (like computing and communications) provides an early indicator of upcoming market conditions and transitions.
5. Keep resources lean and mean. You’ll never find a department or a project team with enough headcount in the semiconductor business. Outsourcing, contractors, and consultants (all of whom can be easily ramped up or down) are often used to manage the peaks and valleys of business cycles.
6. Use market volatility to grab market share. Turmoil can present opportunities to gain market share or displace the leader. Practitioners constantly assess risk versus reward tradeoffs, even in down markets.
7. Embrace “lean” methodologies like supply chain management and just-in-time manufacturing. Industry leaders use these methodologies as a competitive advantage to minimize their inventory, improve process efficiencies, and maximize profits.
8. Adapt with lightening speed. Advance planning, decisive action, and flawless execution ensure rapid responses to market changes and efficient operations.

In spite of economic turmoil, increased global competition, and political upheaval, the semiconductor industry has managed to maintain a long-term growth trajectory and relatively consistent profitability. It’s a great example of what smart strategy, disciplined management, and engaged employees can accomplish.

The above list is by no means complete. I’m sure there are many other proven methods or strategies to mitigate the effects of our current economic climate. There are certain to be some of them that are relevant to your business or industry.

Over the past 20 years M Squared Consulting has helped thousands of clients to evaluate and implement strategies like these, across many industries. The thing that continues to impress me most about the M Squared Consulting business model is that we can truly help any company solve almost any problem. The wealth of talent found in our Consultant Network enables us to quickly deploy proven experts who will cost-effectively deliver results for our clients. In challenging times like this the ability to bring in outside resources who can make an immediate contribution to the bottom line may just be the best management tool of all.

The inspiration for today’s headline came from the 1992 Presidential election. George H.W. Bush was running for re-election against the upstart Governor from Arkansas, William Jefferson Clinton. The economy was in turmoil, we had just suffered through the dot-com meltdown, and the savings and loan scandals. Yet Bush was considered unbeatable because of the end of the cold war and his decisive “victory” in the Persian Gulf war. Clinton was having a tough time focusing on the major issues so his political strategist, James Carville hung a sign in their Little Rock campaign headquarters with the following three points:

• Change vs. more of the same
• The economy, stupid!
• Don’t forget health care

The parallels to today are ironic.

I wrote a few weeks ago about the positive business outlook for the cleantech industry in California. While the long-term business opportunity is significant the results of a recent public survey make it abundantly clear that the ever-fickle gaze of public attention is fading from the problem of global warming, in favor of pretty much everything else.

A recent Pew Center report suggests that there are few things people care about less than whether or not the oceans will crash over their doorstep in a few decades. Here is a list of issues sorted by the percentage of respondents who rated the item as a “top priority”:

• Economy (85%)
• Jobs (82%)
• Terrorism (76%)
• Social security (63%)
• Education (61%)
• Energy (60%)
• Medicare (60%)
• Healthcare (59%)
• Deficit reduction (53%)
• Health insurance (52%)
• Helping the poor (50%)
• Crime (46%)
• Moral decline (45%)
• Military (44%)
• Tax cuts (43%)
• Environment (41%)
• Immigration (41%)
• Lobbyists (36%)
• Trade policy (31%)
• Global warming (30%)

The results are not an anomaly, either. Despite plenty of media attention, a growing number of data points are suggesting that the global warming issue just isn’t connecting with the average American. Take the vehicle sales numbers this past Christmas, which showed gas-guzzling pickups and SUVs outpacing car sales as gas prices have dramatically fallen over the past 12 months.

Pew’s numbers show that the number of people who consider global warming a “top priority” has declined 8 percent since just two years ago, when they started tracking it. Protecting the environment has fallen 15 percent since last year; it was 22 percent higher in 2001. Energy has risen in large part because of terrorism (the previous chart topper) and the oil price peak last year.

Does this public opinion matter? In the short term, perhaps not, at least for renewable energy like solar and wind. The recession has already taken a significant bite out of the sector, and now President Obama is giving cleantech perhaps the strongest boost it has ever had in the United States. But long term, the downward trend of public opinion could begin to spell trouble.

That trouble would come from the cost and effort of switching over to cleantech. Few renewables are on par with coal, gas or oil in terms of cost, and those that are tend to have their own challenges in terms of location and operation. Public opinion similarly torpedoed nuclear power decades ago because of (largely incorrect) safety fears. The fear is that people may be unwilling to take the hit for more expensive renewables like solar on their monthly electricity bill.

This discussion proves that electorates are willing to overlook long-term concerns (like the environment) in favor of short-term worries (like their jobs). Once the economy enters a recovery mode it is very likely that environmental concerns will again bubble to the top. With that growing interest (and the inevitable increase in fossil fuel costs) the cleantech industry will grow. The great news for knowledge workers is that the growing cleantech industry will generate many new full-time and flexible career opportunities. This is certainly a trend we will be monitoring at M Squared Consulting.

In what can only be interpreted as a bit of good news for the battered U.S. economy, a recent survey found the United States to have the best technological infrastructure in the world.

Here’s the back-drop to the story: Many economists believe that the key to improving the economic and productivity performance of a country lies with the greater and better-focused use of information and communications technology.

A study commissioned by Nokia Siemens Networks, measured the extent to which governments, businesses and consumers in 50 countries make use of connectivity technologies to enhance economic and social prosperity. Connectivity is defined as the bundle of infrastructure, complementary skills, software and informed usage that makes communications networks the key driver of productivity and economic growth. They broke the countries up into two groups:

• Innovation driven economies - what are sometimes called developed, or first world, countries.
• Efficiency & resource driven economies - what are sometimes called developing, or third world, countries.

The rankings were then determined by the measurement of each country against two criteria (infrastructure, and usage plus skills) in the realms of business, government and consumer. Low scores reflect gaps in a country’s infrastructure, usage or both. For each of the six components of the Connectivity Scorecard, countries are benchmarked against the best in class in their tier; thus if a country was best in all dimensions, it would score a maximum of 10. The Scorecard, therefore, measures countries against the best usage that currently exists rather than an ideal model.

For the “Innovation-driven” economies, the Connectivity scores were:

• United States (7.71)
• Sweden (7.47)
• Denmark (7.18)
• Netherlands (6.75)
• Norway (6.51)
• United Kingdom (6.44)
• Canada (6.15)
• Australia (6.14)
• Singapore (5.99)
• Japan (5.87)
• Finland (5.82)
• Ireland (5.70)
• Germany (5.37)
• Hong Kong (5.33)
• France (5.22)
• New Zealand (4.85)
• Belgium (4.65)
• South Korea (4.17)
• Italy (3.99)
• Czech Republic (3.71)
• Spain (3.49)
• Portugal (3.02)
• Hungary (2.72)
• Greece (2.62)
• Poland (2.49)

Just below the United States in the innovation-driven economy group, the Connectivity Scorecard confirms the reputation of Scandinavia as a technological power region with Sweden, Denmark and Norway all ranked in the top five. Japan (10th) and Korea (18th) repeat their surprisingly low performances of 2008 as do Germany (13) and France (15). The poor showing of southern European economies is also repeated as Italy, Spain, Portugal and Greece share the bottom spots with eastern European nations.

For the “Efficiency & Resource driven” economies, the Connectivity scores were:

• Malaysia (7.07)
• Turkey (6.71)
• Chile (6.59)
• South Africa (5.76)
• Mexico (5.39)
• Russia (5.37)
• Argentina (5.14)
• Brazil (5.12)
• Columbia (4.08)
• Botswana (3.98)
• Thailand (3.75)
• Iran (3.62)
• Ukraine (3.60)
• Tunisia (3.5)
• China (3.19)
• Philippines (3.17)
• Egypt (3.02)
• Sri Lanka (2.87)
• Vietnam (2.75)
• India (1.88)
• Indonesia (1.87)
• Kenya (1.75)
• Bangladesh (1.60)
• Pakistan (1.54)
• Nigeria (1.30)

Latin American nations make the strongest regional showing in the Efficiency and Resource driven category, with Chile third behind Malaysia and Turkey, leading a group of five nations in the top 10. As was the case in 2008 Asian and African nations fared the worst. In 2009 an expanded group of south Asian nations - Sri Lanka, India, Pakistan and Bangladesh - occupy four slots in the bottom eight, while Nigeria finishes 25th and last. (NOTE: The scores of the innovation-driven economies and the efficiency and resource-driven economies are not comparable, as different sets of criteria, taking account of different circumstances in the two sets of countries, were used to determine scores.)

As the global economy moves more towards being knowledge-based, the technological backbone of each country becomes vital to its competitiveness and economic power. Technology, and the knowledge workers who use it, play an increasing important role within every industry sector.

Consulting firms like M Squared Consulting are at the forefront of the knowledge economy. Our assets are measured in intellectual capital, our inventory is the bench of talented project professionals like those in the M Squared Consultant Network, the products we produce are the results we deliver for clients. We take the experience and expertise of our knowledge workers and deploy them against our clients’ strategic initiatives and biggest challenges. The technological infrastructure will become increasingly important as the way we do work and the very nature of work evolves.

There has been a rapid growth in the number of “green collar” jobs in the state of California over the past few years. According to a new report from Mountain View, Calif.-based Collaborative Economics, between 2005 and 2007 alone, employment in the sector increased 10 percent to about 105,000. To put that in context, during this same time period the overall workforce grew about one percent statewide.

This shift is significant for the state as a whole and Silicon Valley in particular. In Silicon Valley many formidable cleantech companies have taken root alongside the old guard technology companies. The region has always been a hub for computing technology but only recently emerged as a leader in the green economy.

The wave was kicked off in 2004, when then-California Treasurer Phil Angelides pushed the state’s large public pensions (CalPERS and CalSTRS) to commit $1.5 million to a “Green Wave” program. The initiative included investments into venture capital firms that backed clean technology companies. The trend reached a crescendo in 2007, when green evangelist Al Gore decided to join the prestigious Valley venture firm Kleiner Perkins Caufield & Byers to help on clean technology investments. Many cleantech startups have rushed to set up shop nearby and other VC firms have also dedicated substantial resources to cleantech initiatives.

According to the latest MoneyTree Report, compiled by PricewaterhouseCoopers and the National Venture Capital Association, venture capital investments plummeted during the final three months of 2008: VCs invested $5.4 billion in 818 deals, down 26 percent from the $7.3 billion Q3, and the lowest dollar amount invested since the first three months of 2005. Overall, the report shows $28.3 billion invested in 3,808 deals during the past year, making 2008 the first time venture investments have fallen year-to-year since 2003. But there was a substanital silver lining in cleantech - if you look at all of 2008, cleantech investments actually rose a whopping 52 percent from the year before. The sector accounted for seven of the year’s 10 largest deals.

A few other interesting findings:

• More than $3 billion in venture money was invested in California cleantech companies in 2008 - representing over 57 percent of all U.S. investment in the sector.
• California has produced the highest number of patents (607) in the solar, wind and battery industries.
• Energy productivity (the total GDP produced per unit of energy) is 68 percent higher in California than the rest of the country. California generates $2.17 in GDP for every 10,000 BTU of energy it uses. Contrast that with the $1.29 for every 10,000 BTU for the whole U.S.
• More than 100,000 vehicles registered in California are hybrids or run entirely on electricity or natural gas. To hit the point home, more than 20 percent of all hybrids in the country were registered in the San Francisco Bay Area, Los Angeles and Sacramento.

These trends will only continue during the Obama Administration. The President has already endorsed the state’s stringent vehicle emissions standards. This clear support from Washington, and the likely investment of substantial “stimulus” money in cleantech, could go a long way toward fostering further growth in electric car development, solar and wind technologies, and other innovations to limit emissions and energy use.

In addition to specialized technical talent, many of the emerging companies in cleantech have needs for traditional business expertise in functional areas like marketing, human resources, finance, and operations. At M Squared Consulting, our Energy and Technology practice areas are ready to assist clients by deploying expert consultants on engagements to deliver results. Our unique talent-on-demand business model lends itself to the way Silicon Valley, and fast growing companies, work.