The Perception and Reality of Innovation Abroad

I was drinking a Maccabee and snacking on olives — rather than Pinot and crostini — but it felt very much like Silicon Valley — say Il Fornaio or Buck’s. Where was I? At a café in Tel Aviv last year, marveling at the energy of the place. It could have been Silicon Valley 1998: young, professional, driven. I saw first-hand what a recent Business Week article confirmed: “After a time of stagnation, the country is reemerging as a global high-tech-hub” — albeit one still highly dependent on exports. While I was exploring the high-tech industrial parks in Israel, I met with venture capitalists, entrepreneurs, startups and developers, and government organizations. Not surprisingly, I found a number of innovative security startups, security being a passion and area of expertise in Israel. While many may see Israel as embroiled in regional conflicts, there exists a very different Israel as well: one of medical advances, technological breakthroughs, and scientific discoveries that are helping all of us. It’s a story of perception andreality, and similar to the story I’ve seen unfold in many of the places I’ve visited during the past 12 months.

In my role, heading Microsoft’s .NET business development globally, I direct a team that is constantly seeking to better understand emerging business ecosystems worldwide. We’re passionate about learning and about sharing best practices. In this effort, it’s crucial that we understand the perception and the reality of a country. For me, that means I spend a significant amount of time globetrotting: I was on the road visiting international locations for 10 weeks of last year. This travel gave me a chance to gain a unique perspective. Best practices from Silicon Valley (and other high-tech centers such as Boston and Austin) are spreading rapidly.

Software Innovation — The Next Generation of Opportunity

Everywhere I visited, it was clear that the next generation of opportunity for the local economy is tied to innovation — whether pure software ISVs or software and hardware applied to new breakthroughs in biology, healthcare, and more. Software is the magic. Innovation is the fuel. In fact, innovation has become the ‘it’ theme of today. And for good reason. I believe that the more places in the world that really do ‘get’ this notion that guiding innovation takes lots of time and resources — to say nothing of a highly educated workforce, government support, receptive capital markets and more …. the better. It’s what we take for granted in Silicon Valley.

In fact, I think it’s striking to see the heightened and explicit focus worldwide on innovation, manifested in one way through the interest in designing and building out new companies. Each place I visited has a special mix of talent and opportunity, as well as issues. With that in mind, let me share some views on my most recent travels. While occasionally tied to new product rollouts, my international travels are primarily targeted at encouraging a conversation about local economic development. Our ultimate goal is to team up with local partners — governments, the investment community, academics, entrepreneurs, and startups — to spur innovation, jobs, and growth.

Emerging Markets — As Sweet As It Gets

Will they continue to bloom? Analysts are now painting favorable scenarios for the world economy, particularly emerging markets. In December, Morgan Stanley said the global outlook for 2006 “is as sweet as it gets.” Newsweek reports capital flows to emerging markets of well over $300 billion, 50 percent higher than those of a few years ago. That bodes well for technology. In places like Brazil, Argentina, Chile, and Mexico, I saw a lot going on from mature world-class innovation in some spots, to the seeds of innovation in others.

Chile — From Copper and Salmon to High-Tech and Biotech

Chile provides a good example of what emerging market countries are doing to encourage the development of a technology sector, particularly public/private community relationships. It’s a country the size of California with an economy based largely on natural resources and agricultural exports (think copper, salmon, farming, and wine). I met with José Pablo Arellano, President – Fundación Chile, who is trying to identify the core opportunities and work on partnerships with leaders in the technology community to both diversify and integrate information technology into this next generation of industry opportunities.

The Chilean economy has clearly gone through a sweeping transformation over the last quarter century, driven by the government’s commitment to market liberalization, transparency, and fiscal accountability. When Michelle Bachelet, newly elected president of Chile, takes office in March, she will become the first female president in South America. That alone, points to the progressiveness of this country’s culture.

In a meeting with Miguel Pérez, CEO of NovaRed, I learned about the thriving software development community. I also met with José Miguel Benavente Ph.D., Professor of the Economics Department at the University of Chile. He is studying the impact and implications of innovation on the economy, and he has found that there needs to be a stronger emphasis on market liberalization and technology education. One area of focus for the country now is extending their quality of education to all Chilean children.

For the last six years, the Chilean Digital Agenda has defined a clear set of strategies for IT-based government modernization. In fact, Chile has impressive examples of e-government systems in key areas including taxing systems, e-procurement systems, government ERP and interoperability projects.

Biotech is an area of strength — much of which is tied to the former founder of Chiron Corporation, Pablo Valenzuela Ph.D., who has more than 20 years of experience in biotech. He is the founder of Bios Chile in Santiago where he, along with his wife Bernardita Méndez, is building a strong intellectual economy to help Chile industrialize and support the export value chain in Chile and beyond. He is tapping top American Universities, establishing collaborations, and elevating Chilean science. For instance, Bios Chile’s lab has discovered a hairpin RNA that may provide new diagnostics for identifying cancer cells, as well as a selective means of killing them. While the scientific community in Chile may be small, it is already making some big contributions to the national economy.

My key takeaway: It’s glaringly obvious that IT can and is making an impact on accelerating success and innovation in Chile — enabling them to move beyond copper and farming and into more global markets. Clearly, the government is trying to make IT more strategic to its current economy, and is leveraging IT into the next generation of industry for Chile through public/private partnerships.

Viva Brazil!

There’s a fast-growing high-tech sector in Brazil. In fact, its two top priorities are to reduce dependence on imported energy sources and to bring digital technologies to the vast majority of country’s 180 million who cannot now afford them. That’s according to an MIT Enterprise Technology Review in 2005. We’re doing our part too. To further fuel innovation, and the development of strong, self-sustaining local software industries, we are partnering with local governments, academic institutions, industry organizations and software and hardware vendors to expand our network of Microsoft Innovation Centers. These centers already serve 60 communities worldwide and will encompass 90 communities in 30 nations by the end of 2006.

In Curitiba, Brazil, Renato Rodrigues, CTO of Instituto Curitiba de Informatica, a government partner in the Microsoft Technology Center, talks passionately about the dynamic interplay between students, university professors, and software entrepreneurs who use the center to test software prototypes, participate in seminars on emerging technologies, and prepare for jobs in Brazil’s high-tech sector. In 2005, more than 7,400 took part in courses in our MIC in Brazil and more than 120 local software development companies used the centers to validate their cutting-edge technologies.

Argentina — Much More to Come.

Strong IT spending and a brisk national economy have created a huge demand for trained IT workers in Argentina. In fact, according to an IDC IT Economic Impact Study in 2005, IT spending in Argentina is projected to increase at an annual rate of more than 20 percent through 2008 — nearly triple the pace for Latin America as a whole. Argentina’s Chamber of Enterprise Software and IT Services (CESSI) says the country’s software companies are growing so fast that they could conceivably hire 12,000 more qualified IT professionals through 2006 — and that doesn’t even include IT for non-technology companies. IDC reports nearly 40 percent of Argentina’s IT employment is related to Microsoft technologies, and for every $1 in Microsoft sales, local IT companies generate another $17 in revenue.

We’re partnering locally to address the need for skilled IT professionals. In 2004, we joined forces with CESSI, 12 universities, and nearly two dozen software companies and technology incubation centers to create +MAS, a training and employment program for students. Just recently, we teamed up with Argentina’s Ministry of Labor to co-fund 1,000 additional scholarships in 2006. We’re now collaborating with government, industry and academic partners to establish +MAS programs in Chile, Bolivia, Paraguay, and Uruguay.

Mexico—A Near-Shore Answer

Few think of Mexico as a hotbed for high-tech. Yet, there is increasing evidence that our neighbor to the south is beginning to achieve some Silicon Valley style success of its own. According to a recent article in Forbes “Mexico Meets Silicon Valley”, Mexico has a small tech industry (just $3 billion a year from information technology and software firms), yet has a strong commitment to develop the software industry. It already has a number of new companies in software, hardware and the life sciences arena. One of its most promising companies, Softtek, Mexico’s largest software company, is positioning itself as the “near-shore” answer to India’s offshore information technology service providers. There are many other examples. One startup, Medida, a wireless-sensor network company, even caught the attention of Bill Gates at the recent Consumer Electronics Show.

Microsoft is working with Prosoft to help promote Mexican software exports and foreign direct investment in the Mexican software industry. Along with HP and Intel, we are sponsoring software.net.mx, an industry portal of more than 14,000 users and 5,500 registered companies. The portal enables communication between the Mexican software community —government, academia and industry. Working with Prosoft, we’re also developing competitive human capital, further strengthening the linkage between industry and academia. We have strong relationships to local associations, with 225 software development companies in 15 clusters now trained on .NET. In addition, working with the National Association of Informatics Studies Institutes (ANIEI), we have sponsored and developed six courses in Spanish that are being used by some 800 university professors throughout Mexico. And finally, we have the Acelera.Prosoft development project. It is aimed at building out a software ecosystem both on technology and business development. Through this project, we developed KUALI, a free tool to help the local industry implement MOPROSOFT, Mexico’s national software processes standard and preferred methodology for developing software. It’s now being considered a possible International ISO standard for software processes on VSE (Very Small Enterprise).

Next week, I’ll continue my travelogue by delving into some detail from my trip to Israel in 2005, which I visited both before and after Bill Gates’ visit to announce the deal we signed with the Israeli government to provide technology support to Israeli startups. In addition to providing some detail on the great food, the spectacular view of the Mediterranean from our seaside restaurant, and the new S-Class Mercedes I saw (had to put that one in), I’ll return to the innovation story with commentary on European markets — where that same spirit of innovation is alive and well.

Until then. Hasta la próxima semana.

Travels with Dan'l Part II

Travels with Dan'l Part III