Redefining Silicon Valley

It’s been a long time since Silicon Valley was known for silicon. The eponymous element has been superseded many times over in the popular imagination: by the boxes powered by those silicon chips, and the software that runs on the boxes, as well as the pipes that connect them and the communications and commerce that flow through those pipes–not to mention the personalities and wealth of the people behind all that stuff.

These days, to judge by the headlines, blog posts and books like Sarah Lacy’s Once You’re Lucky, Twice You’re Good: The Rebirth of Silicon Valley and the Rise of Web 2.0, you’d think the technology business is all about online advertising, Internet search and social networks.

Most CIOs probably don’t get too excited about the social media buzz or develop their budgets according to the whims of fashion. In dollar terms, the new Silicon Valley remains a relatively small slice of the technology pie.

For its most recent year, Cisco, to choose one established company, had annual revenues of almost $35 billion. That’s larger than the revenue totals of Google, Yahoo, Facebook and MySpace combined, with Microsoft’s online business thrown in for good measure. Oracle’s sales for 2007 ($22.4 billion) were larger than the entire U.S. online advertising market (an estimated $21 billion) for that year.

Market capitalization, of course, is a different tale: The technology industry–and that other geographical synonym for a business sector, Wall Street–loves a good growth story. But there’s more going on here than the latest stage of the hype cycle, something profound that taps into the great theme of the Valley’s history: an ever-increasing amount of creative power to the people.

Empowering people by putting the latest tools at their fingertips has remained a constant as the tech industry has moved from one hot topic to the next, from the personal computer and desktop applications to electronic commerce and mashupable maps. Even if CIOs don’t spend heavily on the relatively simple applications that define social media, those applications represent a critical stage in the evolution of IT management, which continues to become less about technology and more about information.

The same logic applies to the other big technology trend of the moment, the emergence of cloud computing and software as a service. As more IT infrastructure moves to a utility model, users deal with less complex machinery and code. That frees them to spend more time doing their jobs and coming up with new ways to do those jobs better. Even the hot consumer product of the hour, the 3G iPhone, follows the logic of power to the people.

This lengthy decentralizing trend has always presented challenges to IT managers, especially those who wanted to maintain authority over computing resources and information flows. As the latest wave of cool tools pushes control and creativity further into the field than ever before, there will be no way to keep enterprise employees on a short leash.

Smart CIOs will look for ways to leverage this newfound power. There’s a reason that the middle letter of the title is “I” and not “T”–and that’s what the latest redefinition of Silicon Valley is all about.

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