WSJ writes:

Jobs that can be reduced to a series of rules are likely to go -- either to workers abroad or to computers. The jobs that stay in the U.S. or that are newly created in the decade ahead are likely to demand the more complex skill of recognizing patterns or require human contact.

New jobs surely will emerge to replace those lost. That's happened with every past breakthrough in technology and trade. "In 1940," observes chief White House economist Greg Mankiw, "no one could have predicted that some grandchildren of farmers would become Web-site designers and CAT-scan operators. But they did, and at much higher wages and incomes."

This time, two different kinds of jobs are likely to flourish amid outsourcing and computerization.

One sort requires physical contact -- nursing-home aides, janitors, gardeners, dentists. Foreign-born workers may do them, but they'll have to move to the U.S.

The other sort of jobs destined to remain here are high-end jobs. Some require exchanging information in ways that e-mail and teleconferencing don't handle well. Think about teaching first grade or selling a mansion to a multimillionaire or conceiving new forms of software. Others demand such intimate knowledge of the U.S. that it's hard to see foreigners doing them from afar. Think about marketing to American teenagers or lobbying Congress.

The Economist writes that things are looking up for the VCs.

In the fourth quarter of last year start-ups in Silicon Valley received $1.6 billion of VC money, $300m more than in the third quarter, according to VentureOne, a research company. Perhaps more importantly, for the first time in a while venture capitalists say they are spending more time looking at new business plans than nursing their ailing start-ups.

Over the past 20 years, even including the recent downturn, VC investments have yielded an average 15.7% per year, according to Thomson Venture Economics. That is higher than the returns from most other investments...If only venture capital can avoid the excesses of the late 1990s, it could be one of the last few sources of above-average returns.

Venture capitalists have typically concentrated their investing in two broad areas: technology and health care. During the enthusiasm of the bubble years, the term “technology” was stretched to include any dotcom, even if it aimed to sell pet-food or to deliver groceries in a white van. Today VC firms have mostly returned to genuine technology ventures, and notably to companies developing software applications for corporate customers. That has coincided with a rebound in company spending on IT projects.

One computing area that has continued to attract VC investments is open-source software—that is, computer code that is not owned by, say, Microsoft or Apple, and hence can be modified by anyone. For instance, Accel Partners, a big Silicon Valley VC firm, is betting on Jboss, which creates computer applications for corporate clients using Linux, the main open-source software.

Start-ups focused on data storage have also won interest, thanks to companies' ever-growing demands for file storage. That has been driven in part by worries about terrorism and other forms of “business interruption”.

Nearly all information-technology new-business plans include some element of offshoring, notes Peter Wagner, a partner at Accel Partners. Doing software-development work in India seems like a perfect fit when start-ups are receiving smaller amounts of money at wider intervals. It is especially sensible in Silicon Valley, where housing costs alone mean that even mediocre software engineers are several times more expensive than their equivalents in Bangalore. Some start-ups can exist in the more sober funding climate only thanks to cheap foreign programmers.

Silicon Valley's venture capitalists, famous for funding technology's leading edge, now are pushing the companies they fund to be on the leading edge of an employment trend: moving white-collar jobs offshore.

The Valley's ideal start-up business these days is the "micro-multinational," a company that from its inception is based in the U.S. but maintains a less-costly skilled work force abroad. Venture capitalists also are prodding young companies in which they already own stakes to turn themselves into micro-multinationals.

Knowledge@Emory writes about the impact:

Professors at Emory University and its Goizueta Business School who know India well say that they have seen tremendous economic and social changes in this huge nation since the service boom began just a few years ago, and they predict even greater changes and challenges in the years ahead.

India today feels a bit like the U.S. during the dotcom boom, Goizueta’s India-watchers say, where a small class of young people are suddenly making much more money than most people had ever dreamed. Although the new industries don’t employ all that many people – most estimates say IT and business process outsourcing employs fewer than a million workers in this nation of over 1 billion – this sector’s success has had an enormous impact not only on the economy but on the country’s culture and self-confidence.

One key indication of the magnitude of the shift: India’s foreign exchange reserves have grown from almost nothing to about $100 billion in just two years – a huge number for a country whose gross domestic product is forecast to reach $650 billion in the coming year.

Most professors expect growing pains as the country develops. While most Indians now feel that the country as a whole is benefiting from the service boom, Joy Mazumdar says the growth in income inequality could lead to social trouble down the line, as software developers receiving salaries approaching Western standards try to live side by side with people getting along on several hundred dollars a year.

Mazumdar notes that the lack of infrastructure is probably one reason the service exports have grown more quickly than manufactured goods. For example, goods that might ship out of China in hours can take up to 18 days to leave India, he says. “But with service exports, things were very, very different because you did not have these transportation hurdles. All you had to do was send it along on a phone line or a satellite link.”

Finding jobs for India’s billion plus people is another key challenge that the service boom has thus far not addressed. To employ its young and growing population, Jagadish Sheth says that country needs to look outside its service-sector base and export more manufactured and agricultural goods. He says that there’s a lot of potential in these sectors. For instance: India has the largest dairy industry in the world, but doesn’t export any of its dairy products. However, things may be changing. Now, he says, a farmer’s cooperative he spoke to last year about the idea has just concluded a contract with Wal-Mart.

Mazumdar says he expects that the current neat division between India as a servicing hub and China as a manufacturing powerhouse will change. “If these had been fairly small countries, I would say, this specialization is going to continue in the future, but given that these countries are large, there’s enough of a variety of talent that they should actually be able to have a very diversified export portfolio.”