Massachusetts IT Collaborative’s Report Is Data-Rich, Policy-Poor: A News Analysis

12/8/09Follow @wroush

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the finished UMass study “has intelligence and action items that [we can use] to make the sector stronger.” That’s actually true. Here are a few of the more interesting data points—and their possible policy implications:

  • Software is the only part of the IT industry in Massachusetts that has shown net employment growth over the past 10 years. The number of computer hardware jobs in the state dwindled by 38 percent between 1998 and 2008, network communications jobs dropped 16 percent, and IT services employment remained flat—but the rolls of software workers swelled by almost 35 percent. Given this structural trend, which reflects larger national and global changes in the IT industry, it might be wise to make sure that any new public-sector investments or tax breaks disproportionately help (or at least do not harm) software businesses, which are almost single-handedly keeping the IT sector afloat. (IT sector jobs shrank 13 percent overall between 1998 and 2008—but that number would have been catastrophically worse if not for the boom in software, which includes new media, mobile applications, and consumer software, and open source applications as well as traditional enterprise systems.)
  • Massachusetts firms employ more IT professionals per capita than any other state (1 in every 25 workers in the state is in IT) and pay them better (IT workers in Massachusetts earn $87,784 per year on average, compared to California’s $87,685). Software engineers are among the best paid Massachusetts IT workers; they earn about $96,000 per year. And while these professionals have been hit hard by the recession, they’re less likely to become unemployed than people in other fields: computer professionals filed only 2.5 percent of all unemployment claims in Massachusetts in May 2008, even though they represented 3.8 percent of all workers. So any policy that helps IT companies hire more workers, especially software engineers, would be a big boost to consumer spending power in the state and a good insurance policy against big unemployment payouts that could drain the treasury.
  • Further underscoring software’s importance: Venture capital firms closed 318 funding deals in the sector in 2006-2008 (399 if you count Internet and media investments), compared to only 55 in computer hardware and networking equipment, 91 in telecommunications, 70 in IT services, and 41 in semiconductors. When a questioner at yesterday’s IT Collaborative meeting asked Governor Patrick how he would summarize Massachusetts’ strength in information technology in just a few words, he answered “We invent things.” But increasingly, we invent software. Nearly all of the trends that the UMass report describes as constituting “nexus of innovation” in the IT industry—security, virtualization, cloud computing, mobile applications, agile project management, digital media, and gaming—are driven by software.

Are you seeing the pattern yet? More and more, the fortunes of the IT industry in Massachusetts rise and fall with the fortunes of the state’s software companies. Yet there was little emphasis in Goodman’s discussion yesterday on any of the specific problems facing software-oriented startups and larger enterprises.

Some of these problems are mentioned in Goodman’s full report; you just have to dig a bit to find them. For example, 49.4 percent of survey respondents agreed that it’s harder for companies based in Massachusetts to raise venture capital than for California firms (only 35 percent said location didn’t matter in this regard). About 46 percent agreed California offers a more supportive environment for startups and entrepreneurs (39 percent were neutral on that question). And focus group participants told Goodman that the shortage of massive “anchor companies” in the Massachusetts infotech sector hinders capital markets, job mobility, networking, and new startup activity. The fact that Massachusetts law allows non-compete agreements in employment contracts may be another factor there; that subject that came up in a roundtable discussion yesterday, but not in the UMass report.

Underlying the entire IT Collaborative effort is a yearning for a stronger brand identity for the Massachusetts information technology sector—a message that would serve as both a magnet for more outside investment and a rallying cry for local leaders. In a perceptive Twitter post from the IT Collaborative meeting yesterday, Mass High Tech editor Doug Banks wrote “You can’t brand yourself until you know what you are. The Mass. tech community got to know itself better today.” That’s probably true: we have more numbers now than we can shake a stick at. But whether the final destination is a new brand or a substantial set of policies designed to support the growth of more software companies, Massachusetts can’t seem to get out of first gear.

Wade Roush is a contributing editor at Xconomy. Follow @wroush

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