automation alley 2016 tech report

7/24/2019 Automation Alley 2016 Tech Report

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SoutheastMichiganvs.

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This entire report is copyright (c) 2016 by Automation Alley.

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1) K White, Sarah. Could Detroit become the next Silicon Valley? CIO.com. CIO, 05 November 2015. Web. 03 Feb. 2016.

2) Katz, Bruce. Why Detroit could be the next Silicon Valley (and Vice Versa). Fortune.com. Fortune, 07 Apr. 2015. Web.

03 Feb. 2016.

3) Harlow, Poppy. Detroit: The next Silicon Valley? CNNMoney. Cable News Network, 20 May 2011. Web. 08 Feb. 2016.

Youve seen the headlines:

Could Detroit become the next

Silicon Valley?1

Why Detroit could be the next

Silicon Valley (and vice versa)2

Detroit: The next Silicon Valley?3

These headlines

are intended to

shock, because

most peoples

perceptions of

the two regions

couldnt be more

different. The

prevailing attitude both insideand outside of Michigan is that

Southeast Michigan is stuck in

the past, that Detroit is, was and

always will be, a Rust Belt town. In

contrast, Silicon Valley is perceived

as the epicenter of high-tech

innovation and opportunity.

But at Automation Alley, our

experience doesnt t this paradigm.

Over the past 10 years of publishing

this report, we have seen Southeast

Michigan compete strongly with

Silicon Valley in the tech industry.

And every day, we work with

technology companies that are

expanding rapidly and developing

industry-disrupting technology.

To change this outdated perception

of Southeast Michigan, we talked

to the people most familiar with the

tech industry in the two regions:tech executives in Southeast

Michigan and Silicon Valley.

And this was their overwhelming

response: Southeast Michigan is

theplace to grow a technology

business.

In nearly every category,

tech executives saw more in

Southeast Michigan: more ROI,

more opportunity, more support.

And the news is exciting for job

seekers as well as those looking

to start or grow a business in

Southeast Michigan. In 2016, more

tech executives expect to make new

hires, increase company revenue

and invest in R&D than their Silicon

Valley counterparts not to

mention that a paycheck in Detroit

goes much farther than a paycheck

in San Jose. (See pg. 11 for the

difference in rent and housing value

for the two regions.)

Forget what you know about Silicon

Valley. Forget what you think you

know about Southeast Michigan.

Lets write a new headline for

tomorrows paper: Silicon Who?

Tech Industry Booming in

Southeast Michigan.

Southeast Michigan istheplace to grow a

technology business.

FOREWORDKen Rogers, Executive Director, Automation Alley

4| 2016 TECHNOLOGY INDUSTRY REPORT AUTOMATIONALLEY.COM| 5


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Southeast Michigan is a hotbed

of technology and innovation, and

according to the industrys top

executives, its a region that rivals

even Silicon Valley as the best place

to do business.

Thats the conclusion of Automation

Alleys survey of senior executives

currently working in the technology

industry in Southeast Michigan and

Silicon Valley. The results of this

report predict growth for Southeast

Michigan technology companies

in 2016 and showcase regional

strengths that rival those of

Silicon Valley.

This survey coupled withkey economic indicators and

employment and growth projections

for 2016, provided by East Lansing-

based Anderson Economic Group

highlights Southeast Michigans

vast business opportunity and

technological impact. In addition to

assessing data for the Southeast

Michigan region, the report looked

at data for ve of the nations

leading technology hubs: San

Jose, Chicago, Boston, Seattle

and Austin.

As Michigans leading technology

business association, Automation

Alley publishes this report to

increase awareness of Southeast

Michigan as a leading center

for tech talent, innovation and

opportunity in America. We

encourage the regions leaders and

influencers, as well as companies

and individuals, to use the reportas a tool to attract talent and

investment to the region and to

advocate for the technology industry

of Southeast Michigan.

ABOUT THIS REPORTSoutheast Michigan vs. Silicon Valley

6| 2016 TECHNOLOGY INDUSTRY REPORT


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THE FACTS

Employment in the technology

industry in Southeast Michigan

increased by an estimated 4.3%

between 2014 and 2015, and

employment between 2015 and

early 2016 is projected to increase

by 1.5%to 269,877 jobs.

The 3 industry sectors in

Southeast Michigan that are

projected to have the largest

increase between 2015 and

early 2016:

Related and other technology*:

65,399(2.6% increase)

Advanced automotive:92,031(1.8% increase)

Life sciences:

17,279(0.9% increase)

The number of technology-focused

jobs in Southeast Michigan

increased by an estimated

4.1%between 2014 and 2015.

Technology-focused employment

is projected to increase by

2.2%from 2015 into early

2016 to 195,745 jobs in

Southeast Michigan.

The 3 technology-focused jobs

in Southeast Michgian that are

projected to have the largest

increase between 2015 and

early 2016:

Architecture and engineering:

94,222(3.0% increase)

Technology management:13,841(2.1% increase)

Computer and mathematics:

70,783(1.5% increase)

*To estimate employment for 2014 through 2016, Anderson Economic Group considered statewide employment

trends for related subsectors, which include mining (NAICS 21); professional and commercial equipment and

supplies merchant wholesalers (NAICS 4234); and architectural, engineering, and related services (NAICS 5413).

AEG also considered Detr oit and Ann Arbor Metropo litan Statistical Ar ea-level trends for hig her-level industr y

sectors, including merchant wholesalers durable goods (NAICS 423) and professional scientic and technical

services (NAICS 54). NAICS 423 was available for the Detroit MSA only.

How do you expect your

employee headcount

to change in 2016?

99% of Southeast Michigan Technology Companies Project Revenue Growth in 2016

8 in 10 Southeast Michigan Technology Executives Plan to Invest in R&D and Make

New Hires in 2016

While tech executives from both

areas are optimistic about their

company revenue in 2016, those

from Southeast Michigan are more

condent about their companys

revenue projections than their

Silicon Valley counterparts.

Percentage of executives who expect their

company revenue to grow in 2016

While the majority of tech executives surveyed plan to increase investment

in research and development in 2016, slightly more (83 percent) SoutheastMichigan executives expect an increase. In Silicon Valley, 81 percent of

executives surveyed expect an increase in R&D investment.

Also, more executives from Southeast Michigan than Silicon Valley reported

their company is planning to grow their talent base in 2016. In addition, the

percentage of respondents who expected their employee headcount to

decrease in Silicon Valley is higher than that of Southeast Michigan.

Southeast Michigan

Increase - 82%

Stay the Same - 15%

Decrease - 3%

Silicon Valley

Increase - 81%

Stay the Same - 12%

Decrease - 7%

Tech industry employment is projected toincrease to 269,877 jobs in 2016.

SOUTHEAST MICHIGAN

SILICON VALLEY

99%

90%

SOUTHEAST MICHIGANTECHNOLOGYCOMPANIES ARE MORE OPTIMISTIC ABOUT 2016 GROWTH

THAN THEIR COUNTERPARTS IN SILICON VALLEY



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Southeast Michigan

Trumps Silicon Valley

When It Comes to

Cost of Living

Percentage of tech executives

who think their region has a

lower cost of living compared

to other metro areas

THE FACTS

In 2013, the median gross rent

in the Southeast Michigan region

was $855, below the national

average and the lowest of the

comparison regions.*

Fewer than 35%of renters in

Southeast Michigan pay $1,000or

more in gross rent, while in the other

ve comparison areas, 49% or more

of renters pay $1,000 in rent.

Of the six comparison areas, Silicon

Valley has by far the highest median

gross rent, at $1,629.

In 2013, the Southeast Michigan

region had the most affordable

housing of the six comparison

areas, with a median housing

value of $127,904. In contrast,

the median housing value in San

Jose in 2013 was $654,800.

* Comparison regions include the Detroit, San Jose, Chicago, Boston, Seattle and Austin metro areas.

The Majority of Southeast Michigan Tech Executives See Diverse Technology

Opportunities in the Region

Percentage of respondents who think their region offers diverse technology opportunities and experiences

More Southeast Michigan Tech Executives See

Opportunity for Ongoing Education Than

Silicon Valley Executives

Percentage of tech executives who believe their region has leading

academic institutions for self-advancement

Southeast Michigan Technology Executives Agree TheirRegion Provides More Networking Opportunities Than

Other Metro Areas

Percentage of executives who think there are more networking

opportunities in their region compared to other metro areas

THE FACTS

Southeast Michigan was home to

30 colleges and universities

that offered science, technology,

engineering and mathematic

(STEM) degree completions

in the 2013-2014 school year.

During the 2013-2014 school year,

there were 9,335 STEM degree

completionsin Southeast

Michigan, compared to 5,483

STEM degree completions in the

same school year in the San Jose

metro area.

Fewer than 35%

of renters inSoutheast Michiganpay $1,000 or more

in gross rent

SOUTHEAST MICHIGAN

SOUTHEASTMICHIGAN

SILICON VALLEY

SILICONVALLEY

80%

74%

72%

48%

STEM Degree Completions:

Southeast Michigan:9,335

Silicon Valley:5,483

SOUTHEAST MICHIGAN

SOUTHEAST MICHIGAN

SILICON VALLEY

SILICON VALLEY

81%

85%

77%

68%

SOUTHEAST MICHIGANIS A BETTERPLACE FOR TECHNOLOGY PROFESSIONALS TO BUILD

THEIR CAREERS THAN SILICON VALLEY



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THE FACTS

Michigans overall tax burden, at 8.9%, is lower than the

national average (9.1%).

Michigan has the second lowest public utilities sales

tax at 0.1%, the second lowest corporate income tax at

0.6%, and the lowest rate for license fees

at 0.3%among the six comparison regions.

Michigan has lower public utilities sales tax, corporate

income tax, license fees, and general sales tax than

California. In addition, the commercial and industrial

electricity costs in Michigan are also lower than that

in California.

Public utilities sales tax: MI (0.1%) vs. CA (0.4%)

Corporate income tax: MI (0.6%) vs. CA (0.8%)

License fees: MI (0.3%) vs. CA (0.7%) General sales tax: MI (1.6%) vs. CA (1.8%)

Commercial electricity (cents/kWh): MI ($10.42

cents) vs. CA ($18.22 cents)

Industrial electricity (cents/kWh): MI ($7.07 cents)

vs. CA ($13.96 cents)

* Comparison regions include the Detroit, San Jose, Chicago, Boston, Seattle and

Austin metro areas.

Southeast Michigan Trumps Silicon

Valley When it Comes to Tax Burden

Percentage of tech executives who think

their region has a lower tax burden

compared to other metro areas

Southeast Michigan Tech Executives

Think Its Easier to Retain Talent Than

Their Silicon Valley Counterparts

Percentage of executives who believe it is easier

for technology companies to retain talent in their

region compared to other metro areas

Southeast Michigan Yields Greater ROI, According toArea Tech Executives

Percentage of tech executives who believe technology

companies can have greater return on investment if they

have a business location in their metro area

Nearly 7 in 10 (68 percent)Southeast Michigan tech

executives believe technology

companies can benefit from a

lower cost of capital if they have

a business location in their

metro area, compared to 60

percent in Silicon Valley.

Southeast MichiganTechnology Executives

See Greater Support

from the Government

Than Their Silicon Valley

Counterparts

Percentage of tech

executives who believe

technology companies can

benefit from government support

if they have a business location

in their metro area

Michigans overall tax burden, at 8.9%, islower than the national average (9.1%)

SOUTHEAST MICHIGAN

SOUTHEAST MICHIGAN

SILICON VALLEY

SILICON VALLEY

74%

63%

67%

48%

SOUTHEAST MICHIGAN

SILICON VALLEY

83%

69%

SOUTHEASTMICHIGAN

SILICONVALLEY

75%63%

SOUTHEAST MICHIGAN IS A BETTERPLACE FOR TECHNOLOGY COMPANIES TO DO BUSINESS

THAN SILICON VALLEY



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state and local taxes paid by businessesdata used in this analysis were takenfrom the 2015 State Business TaxBurden Ranking Report, 6th Installment,

by Anderson Economic Group. Theelectricity data used in this analysiswere obtained from the U.S. EnergyInformation Administration. The vintageis September 2015, which representsthe most current data available at thetime of publication.

1AEGs industry estimates are rep resentative of

employment levels as of March 31 of each year.2The rst year from which AEG has c onsistently

reported occupational employment statistics for

Automation Alley was 2011. AEGs occupationa lestimates are representative of employment levels

as of May 31 of each year.3While the STEM completion programs in this report are

based on those included in the Postsecondary Awards

in Science, Technology, Engineering, and Mathematics

metric used in the 2012 report, the data may not be

directly comparable, as the data for this report was

pulled by each degree category, rather than STEM

as a whole.

Study 2 Methodology:The other study is an online sur vey among150 senior executives who are currentlyworking in the technology industry in theSoutheast Michigan and the Silicon Valleyareas between November 19-24, 2015.The respondents were recruited through

Research Now online survey panel.

For this study, a senior executive is dened

as a professional who has a manger or

above job title. In addition, the SoutheastMichigan area in this study refers to thefollowing eight counties that Automation

Alley represents: Wayne, Macomb, Oakland,St. Clair, Monroe, Washtenaw, Livingstonand Genesee.

The total number of participants for thestudy was 150, with 56% of them maleand 44% female. All of the respondentsself-identied as a senior executive in the

technology industry from either SoutheastMichigan or Silicon Valley. There were 75

respondents from each area. In addition,28% of respondents reported that they area C-level, 9% are a VP, SVP, or EVP, 29%are a director, and 35% are a manager,

supervisor, or lead. Among all respondents,7% of respondents were 18 to 24 years old,51% were 25 to 34 years old, 29% were 35to 44 years old, 9% were 45 to 54 years old,3% were 55 to 64 years old, and 1% weremore than 65 years old.

Among the 150 respondents, 53% werein computer and IT services. The rest ofthe respondents came from a variety ofindustry sectors, including: computer

software development (13%), computernetwork service (5%), computer hardwaredevelopment (5%), computer-generated

graphics, imaging, and documentmanagement service (4%), mobileapplication development (3%), hardware/software asset management (2%), internetservices provider (2%), web developmentand programming (2%), telecommunications(2%), medical and biotechnology (2%),

engineering, design, and prototyping service(1%), robotic and automation (1%), othertechnology based services (2%), computerproduct distribution (1%), and other (1%).

About Automation AlleyAutomation Alley is Michigans leadingtechnology business association,connecting businesses with talent,resources and funding to accelerate

innovation and fuel Southeast Mic higanseconomy. Since its founding in 1999,the nonprot has grown to include

nearly 1,000 tech-focused members inbusinesses, education and government.

Automation Alley focuses its efforts inve areas: advanced manufacturing,

defense, entrepreneurship, internationalbusiness and talent development. For moreinformation, visit automationalley.com.

About Anderson Economic GroupAnderson Economic Group, LLC (AEG)

was founded in 1996 and today has ofces

in East Lansing, Michigan and Chicago,Illinois. AEG is a research and consultingrm that specializes in economics,

public policy, nancial valuation and

market research. The rm rst provided

Automation Alley with a Technology Industryassessment in 2005, and has done soin subsequent years with a consistentmethodology and careful denition of

technology industries and occupations.

For more information, visit www.AndersonEconomicGroup.com.

Cautions and Limitations of the

Industry DataThe analysis and projections in this reportare based on the most recent publicly

available data. Because economic, market,and industrial conditions change; datacan prove incomplete or misleading; andgovernment policies are outside our control;we cannot warrant that actual employmentlevels during the period, or future periods,align with those estimated in this report.

We recommend careful considerationbe given to actual market and industryconditions by any person using portionsof this analysis in any investment decision,and do not guarantee the future outcome ofany business venture, government policy, or

legal or regulatory proceeding.

Copyright Notice and PermissionsThis entire report is copyright 2016 by

Automation Alley. Selected portions retainan original copyright 2015 by AndersonEconomic Group, LLC (AEG). AEG work

is used in this report by Automation Alleywith permission. All rights reser ved, exceptpermission to reproduce in its entirety,including this notice, for Automation Alleynews media and research purposes.Resale without permission, and use inderivative works, is expressly prohibited.

Fair use excerpts may be included in newsor research reports provided a completecitation is given to Automation Alley.

METHODOLOGYThis report contains two separate studies.One study is the technology industry datacollection and analysis for the metro Detroitregion. Automation Alley commissionedthe East Lansing, Mich.-based AndersonEconomic Group LLC. (AEG) to conductthe study.

The second study is an online surveyamong 150 senior executives who arecurrently working in the technology industry

in the Southeast Michigan and the SiliconValley areas.

Study 1 Methodology:To complete the analyses and benchmarkthe technology sector in metro Detroitagainst ve other metropolitan areas in the

United States including Chicago, Seattle,Austin, Boston, and San Jose, AEG:

Collected data from the U.S. Census

Bureau and the Bureau of LaborStatistics to analyze the technologyindustry, establishments, and workforce(occupations) of the technology sector.

Collected data from the National C enterfor Education Statistics on degree

completions in Science, Technology,Engineering, and Mathematics (STEM)elds as a measure of preparation for

continued growth.

Collected data from the U.S. CensusBureau, U.S. Energy Information

Administration, and the State Business

Tax Burden Study created by AndersonEconomic Group to analyze indicatorson the cost of living and cost of doingbusiness in each metropolitan areaas measures of the desirability of theregion for both businesses andpotential employees.

Analyzed employment trends intechnology industry clusters in metroDetroit from 2006 through 2013, state-

level technology industry data for 2011through 2015, and top-level industryemployment levels for the Detroit and

Ann Arbor metropolitan statistical areas(MSAs) for 2011 through 20151.

Due to the fact that MSA-level data for more

recent years (2013-mid 2014) are primarilyavailable at higher-level NAICS codes,

AEGs estimates for technology clusters arebased on actual, but partial, employment

data, as well as statewide trends. Analyzed occupational employment

trends in metro Detroit from 2011

through 2014, 2010-2020 occupationalemployment forecasts for the Detroitand Ann Arbor MSAs, state-leveltechnology industry employment for2011 through 2015, and top-levelindustry employment for the Detroit and

Ann Arbor MSAs for 2011 through 20152.

Since 2014 is the most recent year forwhich actual occupational employmentdata is available, AEG used employmentdata for industries corresponding toeach technology occupational clusterto inform their estimates for 2015

and 2016. Data at the MSA level wasprimarily available at broad NAICScategories. State-level data wasavailable at more specic NAICS

code levels.

Below are the sources for thetechnology industry data

Industry Data: The industry data usedin this analysis was obtained from theUnited States Census Bureau CountyBusiness Patterns program. The vintageis 2013, which represents the mostcurrent data available at the time

of publication. Occupation Data:The occupation

data used in this analysis was obtained

from the United States Bureau of LaborStatistics Occupational EmploymentStatistics program. The vintage is 2014,which represents the most current data

available at the time of publication. University STEM Degree Data:

The university degrees data used inthis analysis was obtained from theNational Center for Education StatisticsIntegrated Postsecondary EducationData System data center, Compare

Individual Institutions option. The vintageis 2013-2014, which represents the mostcurrent data available at the time ofpublication. The degrees total includes

all levels [associates, bachelors,masters, and doctors (research/scholarship, professional practice,and other)], but not certicates. The

Classication of Instructional Programs

(CIP) codes used are based on IPEDSpredened Postsecondary Awards in

Science, Technology, Engineering, andMathematics variable3. These includeprograms in:

Computer and informationsciences Engineering Engineering technologies Biological and biomedicalsciences

Mathematics and statistics Physical sciences Science technologies

Population Data:The population data

used in this analysis was obtainedfrom the United States Census BureauPopulation Estimates. The vintage is

2014, which represents the most currentdata available at the time of public ation.

Cost of Living Data:The housingdata used in this analysis was obtainedfrom the United States Census Bureau,

American Community Survey 20135-year estimates. The vintage is 2013,

which represents the most current dataavailable at the time of publication.

Cost of Doing Business Data:The



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