Information technology industry questions Michigan's economic development strategy
As Michigan’s economic development spotlight remains trained mainly on alternative energy, biotechnology and the film industry, some Web executives feel neglected.
They argue that the software industry doesn't get enough recognition from the state government.
The four areas identified by the Michigan Economic Development Corp.'s
21st Century Jobs Fund as specific growth sectors for the state are
life sciences, alternative energy, advanced manufacturing and homeland
security and defense. The state’s tax incentives system also favors
companies in those segments, in addition to the film industry.
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Software growth
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Bill Wagner, co-founder of Ann Arbor-based SRT Solutions, argues that Michigan’s economic development strategy should seek to boost IT companies that require low amounts of funding to get started.
“There’s probably no quicker way to increase income tax revenue in the state than software, because all the money pumped into a software companies is going to go out in salaries. That’s where your costs are,” Wagner said. “All the costs for a software business are human capital related. It’s attracting people, it’s salaries, it’s retaining people.”
Some software and Web companies can be considered for state incentives, MEDC spokeswoman Bridget Beckman said. ForeSee Results, Barracuda Networks and Systems In Motion are recent examples of IT companies awarded tax incentives to expand in the Ann Arbor region.
But Beckman said the MEDC is forming a task force to identify ways in which the state can better support the industry.
“We’re taking a much more strategic approach in evaluating what the sector needs to grow and what opportunities may exist,” Beckman said. “There is a tremendous amount of growth in the IT sector.”
Larry Freed, CEO of ForeSee, said it’s important for the state to boost the software and Web community in addition to its alternative energy and life sciences focus.
“Let’s not get too solely focused and tunnel-visioned on one industry,” Freed said.
F. Andy Seidl, co-founder of Ann Arbor-based MyST Technology Partners, said the state should place more focus on boosting the software and IT community. But he said the industry, which does not have a dedicated trade association in Michigan, must better organize to communicate its message.
“We’re too fragmented,” he said. “It’s not the entrepreneurs in this town that are going to compete you out of existence. It’s the ones in Silicon Valley and Boston and New York.”
Contact AnnArbor.com’s Nathan Bomey at (734) 623-2587 or nathanbomey@annarbor.com. You can also follow him on Twitter.
Comments
Dug Song
Sun, Oct 18, 2009 : 11:46 p.m.
There is a reason all the micro-seed funds and startup accelerators around the country focus on software - $500k in our industry is like $5M in life sciences/manufacturing/alt energy. Jed Christensen (UM alum, now Cambridge MBA) published an interesting study comparing several of these efforts around the country: http://blog.jedchristiansen.com/2009/09/21/copying-y-combinator-why-and-how/ Curiously, he's also written up an interesting comparison between the entrepreneurial cultures of Ann Arbor and Cambridge, UK (that to my ear, don't ring quite true - I think we're a lot more like Cambridge than he thinks!): http://blog.jedchristiansen.com/2009/09/30/a-tale-of-two-entrepreneurial-cities/ I have a friend in Singapore pulling together many of the state and University startup programs and resources into a coherent mentorship-driven accelerator program. I believe this could be done similarly here as a public/private partnership, maybe as an L3C (which could take money from, and provide a return to, foundations such as Kauffmann, Lowe, http://neweconomyinitiative.org, etc. as a program-related investment). I've talked with many folks about this idea, and am excited about some interesting proposals currently before the state legislature, but some sharp, energetic, resourceful fund manager really needs to drive this (not me).