TECHNOCATION - Finally, some positive economic news for Maryland, nation

March 6, 2002
By ELLEN WIGGINS,
Special to the Daily Record

Despite the recent return of cold weather, signs of spring are abundant across Maryland. Trees are budding and flower bulbs are already pushing their green shoots from the earth. As we all begin anticipating a transition from fireplace to patio, signs of an economic thaw for Maryland and the nation are also starting to pop up. These long-awaited bits of good news may be the beginning of the end of a year that has been the fiscal equivalent of a long, cold winter for many high-tech industries.

Baltimore made national headlines last week when Boyd Co., a New Jersey-based firm specializing in corporate relocation, announced some surprising results of a study comparing the cost of doing high-tech business in different U.S. metro areas. The Boyd Co. study measured the costs of running a 500-employee, 125,000-square-foot R&D center in 17 cities, and Baltimore turned out to be the cheapest place to do business.

What wasn't surprising is that the West Coast remained the most expensive tech location, with San Francisco holding the top-dollar spot, followed closely by Silicon Valley. Traditional East Coast locales New York and Boston ranked third and fourth respectively.

The Boyd study tallied the annual cost of running the hypothetical R&D center in Charm City at around $34.4 million. Compare that to Left Coast firms who left their wallets in San Francisco to the tune of $43 million per year. The yearly tab for running the same office in New York was just under $41 million and $36.8 million in Fairfax County, Va.

Boyd conducted the study to respond to an increasing demand by tech firms to cut costs in the middle of a recession. As I've said many times before, Baltimore's combination of tech infrastructure, skilled work force, excellent universities, federal labs and strategic location give it a leg up on competition not just regionally but nationally. In a tech economy where revenues have been tough to come by, finding a location with more affordable rent, power bills, payrolls and travel costs is a key way to cut expenses.

Hopefully this study will confirm Baltimore's emergence on the East Coast business map as a bargain location for tech companies. Much like stockbrokers who buy aggressively in a bear market, firms considering relocation would be wise to settle in the land of pleasant (and affordable) living. The Baltimore region's cluster of university research parks and business incubators remain some of the most affordable and supportive locales for startup and small tech businesses looking to grow.

Nationally speaking

The national business picture is also growing increasingly brighter after months of gloom. Last week the federal government reported that the U.S. economy experienced its fastest growth in a year during the fourth quarter of 2001. The biggest jump in consumer spending on cars and other large purchases in 15 years helped fuel the rise.

The most recent data on the gross domestic product, the measure of all goods and services output in the U.S., showed that the recession has probably ended and may be the mildest ever. Federal Reserve Chairman Alan Greenspan told Congress last week similar good tidings, although with a caveat that the predicted recovery will likely be modest.

Other good signs from the Commerce Department included increased consumer spending; the largest increase in personal income in six months; and stronger-than expected-durable goods orders for January. At press time, a key measure of American manufacturing activity, the Arizona-based Institute for Supply Management's business activity index, rose to 54.7 in February from 49.9 in January. This figure also beat predictions and actually signaled a coming economic expansion.

Good news

Some Maryland companies had good news of their own recently. Columbia-based Duratek Inc., which develops technologies and systems for the hazardous waste management industry, announced a $30 million contract with Fluor Hanford Inc. for the U.S. Department of Energy. Lockheed Martin's Naval Electronic and Surveillance Systems division won a $420 million tactical radar contract with the Navy's Sea Systems Command. And on April 8, Maryland's spiciest stock, McCormick & Co., will offer another two-for-one split.

An interesting study released earlier this month reinforced the fact that the fuel for much of this good news for Maryland's economy is its excellent higher education system. The study by the University of Baltimore's Jacob France Institute said that University System of Maryland (USM) institutions account for billions in additional state revenues from increased earnings by graduates and economic activity from out-of-state students and visitors.

The study focused on the return on the state's investment for the classes of 1986 and 1989, showing that the graduates' earning power far exceeded the costs of their education. The study also highlighted the value of partnerships between industry and higher ed. Business incubators, technology transfer and other connections to the private sector and the four USM research campuses in 1999 alone accounted for 43 percent of invention disclosures and 38 percent of new patent applications in the state.

So, there are some reasons for guarded optimism in our backyards and across the country. Maryland companies that continue to concentrate on business fundamentals and take advantage of our state's bountiful infrastructure and work force advantages should be fine. As we look forward to returning to our gardens, business in the region is also poised for revitalization and growth. Maryland companies will still have to roll up their sleeves and get their hands dirty, but they can rest assured that they are working on fertile ground.