IBM Jump Starts High-tech Cluster

The IBM announcement has proven to be more than a run-of-the-mill corporate location. State and local economic development groups expect a cluster of high-tech operations to form near IBM's newest facility -- jumpstarting a new era of investment in the state.

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        "The economic impact of this project is enormous," says Empire State Development's Gargano. "We have estimated the value of this project in additional income to New York residents over seven years, after deducting the cost of all incentives, to be more than $1 billion. The project will create 1,000 permanent jobs and retain 1,390 jobs at the Hudson Valley Research Park in East Fishkill. The project puts New York State on the map as a premier contender for additional semiconductor and high-tech investments."
        Planar Semiconductor Inc. (PSI) is among the first to follow IBM's lead. PSI will launch operations at its $20 million facility in TechCity, a redeveloped former IBM plant in greater Kingston (Ulster County). "The character of the Hudson Valley, with its corporate image, ease of transportation and highly skilled personnel, compelled us to choose this location," says PSI President and CEO Rob Randhawa. "Another factor was Gov. Pataki, who is clearly working to create a New York high-tech image that will help companies like PSI become strong leaders in our industry."
        Several high-tech innovators are already located in the area, including MiCRUS' microchip factory, a division of Philips Semiconductors, and DuPont Photomasks Inc. in Poughkeepsie, which makes blanks for microchip manufacture. A number of Internet-related businesses are also nearby at TechCity. Others will find the new TechCenter@Newburg, Wappinger Falls' Myers Corners Road and Poughkeepsie's One Civic Center Plaza (all under construction) attractive locations.
        These openings are likely to create even more opportunities in the region, says Dutchess County Economic Development Corp.'s President Kathleen Norat. "According to the 'multiplier effect,' which says every high-end job supports three others jobs in the regional economy in a variety of sectors -- manufacturing, distribution, retail, services and so on -- the total jobs impact is 3,000 of which 1,000 are the IBM jobs," she explains.

IBM Represents a Move In the Right Direction

This development is a far cry from seven years ago when IBM shook up the state with large-scale cutbacks. The Hudson Valley alone saw IBM cut its work force from 30,700 workers in 1985 to less than 14,000 in the early 1990s. Today, however, IBM is building it's new chip fab facility in a factory that it shut down in 1993 and adding 1,000 new jobs.
        The region is still some 20,000 jobs short of the number IBM had in the mid-1980s, but the latest announcement is a move in the right direction. In fact, IBM's $2.5 billion investment represents the largest single investment in state history, as well as the largest in the computer giant's history.
        Though the historic announcement "bears testimony to New York's economic renewal under Gov. Pataki," Gargano reports there are still hurdles to overcome for the state's business climate, including how to continue increased high-tech development and improve the appeal of Upstate New York.
        "The biggest challenge facing New York, in my opinion, is to sustain the momentum," says Matt Maguire, director of communications with The Business Council of New York State Inc., the largest organization representing the interests of large and small firms throughout the state. "New York State has been doing a lot of things right since the mid-1990s. The state has had a seven-year winning streak on tax cuts -- hundreds of billions of dollars have been taken off the tax burden. This is absolutely a move in the right direction, but we can and should do more."
        In terms of high-tech development, Maguire suggests that the state make a stronger commitment to university-level research. He cites Michigan as an example for New York to follow. "Michigan is investing its entire share of the tobacco settlement in its life sciences universities: Michigan University and Michigan State," he explains. "That's a very stark, dramatic and courageous commitment, and it's the kind of thing that New York is in a good position to do and wants to do. We have the university assets, we have the potential, but as the federal government steps up its investment in research through increased budgets of the National Science Foundation and the National Institutes of Health, in order to compete, New York is going to have to show an increase in commitment."
        Earlier this year, Pataki did just that. His latest $1 billion high-tech initiative will allow the state to remain a leader in high-tech and biotech university-based research, business creation and job development. The investment represents the largest high-tech economic development initiative in the state's history, according to Gargano. "With an investment of a quarter-billion dollars in state funds, the plan would, over the next five years, leverage federal and private funding to create 'Centers of Excellence' that will bring together the ingenuity of the private sector with the world-class research capabilities of our universities," he explains.
        The state has also taken steps to keep and attract high-tech labor. Empire State Development and The New York State Dept. of Labor recently unveiled a new marketing campaign to promote New York as the premier high-tech center for skilled workers. A key component of the multimedia program is the new Web site www.hightechny. com, which lists more than 20,000 high-tech job opportunities in the state and has links to additional employers and industry associations across the state.
        Such efforts are proving to be successful for the state, according to a recent study conducted by Empire State Development. The study shows that employment in the state's software and related services industry sector grew from about 50,000 in 1994 to more than 82,000 in 1998 -- an increase of more than 63 percent.
        Three New York regions have performed particularly well in terms of software and related services job growth. New York City grew by 109 percent, Mid-Hudson by 87 percent, and the Finger Lakes region saw 75 percent growth.
        The report shows that there are 7,900 business establishments in New York State in the software and related services industry, with a total payroll of $5.6 billion. Average wages range from $43,833 in the data processing and preparation category to $92,204 in prepackaged software.

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