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Building the New Economy FORWARD Building the New Economy “Implementing the InfoComm Revolution in the National Capital Area” FORWARD “Building the New Economy: Implementing the InfoComm Revolution in the National Capital Area.” A study of the Information and Communications Industries and their role in the region. Dear Reader: Executive Summary In September of 1998, the Potomac KnowledgeWay released its first study on the Table of Contents economic impact of the Information and Communications (“InfoComm”) sector in the Greater Washington area. The study, entitled "Toward a New Economy: Merging Heritage with Vision in the Greater Washington Region" showed the InfoComm sector had ■ exceeded the scope of the Federal Government in terms of employment. Background ................................................................................ 1 Recently, a coalition of government, business and academic interests have come together ■ Key Takeaways ............................................................................ 2 to update this study. (The attached executive summary details some of the findings). We are pleased to report that this sector has shown tremendous growth over the past two ■ Vision - The InfoComm Cluster ................................................... 3 years and has firmly taken hold as the driving force behind the strong economy in the National Capital area. ■ Implementing the Vision ............................................................. 5 We wish to thank the many people who contributed to this study, especially the business ● Patterns of Growth ............................................................... 10 executives who took the time to share their insights with our survey team. ● Supporting the Growth ........................................................ 14 FORWARD ■ Voices of the Entrepreneurs ........................................................ 15 Kathleen Kennedy Townsend Anthony A. Williams ■ Building on the Vision ................................................................ 17 Lieutenant Governor, Mayor, District of Columbia State of Maryland ■ Choices for the Future ................................................................ 20 ■ Acknowledgements .................................................................... 21 James Lafond Steven S. Snider, Esq. ■ Interview and Roundtable Participants ....................................... 22 Greater Washington Area Managing Partner, Senior Partner, PricewaterhouseCoopers LLP Hale and Dorr LLP Dr. Alan Merten The full report is posted on the following websites: President, George Mason University District of Columbia Hale and Dorr LLP State of Maryland www.dcbiz.dc.gov www.haledorr.com www.choosemaryland.org www.marylandtedco.org George Mason University PricewaterhouseCoopers LLP www.umd.edu www.gmu.edu www.pwcglobal.com Building the New Economy Building the New Economy TABLE OF BACK FORWARD CONTENTS Executive Summary - The New Economy in the National Capital Area Key Takeaways ■ In 1998, PricewaterhouseCoopers LLP on behalf of the Potomac KnowledgeWay, conducted a ■ The InfoComm Cluster has expanded its strength and importance in the National Capital Area economy, study to analyze the Information and Communications Cluster and trends in the Internet related with 9,800 businesses and total employment 60% greater than that of the Federal Government, industry segments underlying the development of a New Economy in the National Capital Area. representing a strong 68% increase since the initial study. The study was cosponsored by Hale and Dorr LLP, the Greater Washington Initiative, and Virginia’s Center for Innovative Technology. ■ Despite the growth, we appear to be facing uncertain times. Two significant factors underlying the ■ That study provided the first quantitative confirmation of the growth of this sector and the way in region's economy have emerged from the study as strengths in such times: which it was transforming the region in and around Washington D.C. from one focused on the ● The unique role that the Federal Government, through its technology procurements plays in the Federal Government to an innovative center of emerging technologies. region. In 1999, Federal technology contracts accounted for $13.5 billion for the Washington ■ This study revisits the issues identified in 1998, updates the data examined then, and analyzes Standard Metropolitan Statistical Area (SMSA), representing an increase of 36%over two years. new trends that, despite the recent downturn, have turned the National Capital Area into one of the top regions in the country for high technology innovation and employment. ● The diversity of the InfoComm Cluster in this region combining key infrastructure and content elements. The companies are primarily dependent on human capital resources, which can Industry The Information and Communication (InfoComm) Cluster includes three be shifted more easily throughout the sectors as market conditions dictate. Scope: industry sectors with complementary and often interdependent products and services: Communications, Content, and Computing/Systems The InfoComm ■ The National Capital Area is leading the evolution of the Bioinformatics industry, building on the Cluster Integration, with Internet services and products embedded in all of them. strong base of government, academic, and entrepreneurial resources in the region. Washington, D.C.; the Maryland counties of Howard, Prince George’s, Geographic ■ The InfoComm Cluster has depth and breadth of activity but there is not a significant core of major Scope: Montgomery, Anne Arundel, Frederick, Baltimore, Charles and Calvert and the City of Baltimore; and the Northern Virginia counties of Loudoun, Fairfax, companies with individual strengths that match that of the Federal Government. This is more The National Capital Prince William, Arlington, Fauquier, Stafford, and Spotsylvania, along with the Area noticeable as a result of recent mergers and acquisitions. cities of Alexandria, Fairfax, Falls Church, Fredericksburg, and Manassas. ■ Concerns over transportation problems remain, but decisions are within reach on new initiatives for Quantifying current status and qualitatively assessing emerging trends and Evaluation the impact of the InfoComm economy on the region. roads, bridges, mass-transit and telecommuting options. Scope: Key Takeaways Key Background ■ A critical mass of people and networking facilities now exists in the National Capital Area as a result of the Internet services industry. This has provided the base for development of a growing number of Approach: Primary research: including fax surveys; interviews with industry and 1 regional thought leaders; roundtable discussions with executives from interrelated, competitive technologies in communications and computer systems - including wireless data 2 emerging companies in the region; and secondary research. and optical networking. ■ Sponsors: District of Columbia, Office of the Deputy Mayor for Planning & Economic The culture of entrepreneurship has been firmly established, drawing venture capital and other Development; George Mason University; Hale and Dorr LLP; supporting services companies needed to sustain a growing technology economy. Venture capital PricewaterhouseCoopers LLP; State of Maryland, Maryland Department of funding in the area has increased from $777 million in 1998 to over $3 billion in 2000. The Business and Economic Development, Maryland Technology Development Corporation; and the University of Maryland, College Park. prospects for continued venture capital investment in the region will be influenced by the overall state of the capital markets. Implementing the InfoComm Revolution in the National Capital Area Implementing the InfoComm Revolution in the National Capital Area Building the New Economy Building the New Economy TABLE OF BACK FORWARD CONTENTS The InfoComm Cluster has continued to drive economic development in the The InfoComm Cluster consists of Core (Communications and Content) and National Capital Area. Enabling (Computers/Systems Integration) industries. Internet services companies span the InfoComm Cluster and merge elements from both Core ■ As high technology industries have expanded globally, the InfoComm Cluster of industries described and Enabling industries. in the 1998 study have continued to be the key to the region’s growth. ■ The different components of the InfoComm Cluster have many complementary and often interdependent Core Industries Enabling Industries products and services. COMMUNICATIONS CONTENT COMPUTERS AND SYSTEMS INTEGRATION & ● The InfoComm value cycle starts with Content creation and packaging; this includes the new Bioinformatics sector, which is centered in this region. ■ Organizations that provide ■ Organizations that create, ■ Organizations that produce software ● Different media provide the Communications channels for bringing this content to the end communications services package or distribute and provide programming services and access through content (in any format) for (outside of integration services). users, and new value-added services are customized for end-user needs affecting the system combinations of point-to- commercial purposes. ■ requirements for content delivery. point circuits, interface Organizations that develop, ■ Providers of non- implement or maintain software ● Computers and Systems Integration is the hub of the InfoComm value cycle. It enables arrangements, and routing switching, as well as commercial content, such applications. content
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