IT not what it was at time of landmark report

January 19, 2009
In late 2000 came the findings of a report on which the region's economic development priorities remain focused.

Columbus, Ohio-based Battelle Memorial Institute identified advanced manufacturing, life sciences and information technology as the pillars of central Indiana's economy.

That study has proven to be "remarkably prescient" in identifying IT as a mainstay of the local economy that would "affect all industries and all jobs," said Michael J. Hicks, the top economist at Ball State University.

But in a report he presented this month to industry group TechPoint, Hicks said the most profound effect on the state's economy since the Battelle report involves structural change in the IT sector.

Far beyond software development, which became the focus of early IT efforts, the businesses that have been making a splash in the sector now largely involve so-called "emerging media."

Hicks, who writes a weekly column in IBJ, loosely defines "emerging media" as communications of all types based on digital interfaces and, increasingly, with interactive components.

"They come built in to most cell phones; are part of daily Internet news [and] communications; and include video games, marketing packages, electronic kiosks, graphical [Web-based] user interfaces, training packages in schools, and multimedia CD-ROMs."

They're increasingly in more specialized business applications, he added.

The growth of emerging media he attributes to the "growth and now ubiquity" of broadband, which, measured in Internet connections, grew from 6.7 million in 2000 to more than 82 million in 2006. The number of unique Internet Web sites since the Battelle Report has exploded from 7 million to 30 billion in 2007.

In that environment have emerged IT firms in central Indiana steeped in emerging media. Take, for example, Compendium, which makes blogware; ExactTarget, which makes e-mail marketing tools; and Cantaloupe, which produces Internet video magazines.

"The focus of [IT] growth has changed," Hicks said. "Growth in IT-related firms within the IT sector is more heavily oriented towards more specialized firms. Emerging media content is perhaps the most dynamic set of firms," Hicks said.

The trend hardly seems startling when viewed in the time frame of the last couple of years. But it's a change no less profound based on the landscape of eight years ago, when the Battelle study was released.

Hicks' report "crystallized the continued and growing importance of IT to the state's economy," said TechPoint CEO Jim Jay.

But tracking IT's influence in the local market is getting difficult. Besides a dizzying bevy of upstarts, the sector is growing within traditional companies and cuts across other industry sectors. These include the two other pillars of the region's economic development-life sciences and advanced manufacturing.

For example, Jay points to the Indiana Health Information Exchange, which formed in the life sciences realm and electronically provides patient and clinical information to doctors and other medical providers.

Defining IT employment is also harder.

"While demand for the more specialized emerging media occupations [is] occurring in specialty firms within the IT sector, the supporting occupations of computer engineering, software development, and network installation and administration are primarily occurring outside the IT sector," Hicks said in his report. "Focusing solely on the growth of the IT sector entirely misses the point."

In his report, Hicks makes recommendations, including the need to identify key public-sector supports for emerging media, including the extension of research-and-development tax credits to design-focused research.

Among other things, Hicks also recommends that leaders identify and promote the role of emerging media "in sectors in which Indiana's relative strength is already apparent," such as life sciences, advanced manufacturing and logistics.
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