Salt Lake a good fit for tech

Salt Lake City offers continuity of operations, Boyd said, along with a lower cost of living, strong "intellectual capital," strong work ethic and a tradition of fiscal responsibility and business-friendliness.

However, it is disadvantaged by its state corporate income tax (something Sioux Falls doesn't have) and low population growth, he said.

Mark Knold, senior economist with the Utah Department of Workforce Services, said Tuesday that the information technology sector has achieved a "modest" level of recovery since the height of the recession. And, he said, the fundamentals remain strong.

In December 2000, Utah employed about 70,500 IT workers, Knold found. That number fell rapidly from 2001 through 2003, reaching its trough in July 2003, when there were about 54,700 Utahns working in the IT industry. Since then, Knold said, the sector has gained about 2,000 jobs.

He said the department's data indicates that the number of businesses held firm during the lean years.

"There didn't seem to be a whole lot of them going out of business," he said, speculating that the bulk of firms trimmed staff levels and waited out the storm rather than closing their doors.

"The fundamental foundation to establish that (industry's initial growth in Utah) to begin with is still there," Knold said. "It's still in place."

A study by the Center for Urban Economic Development at the University of Chicago looked at six urban markets over a three-year period and found that the IT sector lost more than 403,000 jobs from March 2001 to mid-2004 — more than 200,000 of which were lost after the recession was declared over.

"Despite recent aggregate monthly job growth numbers, there is little evidence of significant job expansion in the IT industry," the report stated.

However, Boyd said, the IT industry is poised to rebound as the larger economy continues to strengthen.

"When that happens, as the economy begins to improve, our clients will reject the old model of becoming increasingly profitable and then relocating to a large marketplace like San Francisco and San Diego," Boyd said. "Because now our clients see what happens when the economy does turn sour and their facilities are in these prohibitively expensive cities."

Richard Nelson, head of the Utah Information Technology Association, said the industry is still showing some reluctance to expand operations out-of-state. But he expressed optimism that the tide is changing, and that Utah is ready for the turnaround.

For now, he said, Utah's IT growth likely will come from within.

"I think you'll see that the direct benefits to the economy will come in the expansion of existing businesses," Nelson said. "We have over 2,600 IT companies, which are so much better positioned to grow after hunkering down and surviving the depressed conditions. Utah is finally very well positioned to grow some of these larger seedling companies into anchors for this state in the near future."

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E-mail: jnii@desnews.com