Is ICT Still a Driving Force?
Although the availability of ICT services is sometimes taken for granted, it's not a given when a company is considering locating in a rural or remote area or in a foreign location.
Jennifer LeClaire  (Feb/Mar 09)

We live in the Information Age. It's an age in which companies and individuals seemingly rely on information and communications technologies (ICT) to make the world go around. Yet when it comes to site selection, ICT was ranked low on the totem pole of important factors, according to Area Development's 2008 Corporate Survey.

ICT is a blanket term that includes equipment or technology involved with the communication of information. The U.S. Census Bureau released a study in March 2008 (the latest available survey) that reveals U.S. businesses spent a total of $250.7 billion on ICT equipment in 2006. Doubtless, ICT is vital in today's global economy, especially with distributed work forces and global clients.

But despite these facts, the "availability of advanced ICT services" factor fell dramatically in Area Development's 2008 Corporate Survey. It was ranked "very important" or "important" by only 55.5 percent of survey respondents. By contrast, 82.2 percent ranked this factor as "very important" or "important" in the previous year's survey.

Is ICT less of a concern in a nation that has focused on bringing broadband Internet capabilities and wireless technologies to the most rural areas? Or is the nearly 30 percent decline in ICT interest simply a fluke?

"ICT is absolutely essential to the way we do business these days," confirms Les Cranmer, a senior managing director at Studley in Philadelphia. "Thirty or 40 years ago, we used to focus on sewage capacity. You'd look at large cities or small towns and ask about the ability to provide adequate sewage for manufacturing plants. Today, it's important but it's an accepted fact. Now, we are also moving beyond technology to other concerns."

ICT: Is It Really a Given?
Again, ICT is undeniably an essential factor. Apparently what has changed is the emergence of other factors that are more important in the eyes of site selectors.

Companies expect telecommunications infrastructure to be in place: it's a necessity, not a nice-to-have amenity, according to Nancy Musselwhite, a senior consultant at Geo Strategy Partners, a research and strategy consulting firm in Atlanta.

"IT rules every business from headquarters to data and call centers to distribution centers to manufacturing locations," she says. "The community that doesn't understand that does not get many looks from site selectors."

ICT has become ubiquitous, and because of that, it's less of a concern than many other site selection categories, echoes Trevor Ragsdale, executive vice president of Jones Lang LaSalle's supply chain and logistics solutions team. There are, of course, some caveats to that statement.

"In some cases, while doing greenfield projects, the availability of ICT is a problem," Ragsdale admits. "However, this can typically be overcome with economic incentive grants to bring service to a site, especially when a company is contemplating the creation of new employment."

While ICT is a given, however, Mark Sweeney, a principal at McCallum Sweeney Consulting, a business and economic development consulting firm in Greenville, S.C., says site selectors aren't taking it for granted. Site selectors are taking steps to verify the robustness of the ICT infrastructure, particularly for manufacturers and distributors that are looking at rural or less-developed areas.

"You can still go into rural areas that don't have adequate technology infrastructure," Sweeny says. "All of a sudden, ICT becomes a very important factor for that project in that location. But generally speaking, it's no longer a geographic differentiator."

Ron Pollina, principal of Pollina Corporate Real Estate in Park Ridge, Ill., offers one more possible explanation for the decline in the number of site selectors that rated advanced ICT as a "very important" factor: economic trends.

"Site selectors aren't working with as many technology-intensive companies today," Pollina offers. "Manufacturing isn't the only industry losing jobs. High-tech isn't growing in this country. So the downgrade in importance could have to do with the fact that there's less demand for it."

Inroads into Rural Areas
Extending broadband access to underserved communities is vital to closing the digital divide between urban and rural areas, but it is often cost-prohibitive to deploy these technologies in remote areas. However, traditional telephone companies, as well as wireless technology providers and cable and satellite companies competing for market share, are making progress on this front.

"We are seeing ICT inroads into rural areas. The vital need is connectivity. You need to have reliable connectivity. If you can have it with more than one source, that's terrific," Cranmer says. "But with technology today, there are lots and lots of manufacturing plants and distribution centers that are operating through satellite linkages rather than being hardwired. So advancement in technology really allows us to operate from anywhere we want."

During 2006, for example, AT&T began implementing several initiatives designed to provide new opportunities for people living and working in rural areas and remote communities to take advantage of high-speed connectivity, as well as to provide new competitive options for customers in other areas. To bring broadband connectivity to rural and remote areas, AT&T is turning to satellite technology, which is not inhibited by line-of-sight or terrestrial-based technology.

For example, the company has a relationship with a vendor to begin using satellite technology to serve customers in many rural and remote areas across the company's traditional 13-state local residential service area.

Another AT&T solution to address the rural broadband deficit is fixed wireless technology. Fixed wireless technology is a "line-of- sight" technology. Instead of a copper wire line for the "last mile" connection into the home or business, the recipient mounts an antenna on the house to receive the wireless signal.

"The hope is that fixed wireless technology can allow us to extend broadband service to a larger population and into less densely populated areas than we can do with traditional DSL," says Jamie Butcher, assistant vice president of AT&T Rural Marketing. "Expanding broadband access to more rural communities is creating a win-win situation for employers and employees."

The promise of the wireless world hasn't completely manifested yet, though. That means some rural areas just can't accommodate maximum bandwidth and high-speed connectivity needs.

"There are still developing corridors, but we look for smart growth and intelligent planning," says Lawrence Moretti, the former eastern regional lead for Deloitte Consulting's Global Expansion Optimization (GEO) and Location Strategies Practice. "If we are looking at a greenfield site 50 miles away from a major metro and where no one else has been, that's a bigger concern than if it's a Class A industrial park right on the trend of development. It's very site-specific," he explains.

The Remaining ICT Challenges
Despite the advances in ICT, there are still concerns and challenges on this front to which site selectors need pay close attention. Connectivity and reliable power are chief among them. Older buildings can also pose problems, and nothing can be taken for granted when searching beyond U.S. borders.

"You can have reliable connectivity in terms of low voltage type systems, telephonics, and through fiber optics etc., but if the power is not operating, then the machine where you connect the technology is not operating," Cranmer says. "So when we have reached the point where we are satisfied that the technology will be there, then the focus has certainly been on reliable electric power, particularly in remote areas where you may be chasing the local cost of manufacturing." Additionally, electricity supply and demand and prediction of long-term power costs run hand in hand with ICT when it comes to siting data centers. These ICT-intensive projects demand in-depth investigation, Cranmer notes.

Another challenge comes in the form of older buildings. Older buildings typically offer older communications technology. That can demand an "upfit" cost - and that has to be factored into the site selection equation. "You can't make any assumptions," Sweeny says. "You may presume a [facility] has all the ICT infrastructure you need, but you have to do your due diligence."

By the same token, ICT infrastructure is far from automatic in international site selection decisions. Emerging markets in Asia or Latin America, for example, don't always have the connectivity manufacturers require. This could demand an extra investment and years of lag time on a new project.

"If you are looking at emerging markets like Vietnam or any other developing country, then ICT definitely becomes an issue," Moretti says. "But if you are looking for 30,000 square feet in suburban New Jersey, it's not as important as a factor - only because it's almost taken for granted. When I first started in site selection 15 years ago, we were impressed when an area had fiber optics, but things are changing," Moretti concludes.

Area Development Online   All contents copyright © 2013 Halcyon Business Publications, Inc.