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High-Tech Hotspots: a Roadmap

New technologies, the demand for quality workers, business-friendly cities, and access to more power are driving high-tech industries toward traditional tech hubs, and to some growing locations that are taking advantage of the boom.

Cynthia Kincaid  (Oct/Nov 08)
(page 2 of 2)
Data Centers
While data centers continue to be built all across the country, they are not without their challenges, namely operating costs and power demand. According to a survey conducted by AFCOM, the leading association for data center professionals, more than half of all data centers will have to relocate to new facilities or outsource applications by 2010. The key factor for this is the cost of cooling and power. Respondents to the survey also reported that insufficient power and excessive heat were two of the biggest problems facing data center operations, with 80 percent of AFCOM members acknowledging a power failure at their center within the last five years, most caused by power outages.

"Some of these large data centers have huge energy demands and tend toward locations with least-cost electricity, like areas with hydroelectric-generated electricity or nuclear-generated electricity," says Buzz Canup, managing principal for Fluor Global Location Strategies.

The Boyd Company, a site selection firm located in Princeton, New Jersey, compares the cost of operating data centers in 45 U.S. cities in its 2008 report Banking and Financial Services: A Comparative Cost Analysis for Information Assurance Operations. Their conclusion: The most expensive city in which to run a data center is in New York City, where operating a 125,000-square-foot center runs $28.1 million. The least expensive city is Sioux Falls, South Dakota, where the cost to operate a 125,000 square-foot center runs $11.2 million. Perhaps this is the reason that ADP, HSBC, and Wells Fargo all have data centers located in Sioux Falls.

Biotechnology and Life Sciences
According to BIO, the world's largest biotechnology organization, biotechnology has created more than 200 new therapies and vaccines over the past few years, including products to treat breast cancer, diabetes, HIV/AIDS, and autoimmune disorders. There are more than 400 biotech drug products and vaccines currently in clinical trials.

As of 2006, there were 1,452 biotechnology companies in the United States, of which 336 were publicly held. The market capitalization of these publicly traded companies was $360 billion as of April 2008. So great is the field that healthcare biotech revenues alone rose from $8 billion in 1992 to $58.8 billion in 2006. U.S. publicly traded biotech companies spent $27.1 billion on research and development in 2006 and employed 180,000 people, according to BIO.

The top 10 states for biotech in the United States, according to the Battelle/BIO study Growing the Nation's Biotech Sector, are New York, New Jersey, North Carolina, Pennsylvania, Illinois, Indiana, Florida, California, Massachusetts, and Missouri. Also emerging as biotech hotspots are Georgia, Maryland, and Texas.

Green Technologies

On December 19, 2007, President George W. Bush signed into law the Energy Independence and Security Act (EISA) of 2007. The key factor in this legislation was an expansion of the Renewable Fuels Standard (RFS), first enacted into law as part of the Energy Policy Act of 2005. This expansion requires the use of 36 billion gallons of renewable fuels annually by 2022, of which 21 billion gallons must come from advanced biofuels; additionally, 16 billion gallons must come from cellulosic ethanol by 2022.

All of this is great news for those companies involved in the production of ethanol, solar, wind, and other alternative energy sources. "A lot of alternative energy sources are in the early stages of development," says Canup. "It's not a huge market right now, but it's certainly going to develop into a huge market pretty quickly." The numbers certainly bear this out. According to Ethanol Across America, a nonprofit, non-partisan education campaign of the Clean Fuels Foundation, by late 2007, 125 U.S. plants had produced seven billion gallons of ethanol annually, with another 80 plants under construction. This has led more than 100 communities in the United States to build ethanol plants.

According to the U.S. Department of Commerce, as of 2005, the ethanol industry has added more than $25 billion to the nation's gross economic output, through operating spending and capital spending for new plants; it has supported more than 147,000 jobs across all sectors of the economy; and $4.4 billion went directly to consumers this past year through increased economic activity and new jobs. In fact, the General Accounting Office reports that a 50 percent decline in ethanol production would cost the U.S. Treasury $3.2 billion annually.

Solar power has also exploded in Europe, Japan, and the United States. According to the Global Solar Center, for the past 15 years, market demand for solar power has grown 30 percent per year. The U.S. solar market increased 57 percent in 2007 and is expected to skyrocket in 2008. The United States is the fourth-largest market for solar power behind Germany, Spain, and Japan, with California controlling 80 percent of the U.S. solar market.

The photovoltaic industry generated $17.2 billion in global revenues in 2007. A report by the European Photovoltaic Industry Association and Greenpeace reports that solar energy could generate 2.5 percent of the world's electricity and fulfill the annual output from 150 coal-fired power plants by 2025. The report also stated that photovoltaic systems, which convert solar light energy into power, now generate 0.05 percent of world electricity and could rise to 2.5 percent in 2025 and 16 percent in 2040.

As high-tech industries continue to grow throughout the United States, more locations will have opportunities to join the growing list of hotspots. Those that can meet the needs of companies seeking low costs, educated employees, and highly desirable quality-of-life offerings will see the most success.
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