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Automation
Alleys201
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Te
chnologyIn
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yRep
ort
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SoutheastMichiganvs.
Silicon
Valley
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Thank You toour Sponsors
Copyright Notice and Permissions
This entire report is copyright (c) 2016 by Automation Alley.
All rights reser ved, except permission to repro duce in its entirety, includi ng this notice, for Automation Al ley news media
and research purposes. Resale without permission, and use in derivative works, is expressly prohibited. Fair use
excerpts may be included in news or research reports provided a complete citation is given to Automation Alley.
1) K White, Sarah. Could Detroit become the next Silicon Valley? CIO.com. CIO, 05 November 2015. Web. 03 Feb. 2016.
2) Katz, Bruce. Why Detroit could be the next Silicon Valley (and Vice Versa). Fortune.com. Fortune, 07 Apr. 2015. Web.
03 Feb. 2016.
3) Harlow, Poppy. Detroit: The next Silicon Valley? CNNMoney. Cable News Network, 20 May 2011. Web. 08 Feb. 2016.
Youve seen the headlines:
Could Detroit become the next
Silicon Valley?1
Why Detroit could be the next
Silicon Valley (and vice versa)2
Detroit: The next Silicon Valley?3
These headlines
are intended to
shock, because
most peoples
perceptions of
the two regions
couldnt be more
different. The
prevailing attitude both insideand outside of Michigan is that
Southeast Michigan is stuck in
the past, that Detroit is, was and
always will be, a Rust Belt town. In
contrast, Silicon Valley is perceived
as the epicenter of high-tech
innovation and opportunity.
But at Automation Alley, our
experience doesnt t this paradigm.
Over the past 10 years of publishing
this report, we have seen Southeast
Michigan compete strongly with
Silicon Valley in the tech industry.
And every day, we work with
technology companies that are
expanding rapidly and developing
industry-disrupting technology.
To change this outdated perception
of Southeast Michigan, we talked
to the people most familiar with the
tech industry in the two regions:tech executives in Southeast
Michigan and Silicon Valley.
And this was their overwhelming
response: Southeast Michigan is
theplace to grow a technology
business.
In nearly every category,
tech executives saw more in
Southeast Michigan: more ROI,
more opportunity, more support.
And the news is exciting for job
seekers as well as those looking
to start or grow a business in
Southeast Michigan. In 2016, more
tech executives expect to make new
hires, increase company revenue
and invest in R&D than their Silicon
Valley counterparts not to
mention that a paycheck in Detroit
goes much farther than a paycheck
in San Jose. (See pg. 11 for the
difference in rent and housing value
for the two regions.)
Forget what you know about Silicon
Valley. Forget what you think you
know about Southeast Michigan.
Lets write a new headline for
tomorrows paper: Silicon Who?
Tech Industry Booming in
Southeast Michigan.
Southeast Michigan istheplace to grow a
technology business.
FOREWORDKen Rogers, Executive Director, Automation Alley
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Southeast Michigan is a hotbed
of technology and innovation, and
according to the industrys top
executives, its a region that rivals
even Silicon Valley as the best place
to do business.
Thats the conclusion of Automation
Alleys survey of senior executives
currently working in the technology
industry in Southeast Michigan and
Silicon Valley. The results of this
report predict growth for Southeast
Michigan technology companies
in 2016 and showcase regional
strengths that rival those of
Silicon Valley.
This survey coupled withkey economic indicators and
employment and growth projections
for 2016, provided by East Lansing-
based Anderson Economic Group
highlights Southeast Michigans
vast business opportunity and
technological impact. In addition to
assessing data for the Southeast
Michigan region, the report looked
at data for ve of the nations
leading technology hubs: San
Jose, Chicago, Boston, Seattle
and Austin.
As Michigans leading technology
business association, Automation
Alley publishes this report to
increase awareness of Southeast
Michigan as a leading center
for tech talent, innovation and
opportunity in America. We
encourage the regions leaders and
influencers, as well as companies
and individuals, to use the reportas a tool to attract talent and
investment to the region and to
advocate for the technology industry
of Southeast Michigan.
ABOUT THIS REPORTSoutheast Michigan vs. Silicon Valley
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THE FACTS
Employment in the technology
industry in Southeast Michigan
increased by an estimated 4.3%
between 2014 and 2015, and
employment between 2015 and
early 2016 is projected to increase
by 1.5%to 269,877 jobs.
The 3 industry sectors in
Southeast Michigan that are
projected to have the largest
increase between 2015 and
early 2016:
Related and other technology*:
65,399(2.6% increase)
Advanced automotive:92,031(1.8% increase)
Life sciences:
17,279(0.9% increase)
The number of technology-focused
jobs in Southeast Michigan
increased by an estimated
4.1%between 2014 and 2015.
Technology-focused employment
is projected to increase by
2.2%from 2015 into early
2016 to 195,745 jobs in
Southeast Michigan.
The 3 technology-focused jobs
in Southeast Michgian that are
projected to have the largest
increase between 2015 and
early 2016:
Architecture and engineering:
94,222(3.0% increase)
Technology management:13,841(2.1% increase)
Computer and mathematics:
70,783(1.5% increase)
*To estimate employment for 2014 through 2016, Anderson Economic Group considered statewide employment
trends for related subsectors, which include mining (NAICS 21); professional and commercial equipment and
supplies merchant wholesalers (NAICS 4234); and architectural, engineering, and related services (NAICS 5413).
AEG also considered Detr oit and Ann Arbor Metropo litan Statistical Ar ea-level trends for hig her-level industr y
sectors, including merchant wholesalers durable goods (NAICS 423) and professional scientic and technical
services (NAICS 54). NAICS 423 was available for the Detroit MSA only.
How do you expect your
employee headcount
to change in 2016?
99% of Southeast Michigan Technology Companies Project Revenue Growth in 2016
8 in 10 Southeast Michigan Technology Executives Plan to Invest in R&D and Make
New Hires in 2016
While tech executives from both
areas are optimistic about their
company revenue in 2016, those
from Southeast Michigan are more
condent about their companys
revenue projections than their
Silicon Valley counterparts.
Percentage of executives who expect their
company revenue to grow in 2016
While the majority of tech executives surveyed plan to increase investment
in research and development in 2016, slightly more (83 percent) SoutheastMichigan executives expect an increase. In Silicon Valley, 81 percent of
executives surveyed expect an increase in R&D investment.
Also, more executives from Southeast Michigan than Silicon Valley reported
their company is planning to grow their talent base in 2016. In addition, the
percentage of respondents who expected their employee headcount to
decrease in Silicon Valley is higher than that of Southeast Michigan.
Southeast Michigan
Increase - 82%
Stay the Same - 15%
Decrease - 3%
Silicon Valley
Increase - 81%
Stay the Same - 12%
Decrease - 7%
Tech industry employment is projected toincrease to 269,877 jobs in 2016.
SOUTHEAST MICHIGAN
SILICON VALLEY
99%
90%
SOUTHEAST MICHIGANTECHNOLOGYCOMPANIES ARE MORE OPTIMISTIC ABOUT 2016 GROWTH
THAN THEIR COUNTERPARTS IN SILICON VALLEY
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Southeast Michigan
Trumps Silicon Valley
When It Comes to
Cost of Living
Percentage of tech executives
who think their region has a
lower cost of living compared
to other metro areas
THE FACTS
In 2013, the median gross rent
in the Southeast Michigan region
was $855, below the national
average and the lowest of the
comparison regions.*
Fewer than 35%of renters in
Southeast Michigan pay $1,000or
more in gross rent, while in the other
ve comparison areas, 49% or more
of renters pay $1,000 in rent.
Of the six comparison areas, Silicon
Valley has by far the highest median
gross rent, at $1,629.
In 2013, the Southeast Michigan
region had the most affordable
housing of the six comparison
areas, with a median housing
value of $127,904. In contrast,
the median housing value in San
Jose in 2013 was $654,800.
* Comparison regions include the Detroit, San Jose, Chicago, Boston, Seattle and Austin metro areas.
The Majority of Southeast Michigan Tech Executives See Diverse Technology
Opportunities in the Region
Percentage of respondents who think their region offers diverse technology opportunities and experiences
More Southeast Michigan Tech Executives See
Opportunity for Ongoing Education Than
Silicon Valley Executives
Percentage of tech executives who believe their region has leading
academic institutions for self-advancement
Southeast Michigan Technology Executives Agree TheirRegion Provides More Networking Opportunities Than
Other Metro Areas
Percentage of executives who think there are more networking
opportunities in their region compared to other metro areas
THE FACTS
Southeast Michigan was home to
30 colleges and universities
that offered science, technology,
engineering and mathematic
(STEM) degree completions
in the 2013-2014 school year.
During the 2013-2014 school year,
there were 9,335 STEM degree
completionsin Southeast
Michigan, compared to 5,483
STEM degree completions in the
same school year in the San Jose
metro area.
Fewer than 35%
of renters inSoutheast Michiganpay $1,000 or more
in gross rent
SOUTHEAST MICHIGAN
SOUTHEASTMICHIGAN
SILICON VALLEY
SILICONVALLEY
80%
74%
72%
48%
STEM Degree Completions:
Southeast Michigan:9,335
Silicon Valley:5,483
SOUTHEAST MICHIGAN
SOUTHEAST MICHIGAN
SILICON VALLEY
SILICON VALLEY
81%
85%
77%
68%
SOUTHEAST MICHIGANIS A BETTERPLACE FOR TECHNOLOGY PROFESSIONALS TO BUILD
THEIR CAREERS THAN SILICON VALLEY
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THE FACTS
Michigans overall tax burden, at 8.9%, is lower than the
national average (9.1%).
Michigan has the second lowest public utilities sales
tax at 0.1%, the second lowest corporate income tax at
0.6%, and the lowest rate for license fees
at 0.3%among the six comparison regions.
Michigan has lower public utilities sales tax, corporate
income tax, license fees, and general sales tax than
California. In addition, the commercial and industrial
electricity costs in Michigan are also lower than that
in California.
Public utilities sales tax: MI (0.1%) vs. CA (0.4%)
Corporate income tax: MI (0.6%) vs. CA (0.8%)
License fees: MI (0.3%) vs. CA (0.7%) General sales tax: MI (1.6%) vs. CA (1.8%)
Commercial electricity (cents/kWh): MI ($10.42
cents) vs. CA ($18.22 cents)
Industrial electricity (cents/kWh): MI ($7.07 cents)
vs. CA ($13.96 cents)
* Comparison regions include the Detroit, San Jose, Chicago, Boston, Seattle and
Austin metro areas.
Southeast Michigan Trumps Silicon
Valley When it Comes to Tax Burden
Percentage of tech executives who think
their region has a lower tax burden
compared to other metro areas
Southeast Michigan Tech Executives
Think Its Easier to Retain Talent Than
Their Silicon Valley Counterparts
Percentage of executives who believe it is easier
for technology companies to retain talent in their
region compared to other metro areas
Southeast Michigan Yields Greater ROI, According toArea Tech Executives
Percentage of tech executives who believe technology
companies can have greater return on investment if they
have a business location in their metro area
Nearly 7 in 10 (68 percent)Southeast Michigan tech
executives believe technology
companies can benefit from a
lower cost of capital if they have
a business location in their
metro area, compared to 60
percent in Silicon Valley.
Southeast MichiganTechnology Executives
See Greater Support
from the Government
Than Their Silicon Valley
Counterparts
Percentage of tech
executives who believe
technology companies can
benefit from government support
if they have a business location
in their metro area
Michigans overall tax burden, at 8.9%, islower than the national average (9.1%)
SOUTHEAST MICHIGAN
SOUTHEAST MICHIGAN
SILICON VALLEY
SILICON VALLEY
74%
63%
67%
48%
SOUTHEAST MICHIGAN
SILICON VALLEY
83%
69%
SOUTHEASTMICHIGAN
SILICONVALLEY
75%63%
SOUTHEAST MICHIGAN IS A BETTERPLACE FOR TECHNOLOGY COMPANIES TO DO BUSINESS
THAN SILICON VALLEY
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state and local taxes paid by businessesdata used in this analysis were takenfrom the 2015 State Business TaxBurden Ranking Report, 6th Installment,
by Anderson Economic Group. Theelectricity data used in this analysiswere obtained from the U.S. EnergyInformation Administration. The vintageis September 2015, which representsthe most current data available at thetime of publication.
1AEGs industry estimates are rep resentative of
employment levels as of March 31 of each year.2The rst year from which AEG has c onsistently
reported occupational employment statistics for
Automation Alley was 2011. AEGs occupationa lestimates are representative of employment levels
as of May 31 of each year.3While the STEM completion programs in this report are
based on those included in the Postsecondary Awards
in Science, Technology, Engineering, and Mathematics
metric used in the 2012 report, the data may not be
directly comparable, as the data for this report was
pulled by each degree category, rather than STEM
as a whole.
Study 2 Methodology:The other study is an online sur vey among150 senior executives who are currentlyworking in the technology industry in theSoutheast Michigan and the Silicon Valleyareas between November 19-24, 2015.The respondents were recruited through
Research Now online survey panel.
For this study, a senior executive is dened
as a professional who has a manger or
above job title. In addition, the SoutheastMichigan area in this study refers to thefollowing eight counties that Automation
Alley represents: Wayne, Macomb, Oakland,St. Clair, Monroe, Washtenaw, Livingstonand Genesee.
The total number of participants for thestudy was 150, with 56% of them maleand 44% female. All of the respondentsself-identied as a senior executive in the
technology industry from either SoutheastMichigan or Silicon Valley. There were 75
respondents from each area. In addition,28% of respondents reported that they area C-level, 9% are a VP, SVP, or EVP, 29%are a director, and 35% are a manager,
supervisor, or lead. Among all respondents,7% of respondents were 18 to 24 years old,51% were 25 to 34 years old, 29% were 35to 44 years old, 9% were 45 to 54 years old,3% were 55 to 64 years old, and 1% weremore than 65 years old.
Among the 150 respondents, 53% werein computer and IT services. The rest ofthe respondents came from a variety ofindustry sectors, including: computer
software development (13%), computernetwork service (5%), computer hardwaredevelopment (5%), computer-generated
graphics, imaging, and documentmanagement service (4%), mobileapplication development (3%), hardware/software asset management (2%), internetservices provider (2%), web developmentand programming (2%), telecommunications(2%), medical and biotechnology (2%),
engineering, design, and prototyping service(1%), robotic and automation (1%), othertechnology based services (2%), computerproduct distribution (1%), and other (1%).
About Automation AlleyAutomation Alley is Michigans leadingtechnology business association,connecting businesses with talent,resources and funding to accelerate
innovation and fuel Southeast Mic higanseconomy. Since its founding in 1999,the nonprot has grown to include
nearly 1,000 tech-focused members inbusinesses, education and government.
Automation Alley focuses its efforts inve areas: advanced manufacturing,
defense, entrepreneurship, internationalbusiness and talent development. For moreinformation, visit automationalley.com.
About Anderson Economic GroupAnderson Economic Group, LLC (AEG)
was founded in 1996 and today has ofces
in East Lansing, Michigan and Chicago,Illinois. AEG is a research and consultingrm that specializes in economics,
public policy, nancial valuation and
market research. The rm rst provided
Automation Alley with a Technology Industryassessment in 2005, and has done soin subsequent years with a consistentmethodology and careful denition of
technology industries and occupations.
For more information, visit www.AndersonEconomicGroup.com.
Cautions and Limitations of the
Industry DataThe analysis and projections in this reportare based on the most recent publicly
available data. Because economic, market,and industrial conditions change; datacan prove incomplete or misleading; andgovernment policies are outside our control;we cannot warrant that actual employmentlevels during the period, or future periods,align with those estimated in this report.
We recommend careful considerationbe given to actual market and industryconditions by any person using portionsof this analysis in any investment decision,and do not guarantee the future outcome ofany business venture, government policy, or
legal or regulatory proceeding.
Copyright Notice and PermissionsThis entire report is copyright 2016 by
Automation Alley. Selected portions retainan original copyright 2015 by AndersonEconomic Group, LLC (AEG). AEG work
is used in this report by Automation Alleywith permission. All rights reser ved, exceptpermission to reproduce in its entirety,including this notice, for Automation Alleynews media and research purposes.Resale without permission, and use inderivative works, is expressly prohibited.
Fair use excerpts may be included in newsor research reports provided a completecitation is given to Automation Alley.
METHODOLOGYThis report contains two separate studies.One study is the technology industry datacollection and analysis for the metro Detroitregion. Automation Alley commissionedthe East Lansing, Mich.-based AndersonEconomic Group LLC. (AEG) to conductthe study.
The second study is an online surveyamong 150 senior executives who arecurrently working in the technology industry
in the Southeast Michigan and the SiliconValley areas.
Study 1 Methodology:To complete the analyses and benchmarkthe technology sector in metro Detroitagainst ve other metropolitan areas in the
United States including Chicago, Seattle,Austin, Boston, and San Jose, AEG:
Collected data from the U.S. Census
Bureau and the Bureau of LaborStatistics to analyze the technologyindustry, establishments, and workforce(occupations) of the technology sector.
Collected data from the National C enterfor Education Statistics on degree
completions in Science, Technology,Engineering, and Mathematics (STEM)elds as a measure of preparation for
continued growth.
Collected data from the U.S. CensusBureau, U.S. Energy Information
Administration, and the State Business
Tax Burden Study created by AndersonEconomic Group to analyze indicatorson the cost of living and cost of doingbusiness in each metropolitan areaas measures of the desirability of theregion for both businesses andpotential employees.
Analyzed employment trends intechnology industry clusters in metroDetroit from 2006 through 2013, state-
level technology industry data for 2011through 2015, and top-level industryemployment levels for the Detroit and
Ann Arbor metropolitan statistical areas(MSAs) for 2011 through 20151.
Due to the fact that MSA-level data for more
recent years (2013-mid 2014) are primarilyavailable at higher-level NAICS codes,
AEGs estimates for technology clusters arebased on actual, but partial, employment
data, as well as statewide trends. Analyzed occupational employment
trends in metro Detroit from 2011
through 2014, 2010-2020 occupationalemployment forecasts for the Detroitand Ann Arbor MSAs, state-leveltechnology industry employment for2011 through 2015, and top-levelindustry employment for the Detroit and
Ann Arbor MSAs for 2011 through 20152.
Since 2014 is the most recent year forwhich actual occupational employmentdata is available, AEG used employmentdata for industries corresponding toeach technology occupational clusterto inform their estimates for 2015
and 2016. Data at the MSA level wasprimarily available at broad NAICScategories. State-level data wasavailable at more specic NAICS
code levels.
Below are the sources for thetechnology industry data
Industry Data: The industry data usedin this analysis was obtained from theUnited States Census Bureau CountyBusiness Patterns program. The vintageis 2013, which represents the mostcurrent data available at the time
of publication. Occupation Data:The occupation
data used in this analysis was obtained
from the United States Bureau of LaborStatistics Occupational EmploymentStatistics program. The vintage is 2014,which represents the most current data
available at the time of publication. University STEM Degree Data:
The university degrees data used inthis analysis was obtained from theNational Center for Education StatisticsIntegrated Postsecondary EducationData System data center, Compare
Individual Institutions option. The vintageis 2013-2014, which represents the mostcurrent data available at the time ofpublication. The degrees total includes
all levels [associates, bachelors,masters, and doctors (research/scholarship, professional practice,and other)], but not certicates. The
Classication of Instructional Programs
(CIP) codes used are based on IPEDSpredened Postsecondary Awards in
Science, Technology, Engineering, andMathematics variable3. These includeprograms in:
Computer and informationsciences Engineering Engineering technologies Biological and biomedicalsciences
Mathematics and statistics Physical sciences Science technologies
Population Data:The population data
used in this analysis was obtainedfrom the United States Census BureauPopulation Estimates. The vintage is
2014, which represents the most currentdata available at the time of public ation.
Cost of Living Data:The housingdata used in this analysis was obtainedfrom the United States Census Bureau,
American Community Survey 20135-year estimates. The vintage is 2013,
which represents the most current dataavailable at the time of publication.
Cost of Doing Business Data:The
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