It’s been a steady yet sometimes slow ride for the high-tech sector in Rhode Island and the region.
The first half of the year brought both heartache and excitement to the industry – depending on what sector you were looking at, but many are hopeful for a more prosperous second half of the year.
Information technology spending has slowed and has resulted in a decrease in hiring for the first half of the year.
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Hiring in IT, however, will be more promising in the third quarter of 2003 compared to the first two quarters, according to a report by Robert Half Technology, a San Francisco-based research company.
After surveying 1,400 chief information officers from U.S. companies with more than 100 employees, analysts found that the hiring outlook in New England in the second half of the year will be better than the first half.
Ten percent of those surveyed nationally planned to expand their IT departments in the coming months, while 3 percent are planning reductions.
The 7 percent increase is up three points from the second quarter when only 9 percent of CIOs planned to hire and 5 percent said they had no intention of hiring.
In New England, however, things look a bit brighter for the IT sector.
IT executives in New England projected a net 9 percent increase in hiring activity in the next quarter.
“CIOs in New England plan to hire database analysts and project managers who can assist companies in centralizing isolated ERP (enterprise resource planning) and CRM (customer relationship management) applications,” Katherine Spencer Lee of Robert Half Technology said in the report.
Forty-one percent of the hiring is because of business growth, 30 percent will reflect the need for customer support and 11 percent will be for systems upgrades.
While other high-tech sectors are lagging, defense-related businesses have benefited from federal spending in homeland security and the war against Iraq.
The defense industry, which employs nearly 17,000 Rhode Islanders and has a payroll of $1 billion, has been raking in several defense and government-related contracts. Electric Boat, Raytheon, Textron and the Naval Undersea Warfare Center have been responsible for most of those primary contracts, which then trickle down to some of the smaller defense-related businesses in the state.
Nationally, defense will be a lucrative business in the second half of 2003, according to James Kane, president and chief executive of Federal Resources Inc., who last month presented an American Electronics Association conference on the federal marketplace and what and how the government is buying.
Kane expects the defense business to increase by 9 percent between 2002 to 2004. Total IT spending is expected to hit $58.7 billion in fiscal year 2003 and $62.5 billion in 2004, according to the presentation.
The biotech sector has also played a huge role in business in the Ocean State.
Companies such as Amgen can’t fill positions fast enough and have more applicants than job openings while smaller biotech businesses such a Spherics and Sention continue to plug away.
Several groups in the state have come together to tout the biotech industry and have invested money into the sector by supporting local developments.
Earlier this year, Amgen contributed $25,000 to the University of Rhode Island for its biotech manufacturing facility, which will be located in URI’s Shepard building. The Rhode Island Human Resource Investment Council also contributed to the development with $100,000 in donations. And Gov. Don Carcieri plans to set aside $300,000 in his budget for the new Providence lab.
The Slater Center for Biomedical Technology, which has watched the biotech sector hit a few bumps in the last six months, is hopeful about a better second half of the year.
For Slater, the first half of the year was mixed with a few disappointments and successes.
“In the last six months, we’ve made a total investment of $450,000 in new financing commitments,” said Richard Horan, executive director of the Slater Center for Biomedical Technology. “Of those financing commitments made, four have been follow-on investments in existing portfolio companies and one is a new investment.”
Currently, Slater has 24 companies in its portfolio.
And Horan’s group has announced plans to open a 7,500-square-foot incubator in Richmond Square that will house up to four companies.
“The availability of the lab facility will be crucial to get these companies up and running,” he said.
The local biotech community has taken a few hits in the past year. Cell Based Delivery, a Providence-based Slater Biomedical-funded company that spun out of Brown University, shut its doors. Slater invested a total of $360,000 in the startup before it closed. Pan Pacific Pharmaceuticals, a company that moved from California to Rhode Island, also shut its doors.
“I think our experience in the last six months parallels that in the biotech business in general and the venture capital business in general where all of the firms where there has been a very difficult financing environment for biotech companies,” Horan said. “And there has been a significant shakeout going on and evidence by a number of companies cutting back traumatically and shutting down completely.
“The trend in the recent past has been in concentrating resources in support of existing portfolio companies with the potential to attract follow-on investments,” Horan added. “The trend going forward is going to be very much in supporting the launch of new companies.”
The next six months are hopeful, he added.
“Speculating, there is a significant overhang of invested capital in the venture capital community in general and investors in life sciences have their fair share,” Horan said. “And these firms at the end of the day have a mandate to invest their money in promising ventures.
“I think we’re beginning to see signs of that reluctance giving way to moving
forward on new deals. Slater Biomed’s strategy is keying off that macro situation
– I’m optimistic.”
