Building from a position of strength: Arizona advanced communications and information technology roadmap

              An Evaluation of the Arizona Small
Business Opportunity Credit Using the
REMI Model
April 2004
Building from a Position of Strength:
Arizona Advanced Communications and
Information Technology Roadmap
March 2004
Prepared by
the Battelle Technology Partnership Practice
as part of the
Arizona Statewide Economic Study
Building from a Position of Strength:
Arizona Advanced Communications and
Information Technology Roadmap
March 2004
Prepared by:
Technology Partnership Practice
Battelle Memorial Institute
Cleveland, Ohio
Peer reviewed by the Arizona Department of Commerce Economic Research Advisory Committee:
Dan Anderson
Assistant Executive Director for
Institutional Analysis
Arizona Board of Regents
Brian Cary
Principle Economist
Joint Legislative Budget Committee
Lisa Danka
Director, Commerce & Economic
Development Commission
Arizona Department of Commerce
Kent Ennis
Economic Consultant
CH2M Hill
Wayne Fox
Director, Bureau of Business and
Economic Research
Northern Arizona University
James B. Nelson
Economic Development Manager
Salt River Project
William P. Patton, Ph.D.
Director of Economic Development
Tucson Electric Power
Elliott D. Pollack
Elliott D. Pollack & Co.
Tom Rex
Research Manager, Center for
Business Research
Arizona State University
Brad Steen
Chief Economist
Arizona Department of
Transportation
Marshall J. Vest
Director, Economic and Business
Research
Eller College of Business and
Public Administration
University of Arizona
Don Wehbey
Economist
Research Administration
Arizona Department of Economic
Security
Technical review by members of the Advanced Communications and Information Technology
Roadmap Steering Committee
This report was prepared for the Arizona Department of Commerce with funding from the Commerce and Economic Development
Commission. It will be available on the Internet for an indefinite length of time at http://www.azcommerce.com/Economic/default.asp.
Inquiries should be directed to the Office of Economic Information and Research, Arizona Department of Commerce, (602) 771-1100.
The Arizona Department of Commerce has made every reasonable effort to assure the accuracy of the information contained herein,
including peer and/or technical review. However, the contents and sources upon which it is based are subject to changes, omissions and
errors and the Arizona Department of Commerce accept no responsibility or liability for inaccuracies that may be present. THIS DOCUMENT
IS PROVIDED FOR INFORMATIONAL PURPOSES ONLY. THE ARIZONA DEPARTMENT OF COMMERCE PRESENTS THE MATERIAL IN THIS
REPORT WITHOUT IT OR ANY OF ITS EMPLOYEES MAKING ANY WARRANTY, EXPRESS OR IMPLIED, INCLUDING THE WARRANTIES OF
MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE, OR ASSUMING ANY LEGAL LIABILITY OR RESPONSIBILITY FOR THE
ACCURACY, COMPLETENESS, OR USEFULNESS OF ANY INFORMATION, APPARATUS, PRODUCT, OR PROCESS DISCLOSED, OR
REPRESENTING THAT ITS USE WOULD NOT INFRINGE PRIVATELY OWNED RIGHTS. THE USER ASSUMES THE ENTIRE RISK AS TO THE
ACCURACY AND THE USE OF THIS DOCUMENT AND ANY RELATED OR LINKED DOCUMENTS.
To the Reader:
This Roadmap is part of a body of work known as the Arizona Statewide Economic Study, a
decennial research project undertaken to provide the foundation for development of a 10-
year economic strategy for Arizona. The Arizona Statewide Economic Study has been
overseen by the Commerce and Economic Development Commission, the body responsible
by state statute for developing the 10-year strategy.
Jointly commissioned by the Arizona Department of Commerce and the Arizona Board of
Regents, the Advanced Communications and Information Technology (ACIT) Roadmap
follows an earlier report, Science and Technology Core Competencies Assessment, which
identified world-class research and development competence in Arizona’s university system
in the areas of biosciences, advanced communications and information technology, and a
broad group of ecological sciences that provide the innovation platform for sustainable
systems.
In addition to this Roadmap, companion technology plans resulting from the Core
Competencies report include the Sustainable Systems Prospectus, another joint effort of the
Commerce Department and the Arizona Board of Regents (available at
http://www.azcommerce.com/Economic/default.asp); and the Biosciences Roadmap,
spearheaded by the Flinn Foundation (www.flinn.org). Collectively, the ACIT and Bioscience
roadmaps and Sustainable Systems Prospectus provide the focus and strategies needed to
capitalize on Arizona’s university R&D strengths in the creation of new products, new
markets and high quality jobs.
Finally, we are most grateful to the members of the ACIT Steering Committee, a team of
experts from Arizona’s universities, the private sector and non-governmental organizations.
Their input was instrumental in ensuring this Roadmap focuses on the primary, foundational
issues critical to the success of all ACIT companies. Their service has been invaluable and
on behalf of Governor Janet Napolitano and the Arizona Board of Regents, I thank and
commend them for their dedication.
Sincerely,
Gilbert Jimenez
Director, Arizona Department of Commerce
and
Chairman, Commerce and Economic Development Commission
Building from a Position of Strength:
Arizona Advanced Communications and
Information Technology Roadmap Steering Committee
Co-chaired by: Tom McCloud, Intel
Gilbert Jimenez, Arizona Department of Commerce
Members: Barry Albrecht, Sierra Vista Economic Development Foundation
Jim Apperson, Arizona Chamber of Commerce
Todd Bankofier, Arizona Technology Council
Trish Bear, I-ology
John C. Bentley, Grayhawk Venture Partners
Brian Beyer, AZImagination, LLC
Adriane Brown, Honeywell
Isador Davis, Raytheon
Jonathan (Jon) Fink, Ph.D., Arizona State University
Michael Fong, Calence
Carl Fox, Ph.D., Northern Arizona University
Bob Hagen, Southern Arizona Tech Council
Gail Howard, Office of the Governor
Saundra Johnson, Flinn Foundation
Sayfe Kiaei, Ph.D., Connection One
Ed Koopman, Boeing
Noah Kroloff, Office of the Governor
Rod Lenniger, Stoner-Roland
Chad Little, Mygeek.com
Rob Melnick, Ph.D., Morrison Institute
Cory Miller, AeA
Phil Myers, Cyclone Commerce, Inc.
Dan O’Neill, DJT Enterprises
S. (Panch) Panchanathan, Ph.D., Arizona State University
Kent Petzold, Arris Ventures
Dick Powell, Ph.D., University of Arizona
Vernon Reed, Greater Flagstaff Economic Council
Steve Sanghi, Microchip Technologies
Glenn Shand, Digital Concepts
Marilyn Teplitz, MGT Associates
Wendy Vittori, Motorola Computer Group
Sandra Watson, Arizona Department of Commerce
Steve Weathers, Greater Tucson Economic Council
Rick Weddle, Greater Phoenix Economic Council
Tom Wickenden, Ph.D., Arizona Board of Regents
BUILDING FROM A POSITION
OF STRENGTH:
ARIZONA ADVANCED
COMMUNICATIONS
AND INFORMATION
TECHNOLOGY ROADMAP
PREPARED FOR:
Arizona Commerce and Economic Development
Commission, Arizona Department of Commerce,
and the Arizona Board of Regents
PREPARED BY:
Technology Partnership Practice
Battelle Memorial Institute
Cleveland, Ohio
March 2004
© 2004 Battelle Memorial Institute
EXECUTIVE SUMMARY
Battelle Memorial Institute (Battelle) does not endorse or recommend particular companies, products, services, or
technologies, nor does it endorse or recommend financial investments and/or the purchase or sale of securities.
Battelle makes no warranty or guarantee, express or implied, including without limitation, warranties of fitness for a
particular purpose or merchantability, for any report, service, data, or other information provided herein.
Copyright 2004 Battelle Memorial Institute. Use, duplication, or distribution of this document or any part thereof is
prohibited without the written permission of Battelle Memorial Institute. Unauthorized use may violate the copyright
laws and result in civil and/or criminal penalties.
Arizona’s AC-IT Roadmap
xi
Executive Summary
Arizona is at a crossroad in determining its future in the globally competitive advanced
communication and information technology (AC-IT) industry. The Arizona AC-IT industry of the
future begins from a position of relative strength. However, like the global AC-IT industry,
Arizona’s industry is in a state of transition. Unlike other technology industries in the state,
AC-IT is much more mature, developing a sizable and significant presence in many of the various
technology domains that make up the primary and embedded AC-IT sectors—semiconductors,
aerospace products and parts, navigation and control instruments, software, and electronic
components. However, with this maturity and size comes the tendency to take for granted the
importance of the industry to the state’s economy and the speed at which this most global of
industries can change.
The advanced communications and information technology (AC-IT) industry has historically
been a strong driver for both the national and Arizona economies—diversifying the base; offering
good, well-paying jobs; and contributing to economic growth throughout the 1990s. However,
with global competition intensifying, the state’s strong past performance is not necessarily the
pattern for the future. Recent economic events, including the bursting of the Internet bubble, the
telecommunications downturn, and the socio-economic impacts of 9/11 have provided a wake-up
call to the state.
The combination of a dramatic industry expansion followed by one of the most significant
downturns in the technology age had an extraordinary impact on the Arizona AC-IT industry
between 1998 and 2002. While Arizona’s primary AC-IT sector (including computer and
communications equipment, semiconductors, and software firms) experienced strong growth
from 1998 to 2001 (adding nearly 15,000 jobs), it also was especially hard hit during the
economic downturn from 2001 to 2002—losing more than 19,000 jobs in these 2 years. Hence,
between 1998 and 2002, the primary AC-IT sector actually lost nearly 4,300 jobs. However,
Arizona’s embedded AC-IT sector (including navigational instruments, aerospace, research and
development [R&D] firms, and corporate administrative offices) remained stable and relatively
strong (compared with the United States) even during the economic downturn. The embedded
AC-IT sector added more than 3,400 jobs from 1998 to 2001 and lost approximately 1,500 from
2001 to 2002, for a net gain between 1998 and 2002 of approximately 1,900 jobs.
To remain competitive in this global economy and to grow and provide jobs to Arizona’s
residents, the state’s AC-IT industry stakeholders must focus on the aspects of the industry that
create and add value. This Roadmap develops a framework upon which these stakeholders can
work to reorient the state’s competitive positioning in the AC-IT industry from a low-cost place
of doing business to a place of creating wealth and increasing productivity. This Roadmap charts
future directions for private and public partnerships and investments; but, primary responsibility
for achievement of its vision lies with the private sector, spurred by a business environment and
strategic public investments that enable these private investments to happen.
Arizona’s AC-IT Roadmap
xii
VISION
The following vision is proposed for Arizona’s future in the global AC-IT industry:
Arizona will be a principal location for globally oriented research, development,
testing, evaluation, and high value-added manufacturing and related services in the
fields of advanced communications, electronics, and information technologies,
providing quality jobs, career ladders, and wealth for the state and its various regions.
MISSION
To achieve this vision, the mission for Arizona’s AC-IT future is
􀂾􋹄 Develop a sense of identity as home to a key integrated set of industries through
improved relationships and coordination of Arizona’s AC-IT stakeholders.
􀂾􋹅 Enhance, focus, and better connect the AC-IT-relevant research of Arizona’s
universities with industry’s existing and emerging strengths and opportunities.
􀂾􋹂 Build upon Arizona’s existing AC-IT strengths by taking full advantage of its unique
federal, state, and private sector assets, skills, and capabilities in AC-IT-related
research, design, testing, evaluation, and manufacturing arenas.
􀂾􋹄 Develop the research, infrastructure, and entrepreneurial support mechanisms to
achieve and capture the full economic potential of this fast-paced global industry.
WHY FOCUS ON THE AC-IT INDUSTRY?
There are a number of reasons to target Arizona’s AC-IT
industry for economic development:
• The AC-IT industry is a significant part of the Arizona
economy, accounting for 9.4 percent of all private sector
employment and roughly 7.6 percent of the total gross
state product.
• The AC-IT industry constitutes the majority of Arizona’s
foreign exports. In 2002, the two major segments of the
AC-IT industry (computers and electronic products; and
electronic equipment, appliances, and parts) accounted for
more than half of all foreign exports.
• The AC-IT industry was a major contributing factor to
the national economic expansion from 1991 through
2001—between 1998 and 2001, AC-IT employment
increased by 12 percent and establishments increased by
13 percent across the nation.
Reasons for Arizona to Focus on the
AC-IT Industry
• A significant part of the Arizona
economy—more than 9% of private
sector employment and 7.6% of
gross state product
• The state’s major exporting
industry—with only two sectors
accounting for more than half of the
state’s exports
• A nationally and internationally
significant industry—driving all
sectors of the economy
• Offers high-quality, good-paying
jobs with annual salaries of more
than $60,000—75% above state
average
• An opportune time for action with
upturns in markets, introduction of
new technologies, and technology
convergence with industries such
as the biosciences
Arizona’s AC-IT Roadmap
xiii
• The AC-IT industry is a tremendous source of well-paying jobs for Arizona, with an
average annual salary of more than $60,000—more than 75 percent higher than the statewide
average wage of nearly $34,000.
• The AC-IT industry is expected to rebound from the economic downturn—analysts
predict IT budgets to increase by 6 to 8 percent through 2004.
The broad-based AC-IT industry demonstrates a wide-ranging impact on Arizona’s overall
statewide technology-based economy. Industries are increasingly integrating new AC-IT-related
technologies to raise productivity and enhance product capabilities. As the AC-IT industry
continues to invent new technologies and converges with other sectors of the economy such as
the biosciences, the potential to spur new economic activity will be extensive.
Project Methodology
In April of 2003, Battelle’s Technology Partnership Practice completed the Science and
Technology Core Competencies Assessment for the Arizona Commerce and Economic
Development Commission and the Arizona Department of Commerce in association with
Arizona’s public research universities and the Arizona Board of Regents. In this competencies
assessment, Battelle examined the non-biosciences areas of Arizona's public research universities,
including AC-IT and the technology platforms around Arizona’s academic research drivers.
As a follow-on to that study, in June of 2003, the Arizona Commerce and Economic Develop-ment
Commission and the Arizona Board of Regents commissioned Battelle to develop a
Roadmap for the AC-IT industry, building on the core competency Phase I effort. The
methodology to complete this Roadmap for AC-IT included the following elements:
• An economic analysis of the industry to determine (1) its current status in Arizona and
(2) areas of strength and specialization within the subsectors of the AC-IT economic base
from which to build a stronger AC-IT industry in the future
• A benchmarking analysis of other states and regions that are peers, competitors, or
exemplary leaders in AC-IT from which to learn best practices and other lessons
• A situational analysis that, through intensive industry interviewing, develops an
understanding of the strengths, weaknesses, opportunities, and threats (SWOT) facing the
AC-IT industry in Arizona and an analysis of gaps and challenges that need to be addressed
• A 10-year vision for Arizona in these industries
• A set of mutually reinforcing private and public sector-supported strategies and actions to
further position Arizona in these industries
• An implementation plan, including priorities, first year work plan, resources needed, lead
and partner organizations, and metrics for success
• A rollout and communications effort designed to engage the state’s AC-IT stakeholders and
begin the process of implementation.
Arizona’s AC-IT Roadmap
xiv
Arizona’s AC-IT Stakeholders
Understanding the context of the
following analysis and success-fully
implementing the strategies
and actions contained within this
Roadmap require the mutual
support, collaborative action, and
collective involvement of a
variety of AC-IT stakeholders
within the State of Arizona.
Throughout this Roadmap, the
term “AC-IT stakeholders” is
used to refer to this group.
AN ECONOMIC ANALYSIS
OF ARIZONA’S AC-IT
INDUSTRY BASE
The AC-IT industry is an
assortment of knowledge-based segments, which collectively form a cluster of established and
emerging opportunities. AC-IT is constantly altered and reinvented as scientists, engineers, and
researchers develop new and functional ways of collecting, analyzing, and transmitting data.
These technological breakthroughs take shape in new and innovative products used in everyday
life. This explains in part the reason that public officials, private investors, and academic scholars
have watched developments in the AC-IT industry with intense interest.
The AC-IT industry can be divided into two major sectors: primary and embedded. The primary
AC-IT sector consists of those industrial subsectors that are involved in creating, developing,
supporting, and manufacturing
new software, hardware, and
electronic technologies for
transmitting information and data.
These industries are essentially
the producers of the underlying
infrastructure of the AC-IT
industry. Figure ES-1 depicts the
five major subsectors that together
are identified as the primary
AC-IT sector.
The embedded AC-IT sector consists of industries that integrate and embed a high degree of
information and communication technology content (typically device specific hardware or
software) into their products, systems, or services. Industries included in this definition are
typically classified in major groups not usually considered part of AC or IT. Products
manufactured or services provided by these embedded AC-IT subsectors include automated
Semiconductor
& Electronic
Components
Computer &
Peripheral
Equipment
Communications
& Media
Equipment
Communications
Services
Software &
Data Processing
• Storage devices
• Computer terminals
• Electronic computer
• Prerecorded optical
discs
• Magnetic & optical
recording
• Telephones, radios,
TVs, audio/video
equipment
• Fiber optic &
communications
cable
• Semiconductors
• Electronic tubes,
coils, transformers,
resistors, capacitors,
connectors
• Circuit boards
• Radio, TV, cable
broadcasting
• Wired tele-communications
• Cellular
• Satellite tele-communications
• Systems
design
• Internet
publishing
• Web search
portals
Figure ES-1: Major Subsectors of the Primary AC-IT
Defining Arizona’s AC-IT Stakeholders
• Primary AC-IT industry—including computer and
communications hardware and software companies
• Embedded AC-IT industry—including aerospace/defense
electronics firms, research/testing firms, and corporate operations
• Other Arizona industries using AC-IT technologies—including
the biosciences, F.I.R.E., and other advanced manufacturing firms
• Arizona research universities/higher education—including
three public universities, private universities, and the state’s
community college system
• Arizona governments at a state, regional, local, and tribal
level—including state agencies and nongovernmental
organizations (NGOs)—including regional economic and tech
councils, cluster and trade organizations, and other entities
engaged in high-tech infrastructure development
• Federal agencies, especially those with Arizona-based
operations—including U.S. Departments of Defense and
Homeland Security operations and other federal agencies
Arizona’s AC-IT Roadmap
xv
industrial machines, medical equip-ment,
central database operations,
and aerospace navigational equip-ment.
Figure ES-2 depicts the four
major subsectors that together are
identified as the embedded AC-IT
sector.
Based on an analysis of the six-digit
codes of the North American
Industrial Classification System, 62
industries were selected and organized according to the nine major subsectors of the AC-IT
industry. These subsector industries were then classified into the appropriate category—primary
or embedded.
The diverse nature of the AC-IT industry requires an analytical approach that accounts for the
numerous applications of IT advancements. Utilizing the U.S. Census Bureau County Business
Patterns (CBP) data series, Battelle examined the Arizona and U.S. AC-IT industry for the years
between 1998 and 2002. For specific details regarding data sources and methodology, see
Appendix A.
The AC-IT industry both at the state and national level has been experiencing a market
restructuring since the economic downturn of 2001. The Arizona AC-IT industry experienced
a relatively strong 10 percent growth over the 1998 to 2001 period. However, this 3-year growth
was followed by a 1-year dramatic decline—losing 11.1 percent or more than 22,000 jobs from
2001 to 2002. This 1-year loss caused the Arizona AC-IT industry to suffer an overall 2.3
percent decline in employment over the entire 1998 to 2002 period.
Arizona’s primary AC-IT sector was largely responsible for the losses in the AC-IT
industry as a whole. Primary sector employment losses from 2001 to 2002 account for
85 percent of the total employment decline in the Arizona AC-IT industry—an overwhelming
18.9 percent. Though primary AC-IT sector employment also declined at the U.S. level,
employment fell by only 4 percent from 2001 to 2002.
Arizona’s embedded AC-IT sector actually outperformed the United States during the
economic downturn. Though Arizona experienced employment losses from 2001 to 2002 in the
embedded AC-IT sector, relative to the nation, the sector emerged as a bright spot in the state’s
AC-IT industry. From 2001 to 2002 embedded AC-IT employment decreased by 1.5 percent in
Arizona. Nationally, however, employment in the embedded AC-IT sector fell by 2.9 percent
during the same period. Examining the sector over the entire 1998 to 2002 period, Arizona’s
embedded AC-IT sector actually grew by 2 percent, outpacing the 0.9 percent growth across the
United States.
The AC-IT industry base in Arizona remains large and concentrated despite a fluctuating
employment base. In 2002, Arizona’s AC-IT industry still employed 180,233 people, accounting
for 9.4 percent of all total private sector employment (Table ES-1)—compared with nationally
where the industry accounted for 8.7 percent of total private sector employment. At this
employment level, Arizona still has a regional concentration in the AC-IT industry that is
8 percent greater than the nation.
Research,
Development, &
Engineering Services
Navigation &
Control Instruments
Aerospace
Products & Parts
Strategic
Office Centers
• Detection, navigation,
guidance, aeronautical,
& nautical instruments
• Electromedical
devices
• Measuring, displaying,
and controlling devices
• Aircraft engine &
assembly
manufacturing
• Guided missile &
space vehicles
• Propulsion unit
manufacturing
• Scientific research
& experimental
development
• Engineering
design,
development, &
deployment
• Central
administrative offices
• District and regional
offices
• Subsidiary
management offices
Figure ES-2: Major Subsectors of the Embedded AC-IT Sector
Arizona’s AC-IT Roadmap
xvi
Subsectors
Employment
2002
Location
Quotient
Employment Growth
1998-2002
Total AC-IT Industry 180,233 1.08 -2%
Primary AC-IT 82,684 0.99 -5%
Computer & Peripheral Equipment 1,266 0.36 -40%
Communications & Media Equipment 5,724 1.18 -39%
Semiconductor & Electronic Components 22,234 2.50 -23%
Communications Services 26,261 0.77 5%
Software & Data Processing 29,139 0.93 35%
Embedded AC-IT 99,356 1.19 2%
Navigation & Control Instruments 10,257 1.41 -8%
Aerospace Product & Parts 24,084 3.44 5%
R&D Engineering Services 17,441 0.87 21%
Strategic Office Centers 47,923 0.97 -2%
Table ES-1: Arizona AC-IT Industry and the Associated Subsectors
Arizona’s AC-IT subsectors can be categorized into four classes based upon their
performance from 1998 to 2002 (Figure ES-3). The four categories are based on (1) the
subsector’s growth relative to U.S. growth and (2) the subsector’s location quotient (or regional
concentration). The four classifications of subsectors are stars, emerging potential, transitional,
and divergent. Subsectors classified as stars or emerging are vital for the overall industry and its
future development potential. These subsectors are often seen as the driving force behind the
industry’s success. Subsectors classified as transitional or divergent are in a declining state.
Though not irreversible, these subsectors demonstrate current characteristics that may threaten the
long-term viability of the industry.
The strength and resiliency of the Arizona AC-IT industry in the midst of an economic
downturn can be attributed to strong subsector performance. Aerospace products and parts
as well as navigation and control instruments are major Arizona AC-IT subsectors that have had
relatively strong performances throughout the 1998 to 2002 period, especially compared with the
national subsector averages. These industry subsectors have demonstrated growth rates above the
national average and possess a level of employment concentration considered to be a significant
regional specialization.
Some subsectors of state’s AC-IT industry have emerged from the downturn as platforms
for future potential. The software and data processing and research, development, and
engineering services subsectors both outperformed the United States in terms of employment
growth rate. The fast-paced growth of these two subsectors promises an opportunity for Arizona
to build and strengthen the future AC-IT industry.
Arizona’s anchor subsectors also provide a solid foundation for the future of the state’s AC-IT
industry. Though in a transitional state, semiconductor and electronic components as well as
communication and media equipment are heavily concentrated within the state. The semi-conductors
subsector and its sizable employment are considered significantly specialized, with an
employment base that is more than twice the national average concentration. Communication and
media equipment is 18 percent more concentrated in Arizona than in the nation.
Arizona’s AC-IT Roadmap
xvii
0.00
0.50
1.00
1.50
2.00
2.50
3.00
3.50
4.00
-40% -30% -20% -10% 0% 10% 20% 30%
Quadrant II
Transitional
Quadrant III
Divergent
Quadrant I
Stars
Quadrant IV
Emerging Potential
Semiconductor &
Electronic Components
Communications &
Media Equipment
Computer &
Peripheral Equipment
Software &
Data Processing
Navigation &
Control Instruments
Research, Development,
& Engineering Services
Aerospace
Products & Parts
Strategic
Office Centers
Location Quotient
Employment Growth Relative to US, ’98-’02
Communication
Services
Figure ES-3: 1998 to 2002 Subsector Economic Performance
Arizona’s subsectors exhibiting characteristics contrary to national trends also hold
significance for the overall industry. The divergent nature of strategic office centers,
communication services, and computer and peripheral equipment does not negate the relevance
these subsectors play in determining the health and future of the state’s AC-IT industry. The sheer
employment size and industry importance of these subsectors should position them as integral
pieces of the Arizona AC-IT development strategy at least in the short term.
BENCHMARKING
Benchmarking allowed Battelle to identify other states that have strong AC-IT industries and
have undertaken private-public partnerships to further these industries. From these states Arizona
can learn lessons—both of what works and what does not work. The lessons learned from the
benchmarking process include the following:
• Despite a sluggish economy and technology downturn, “big ticket” investments and
initiatives are emerging as important drivers.
• Major corporate involvement in university-based AC-IT research comes from company
headquarters or significant corporate R&D locations.
• Implementation of successful AC-IT assistance and networking efforts occurs at the
regional/metropolitan level
• Successful states and regions have fostered entrepreneurial development entities that target
commercially viable technologies.
Arizona’s AC-IT Roadmap
xviii
• Most successful states and regions have
either strong levels of private capital or
active government investment programs or
both.
• States have served as catalysts/facilitators to
transition major industry facilities to new
and different uses to preserve their anchor
benefits.
Domestic benchmarks selected for this analysis
included California and the San Diego region;
Massachusetts and Boston; New Jersey;
Rochester and Albany, New York; Texas and
Austin; and northern Virginia. International
benchmarks included Ireland, Singapore, and
Sweden.
SITUATIONAL ANALYSIS
Arizona currently has a sizeable AC-IT
employment base. The previous Science and
Technology Core Competencies Assessment
examined the research and development status of Arizona’s research universities. This assessment
detailed a variety of university strengths in key AC-IT domains. However, determining how best
to link these research strengths and integrate these assets to foster both business development and
economic development for Arizona’s AC-IT stakeholders and the state’s citizenry remains an
issue.
This situational analysis begins with an understanding of the state’s AC-IT strengths, weaknesses,
opportunities, and threats (SWOT); follows with a structured gap analysis based on overall
findings; and concludes with the key challenges that Arizona’s AC-IT stakeholders must address
to position the overall industry and its subsectors for the future.
SWOT Analysis
This SWOT analysis is similar to processes employed when a firm creates its business plan. In
the process of preparing this plan, companies often undertake a SWOT analysis, identifying
internal strengths and weaknesses while accounting for and addressing external factors such as
market opportunities and adverse events and threats. For this Roadmap, this SWOT analysis
provides a strategic assessment of Arizona’s position in the AC-IT industry. It should be noted
that, in some cases, perceptions are included in this SWOT analysis, whether accurate or not, that
reflect the climate within which progress can be made in building Arizona’s AC-IT industry. The
following summarizes the results of the SWOT analysis.
Strengths
• Three critical industrial strengths of Arizona’s AC-IT future are navigation and control
instruments, aerospace products and parts, and semiconductors and electronic components.
Benchmarking Implications for Arizona
• Other states are investing significant resources
in developing their strengths in specific AC-IT
niches.
• Increasingly, universities, including those in
Arizona, must find creative ways to work with
both smaller and larger AC-IT firms.
• Opportunities to grow the AC-IT industry and its
subsectors may vary among and between
regions within the state.
• Building a successful cluster requires
cooperative relationships among industry,
universities, and government entities.
• Robust mechanism to identify potential start-ups
and a strong support infrastructure must exist to
sustain AC-IT start-ups.
• Public-private partnerships are important to
positioning a state in the AC-IT industry,
especially when assembling investment capital.
• Opportunities may exist to reuse vacated
industry facilities as relevant, unique, and value-added
assets for AC-IT development.
Arizona’s AC-IT Roadmap
xix
• Arizona possesses a myriad of industry strengths in
electronics design, R&D, and other value-added
operations across a variety of subsectors (e.g.,
computer equipment, semiconductors, and aerospace
products).
• Arizona possesses a large and solid base of sizable
AC-IT firms that rely heavily on AC-IT-relevant job
functions.
• Small and mid-sized firms consider the strong
workforce capabilities of the state a substantial
competitive advantage.
• Certain AC-IT technology platform areas have
begun to emerge as examples of Arizona’s
strengths—embedded systems, software
development and design, radio-frequency integrated
circuit design.
• Arizona universities are leveraging the state’s existing technology asset base by enhancing
research capabilities (often with federal investments) and engaging the state’s AC-IT industry
community.
• Nonscientific and non-engineering programs at Arizona universities can strongly support the
state’s efforts to develop new AC-IT technology applications.
• Arizona has recently demonstrated a growing commitment to technology transfer,
commercialization, and entrepreneurial development within the state’s research universities.
• Arizona’s various military base capabilities provide unique testing and evaluation capabilities
for AC-IT technologies.
• Arizona’s southwest location provides both a high quality of life and a predictable economic
environment.
Weaknesses
• Arizona possesses a sizable AC-IT industrial base,
but significant employment is in non-Arizona
headquartered firms.
• It is often difficult to grow Arizona’s smaller AC-IT
firms into mid-sized, market leaders.
• There continues to be a mismatch between the
capital needed by AC-IT firms and capital available
in Arizona, further complicating the issue of
growing AC-IT companies and fostering
entrepreneurial development.
• There appears to be somewhat limited interaction
Summary of Strengths
• Industry strengths—specific “chip-based”
subsectors, value-added
capabilities, sheer size
• New emerging areas in embedded
systems, software development, and
wireless circuitry both in industry and
universities
• Additional university strengths in
supporting disciplines, technology
transfer, commercialization, and
entrepreneurial development
• Unique military-based testing and
evaluation capabilities
• High quality of life and predictable
economic environment
Summary of Weaknesses
• Significant branch plant employment
• Difficult to start and grow AC-IT firms,
often due to capital availability
• Limited strategic/technical interactions
among firms
• Industry/university collaborations not
as strong as required
• Lack of knowledge about state’s AC-IT
assets and capabilities limits
collaboration and ability to grow
industry
• Infrastructure issues impact growth
potential across the state
Arizona’s AC-IT Roadmap
xx
among AC-IT firms for industry strategic/technical purposes.
• Industry partnerships with Arizona universities are typically structured as sponsorships, as
opposed to mutually beneficial collaborations.
• There remains within industry a perception that Arizona’s AC-IT-related research is
somewhat less than world class.
• Collaboration among Arizona AC-IT stakeholders is difficult because of the lack of
knowledge about the state’s AC-IT asset base and capabilities.
• Current economic development approaches make it difficult for the state to support the long-term
growth and vitality of the AC-IT industry.
• The long-term growth potential of the state’s AC-IT industry is critically impacted by
fundamental infrastructure issues.
Opportunities
• Arizona’s AC-IT technology strengths provide
opportunities to meet new federal defense and
homeland security requirements.
• Arizona can build on its unique military
infrastructure and reposition these assets as a
potential test bed for the larger AC-IT industry
sector.
• Wireless and embedded systems capabilities in
Arizona have the potential for broad technology
development and employment opportunities.
• Optics and photonics strengths in the state can be
further oriented toward developing collaborative and
integrated technologies.
• Opportunities exist to enhance the AC-IT industry in areas such as the biosciences.
• The state’s entrepreneurial resources can be leveraged to create a robust “home-grown” AC-IT
business community.
• Arizona’s location and proximity to significant
markets provide both opportunities and comparative
advantage.
Threats
• Globalization presents a number of challenges to the
growth and future of the AC-IT industry in
Arizona—off-shoring of existing jobs, market
expansions dictating the location of many future
jobs, and consolidation or restructuring of corporate
parents.
Summary of Opportunities
• Explore potential opportunities in new
defense and homeland security
requirements.
• Build on existing military testing and
evaluation assets.
• Build on state’s strengths and
capabilities in wireless, embedded
systems, and photonics.
• Fully leverage emerging bioscience
opportunities, new emphasis on
entrepreneurial development, and
location to nearby markets
Summary of Threats
• Globalization of AC-IT industry
presents potential challenges to
Arizona
• Recent economic downturn in AC-IT
industry makes it difficult to generate
excitement over development.
• Other regions investing significantly in
AC-IT industry development.
• Arizona’s budget situation makes it
difficult to compete with these regions.
Arizona’s AC-IT Roadmap
xxi
• Recent national and global economic downturn in the AC-IT industry may make it difficult to
generate a “buzz” around efforts to foster industry growth in Arizona.
• Despite increasing global competition and difficult economic conditions, other nations, states,
and regions have begun investing significant resources in the AC-IT industry.
• The public sector budget situation Arizona faces makes it difficult to devote resources to
AC-IT infrastructure investments.
Gap Analysis
The economic analysis, stakeholder interviews, and the SWOT analysis identified a number of
specific issues and gaps that need to be addressed to ensure the robust future of the AC-IT
industry in Arizona. Table ES-2 shows these gaps grouped into categories.
Challenges
This situational analysis identified four key challenges that represent barriers for the state to
overcome if it is to realize its long-term potential in the AC-IT industry. As Arizona moves
forward to build and strengthen the capacity of its statewide AC-IT industry base, the state needs
to remove these fundamental obstacles to AC-IT-based economic development. These challenges
include the following:
• Bridge the knowledge and information gap between industry and universities in terms
of AC-IT-related capabilities, capacities, and assets. Arizona must increase communica-tions
and connectivity among key stakeholders to create a cohesive, understandable, and
succinct AC-IT focus that contains specific priorities which are mutually beneficial for all
interested parties.
• Improve the entrepreneurial climate for AC-IT start-up firms. Arizona must address
significant economic and cultural barriers that are crippling the state’s ability to grow a
critical mass of its own wealth of new AC-IT companies.
• Strengthen the level and depth of AC-IT R&D. Arizona must concentrate on increasing the
state’s capacity within particular core research strengths, as identified in the core
competencies assessment report, to increase private-public partnerships.
• Make Arizona a hospitable location for AC-IT firms to create and add value. Arizona
must reorient its competitive positioning in the AC-IT industry from a low-cost place of
doing business to a place of creating wealth and increasing productivity.
Arizona’s AC-IT Roadmap
xxii
Table ES-2: Key Gaps in Arizona’s AC-IT Development Path
Area Key Gaps
Knowledge
Infrastructure
􀂾􋹌 Lack of knowledge about the broad AC-IT capabilities and assets of industry,
universities, and military installations
􀂾􋹌 Limited collaboration and coordination among existing AC-IT research efforts within
and across industry, universities, and government in the state
Entrepreneurial
Culture
􀂾􋹌 Limited interaction among AC-IT firms for industry strategic/technical purposes
􀂾􋹅 Existing networking opportunities perceived as providing limited benefits
􀂾􋹌 Limited interaction between existing university centers/research and small to mid-sized
firms
􀂾􋹄 Difficult to find/access senior entrepreneurial management teams
􀂾􋹌 Limited access to retirees as source for entrepreneurial mentors
Available Capital 􀂾􋹐 Perceived mismatch between investment capital for firms and what firms actually need
􀂾􋹉 Insufficient pre-seed/seed funds for AC-IT entrepreneurs
􀂾􋹌 Lack of sufficient organized angel investment community
􀂾􋹌 Limited support and assistance to take full advantage of Federal SBIR/STTR grants
Quality of Life 􀂾􋹋 K-12 education systems lack strength and cohesion—brings into question the ability to
attract key upper management individuals with families to Arizona
􀂾􋹏 Outside of Phoenix, labor markets are small—brings concerns regarding trailing
spouse opportunities
􀂾􋹄 Dispersed population around Phoenix and Tucson is bringing a host of problems such
as long commute times and air pollution issues
􀂾􋹈 Housing affordability differs widely among the various Arizona regions
Business Climate
and Infrastructure
􀂾􋹌 Limited knowledge of state economic development efforts and limited economic
development assistance programs/ resources for AC-IT
􀂾􋹔 Telecommunications infrastructure limits ability for AC-IT industry to flourish outside of
Phoenix/Tucson
􀂾􋹃 Constant environmental impact concerns affect efforts by military to expand testing
and range capabilities within the state
Arizona’s AC-IT Roadmap
xxiii
STRATEGIES AND ACTIONS
Four strategies are proposed that will develop, enhance, and position Arizona’s AC-IT industry
for the future.
Strategy One: Foster improved communication, coordination, and knowledge sharing among
Arizona’s AC-IT stakeholders to facilitate the growth, development, and economic future of
Arizona’s AC-IT industry.
Strategy Two: Enhance and focus the AC-IT research and commercialization functions of
Arizona’s universities to better reflect and engage existing industry strengths.
Strategy Three: Fully leverage the existing Arizona-based assets and current opportunities
offered by the U.S. Departments of Defense and Homeland Security to develop, grow, and
expand the AC-IT industry in the State of Arizona.
Strategy Four: Address the critical challenges faced by Arizona’s AC-IT entrepreneurs.
These four strategies and their associated 12 actions form a focused set of activities designed to
foster the development of Arizona’s AC-IT industry and are outlined in Table ES-3. Altogether,
the 12 actions call for approximately $12 million to $19 million in annual private and public
support over the next 5 years and at least $35 million in one-time private or public investments
and expenditures. The resources are expected to come largely from private and philanthropic
sectors, with some focused public sector reallocation of expenditures to support the proposed
AC-IT investments and activities.
Priorities are established as critical (those actions that are essential for the success of the
strategy), significant (those actions that can make a major impact in advancing the strategy), or
important (those actions that can contribute to the broad-based success of the strategy). Timing is
defined as short-term (those that can be implemented immediately or within the next 12 months),
mid-term (those that should be implemented within the next 1 to 3 years), or long-term (those
needing 3 to 5 years to fully implement).
Arizona’s AC-IT Roadmap
xxiv
Table ES-3: Summary of Strategies and Actions for Arizona AC-IT Roadmap
Strategy Action Priority Timing Resource
Requirement
Establish a statewide AC-IT
collaboration committee to
facilitate, develop, promote, and
ensure technical and
programmatic linkages among
Arizona’s AC-IT stakeholders and
assets.
Critical Short- to
Mid-term
$100,000 annually for
administrative and
programmatic expenses;
$2 million to $3 million
annually for “star
researcher” start-up
packages.
Develop AC-IT relevant, value-added
technical networks focused
on bringing the state’s technical
talent together with each other
and with potential market drivers
(e.g., software—biosciences).
Important Short-term
Approximately $5,000
annually for administration
of each technical network.
Strongly support public-private
efforts to improve the overall
business environment in Arizona
for AC-IT companies.
Critical Short- to
Long-term
No direct financial
requirements for support
efforts.
Initiate a collaborative statewide
marketing and business
development effort to position
Arizona as a location of choice for
AC-IT firms to create and add
value.
Critical Short-term
Reprogramming of some
existing marketing funds;
various support for
conference attraction;
$200,000 annually for
Arizona Technology
Convergence Conference.
Strategy One:
Foster improved
communication,
coordination, and
knowledge sharing
among Arizona’s AC-IT
stakeholders to
facilitate the growth,
development, and
economic future of
Arizona’s AC-IT
industry.
Facilitate and strengthen AC-IT
stakeholders “stewardship”
opportunities with the state’s K-12
educational institutions.
Important Short- to
Long-term
FIRST sponsorship
approximately $2,500 per
firm sponsor; Academy
costs TBD; After-school/
weekend program
$200,000 annually.
Principal resource required
is time from AC-IT
stakeholders.
Strategy Two:
Enhance and focus
the AC-IT research
and
commercialization
functions of Arizona’s
universities to better
reflect and engage
existing industry
strengths.
Develop three related Centers of
Excellence (CoE) in AC-IT, each
expanding upon core capabilities
existing in Arizona’s universities
and focused on a specific area of
industry need —wireless
technologies, embedded systems
development, and photonics.
Critical Short- to
Mid-term
$3 million to $5 million
annually for each CoE
operations; each CoE will
generate an increasing
amount of federal/industry
research funding starting at
$2 million to $3 million
annually to approximately
$15 million per year by
Year 5. One-time $5 million
to $10 million investment for
each CoE in people and
equipment.
Arizona’s AC-IT Roadmap
xxv
Table ES-3: Summary of Strategies and Actions for Arizona AC-IT Roadmap (continued)
Strategy Action Priority Timing Resource
Requirement
Strategy Two:
(continued)
Establish an AC-IT-specific
industry/university matching grant
program to improve the ability of
industry and entrepreneurs to
access and leverage Arizona’s
university AC-IT strengths and to
build collaboration in emerging
AC-IT technical domains.
Significant Short- to
Mid-term
Initially funded at $500,000
annually; increasing to
$3 million per year by
year 5.
Solidify and enhance Southern
Arizona’s military testing and
evaluation assets and work to
expand these capabilities to
include applied development
initiatives.
Important Mid-term No direct resources
required initially; may
ultimately require some
state cost-share for
expansion efforts.
Strategy Three:
Fully leverage the
existing Arizona-based
assets and
current opportunities
offered by the U.S.
Departments of
Defense and
Homeland Security to
develop, grow, and
expand the AC-IT
industry in the State
of Arizona.
Seek federal funding support for
Defense and Homeland Security-related
AC-IT R&D platform
efforts.
Critical Short- to
Mid-term
Indirect resources to identify
opportunities and educate
Delegation and federal
agency decision makers;
Major initiatives may require
a proposal fund of $10,000
to $20,000.
Building on existing
entrepreneurial assistance efforts,
develop AC-IT focused programs
to foster and support new and
potential entrepreneurs.
Significant Short- to
Mid-term
$350,000 for program
planning, development, and
initial start-up costs.
Continue to improve and enhance
the support available to Arizona’s
entrepreneurs to increase both
awards and funding support from
the federal SBIR program.
Critical Short-term
At least $200,000 annually
for additional SBIR/STTR
outreach, education, and
assistance; additional
$200,000 annually for
increasing Arizona FAST
program.
Strategy Four:
Address the critical
challenges faced by
Arizona’s AC-IT
entrepreneurs.
Create an early-stage/pre-seed
fund focused on the needs of AC-IT
entrepreneurs.
Critical Short- to
Mid-term
The total fund size needs to
reach at least $20 million to
$25 million.
IMPLEMENTATION
This section identifies actions critical to success, immediate priorities, measures of success and
accountability, and potential outcomes and impacts.
Critical Actions
Seven of the 12 proposed actions will ultimately determine the success of the four recommended
strategies:
Arizona’s AC-IT Roadmap
xxvi
• Establish a statewide AC-IT stakeholder collaboration committee to facilitate, develop,
promote, and ensure technical and programmatic linkages among Arizona’s AC-IT
stakeholders and assets.
• Strongly support public-private efforts to improve the overall business environment in
Arizona for AC-IT companies.
• Initiate a collaborative statewide marketing and business development effort to position
Arizona as a location of choice for AC-IT firms to create and add value.
• Develop three related Centers of Excellence in AC-IT, each expanding upon core capabilities
existing in Arizona’s universities and focused on a specific area of industry need—wireless
technologies, embedded systems development, and photonics.
• Seek federal funding support for Defense and Homeland Security-related AC-IT R&D
platform efforts.
• Continue to improve and enhance the support available to Arizona’s entrepreneurs to increase
both awards and funding support from the federal Small Business Innovation Research
(SBIR) program.
• Create an early-stage/pre-seed fund focused on the needs of AC-IT entrepreneurs.
While these seven actions are critical to Arizona’s efforts to reposition its AC-IT industry for
future growth, the support,
passage, and full implementation
of the Governor’s Council for
Innovation and Technology
(GCIT) form the basis for the
success of many of the actions of
this Roadmap. The ultimate goal of
this Roadmap is to build upon
these GCIT efforts and add
specific initiatives to further the
specific growth and development
of the AC-IT industry.
Immediate Work Plan Priorities
Immediate work plan priorities are
those steps that Arizona’s AC-IT
stakeholders should undertake in
the first 12 months of this
Roadmap’s implementation. Some
of these items are not fully
implemented actions, but initial
steps to full actions because of
their fiscal costs or the
practicalities and/or ease of implementation. Several critical priorities need to be implemented
right away, while others will need to be planned and funds secured before they can be fully
Summary of Work Plan Priorities
• Develop a membership roster and invite initial members to
form the statewide AC-IT collaboration committee.
• Establish the process for nomination, identification, and
launch of AC-IT-related technical networks.
• Begin vocal/editorial support of GCIT recommendations.
• Begin conceptualizing AC-IT image and marketing
message.
• Begin a dialog on addressing K-12 “stewardship”
opportunities.
• Develop AC-IT Centers of Excellence, seeking to leverage
federal funding and industry investments.
• Identify funding sources and establish mechanism for AC-IT
specific industry/university matching grants program.
• Educate Arizona’s Congressional Delegation and federal
Defense and Homeland Security representatives on the
state’s AC-IT-related assets and capabilities.
• Develop with existing university-based entrepreneurial
assistance efforts including SBIR/STTR assistance.
• Begin process to establish early-stage/pre-seed fund
focused on the needs of AC-IT entrepreneurs.
Arizona’s AC-IT Roadmap
xxvii
implemented. The text box, “Summary of Work Plan Priorities,” summarizes 10 work plan steps
or activities to be undertaken immediately during the first year.
Measures of Success and Accountability
To measure, track, and report on progress related to the outcomes of this Roadmap, the following
key measures are proposed:
• Increase the number of firms and employment, and maintain or increase the overall
concentration level compared with the nation, in key subsectors of Arizona’s primary and
embedded AC-IT sectors.
• Increase the federal and industry research funding received in three critical technology areas
of wireless, embedded systems, and photonics—directly to the proposed Centers of
Excellence and beyond—by 2005.
• Further demonstrate Arizona’s reputation and stature in core disciplines related to AC-IT
university research and technology development as represented in reputation rankings and
citation analysis.
• Increase the overall impact of the federal SBIR/Small Business Technology Transfer (STTR)
programs on Arizona’s AC-IT industry by increasing AC-IT participation and proposals, the
number and success rate of Phase I awards, and the number and funding level of Phase I
awards converted into Phase II awards.
• Increase in the private and public venture capital invested in Arizona’s AC-IT firms by
$20 million per quarter (to reach approximately $40 million per quarter) by 2008.
• Implement at least 70 percent of the actions in this Roadmap by year three and 90 percent by
year five.
Analysis of Potential Roadmap Outcomes and Impacts
This analysis conveys the potential outcomes and impacts of the Arizona AC-IT Roadmap’s
actions over the next ten years. This is an estimate, based on a complete implementation of the
Roadmap. The estimates and forecasts contained within this impact analysis, while capturing the
potential and desired growth within the state’s AC-IT industry, are still fairly conservative in their
leveraging and growth projections. While the results of much of this analysis focus on the impacts
within the region over the next 10 years (assumed to be 2004 to 2013), the benefits of these
investments and capability enhancements will extend well beyond 2013.
In terms of research-derived economic development, two principal impact effects exist: (1) those
from the direct employment of researchers, technical staff, and business development staff within
the universities and centers; and (2) those from start-up firms and company relocations. In
summary these impacts include the following:
• Almost 390 positions will be directly created over the 10-year period as a result of the
Roadmap’s investments in new research capacity within the three proposed Centers of
Excellence and the industry/university matching grant program. These jobs also will have a
multiplier effect on the regional economy, accounting for more than 580 additional jobs in the
region.
Arizona’s AC-IT Roadmap
xxviii
• Arizona’s AC-IT industry can conservatively grow by an additional 75 firms over the next
10 years, composed of 65 technology-based start-ups and 10 companies attracted to the
region to collaborate with the region’s research institutions.
• Employment in Arizona’s AC-IT industry can grow over the next 10 years by almost
4,500 jobs from both new technology-based start-up firms and company relocations to the
region. In turn, these new cluster-related jobs will have a multiplier effect, accounting for
approximately 8,900 additional jobs in all sectors of the state’s economy.
• This increase in Arizona’s AC-IT-related R&D, combined with the improvements in
networking and to the supporting infrastructure, will lead new regional technology-based
firms to generate, over only a 10-year period, annual sales that reach more than $60 million
by year 5 and more than $1.2 billion in year 10, with a cumulative total of more than
$2.8 billion over 10 years.
Summary
Arizona’s AC-IT industry, like the entire global AC-IT industry, is in a state of transition. The
strategies and actions set forth in this Roadmap are designed to position Arizona to proceed along
a number of fronts—improving the connectivity among the state’s stakeholders, focusing the
state’s AC-IT research strengths on meeting the current and future needs of Arizona’s primary
and embedded AC-IT sectors, and enhancing the entrepreneurial support functions in the state to
capture new technology and market opportunities in home-grown firms.
xxix
Arizona’s AC-IT Roadmap
Table ES-4: Detailed Potential Impacts from Arizona AC-IT Roadmap
Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8
Annual Investments, in $M 47.825 31.725 38.075 34.475 47.975 52.075 54.975 60.975
Regional Research Institutions Cluster Relevant R&D, in $M 62.505 68.061 74.111 80.698 87.871 95.681 104.186 113.446
Three Centers of Excellence, in $M 9.000 9.000 15.000 21.000 30.000 33.000 36.000 39.000
Industry/University Matching Grants, in $M 2.000 3.000 4.000 6.000 12.000 12.000 12.000 12.000
Defense and Homeland Security Opportunities, in $M 5.000 7.500 10.000 12.500 15.000 17.500 20.000 22.500
Total Increased AC-IT Reseach Investments, in $M 16.000 19.500 29.000 39.500 57.000 62.500 68.000 73.500
Arizona Institutional and Related R&D, and Programmatic
Investments, in $M 78.505 87.561 103.111 120.198 144.871 158.181 172.186 186.946
New Researchers for Centers of Excellence
(6 per $1M) 54 54 90 126 180 198 216 234
New Researchers for Industry/University Matching &
Defense/Homeland Security (3 per $1M) 21 32 42 56 81 89 96 104
Projected Total Employment from Direct Roadmap Funded
Activities 75 86 132 182 261 287 312 338
Research-based start-up efficiency
($M per Start-up) 40.000 36.000 32.000 28.000 24.000 20.000 20.000 20.000
Start-ups from base-level Arizona research funds 2 2 2 3 4 5 5 6
Start-ups from additional leveraged research funds 0 1 1 1 2 3 3 4
Annual Totals 2 3 3 4 6 8 8 10
Cumulative Start-ups 2 5 8 12 18 26 34 44
Sales Progression Forecast, in $M 0.200 0.500 2.000 5.000 10.000 17.000 27.000 45.000
Projected Sales from Start-ups, in $M 0.400 1.600 6.100 18.300 44.200 91.600 172.600 314.000
Projected Total Employment from Start-ups 2 7 27 81 196 407 767 1,396
Relocations/Attracted Firms 0 0 1 1 1 1 1 1
Cumulative Relocations 0 0 1 2 3 4 5 6
Sales Progression Forecast, in $M 2.000 5.000 10.000 17.000 27.000 45.000 100.000 110.000
Projected Sales from Relocations, in $M 0.000 0.000 2.000 7.000 17.000 34.000 61.000 106.000
Projected Total Employment from Relocations - - 9 31 76 151 271 471
Multiplier of Directly-Funded (University) Employment (1.5)
(Cumulative In-Direct/Induced) 113 129 198 273 392 431 468 507
Multiplier of Increased AC-IT Employment (1.64)
(Cumulative In-Direct/Induced) 3 11 59 184 446 915 1702 3062
Total Roadmap-Related Employment 193 233 425 751 1,371 2,191 3,520 5,774
Cumulative In-Direct and Induced "Multiplier-Effect" Impacts
New Arizona Employment
Start-up Firms
Relocations
Employment - Directly Funded Impacts
Forecast Increase in Arizona AC-IT Research Investments Due to Roadmap Actions
Total Regional Research Investments
Employment - Direct Results of Roadmap Impacts
Total Investments in Arizona AC-IT Roadmap Efforts
Baseline Arizona AC-IT Institutional Research Investments
Arizona’s AC-IT Roadmap
xxx
Figure ES-4: Total Direct and Indirect/Induced Employment Impacts of Arizona AC-IT Roadmap
CONCLUSION
Arizona is at a crossroad in determining its future in the globally competitive AC-IT industry.
The primary and embedded AC-IT sectors have been and continue to be major employers and
economic drivers of the Arizona economy. However, the overall industry is at the forefront of
global outsourcing of technology jobs, once seen as the mainstay of the U.S. economy. To remain
competitive in this global economy and to grow and provide jobs to Arizona’s residents, the
industry’s stakeholders must focus on the aspects of the Arizona industry that create and add
value.
This Arizona Advanced Communications and Information Technology Roadmap provides a
comprehensive structure and approach to meeting the industry’s challenges and sets a path for
future development. The Roadmap also provides a framework upon which Arizona’s AC-IT
stakeholders can work to reorient the state’s competitive positioning in the AC-IT industry from a
low-cost place of doing business to a place of creating wealth and increasing productivity. The
goals, strategies, and actions articulated in this Roadmap will be accomplished by increasing
communications and connectivity among key stakeholders, addressing significant barriers that are
impeding the state’s ability to grow new AC-IT companies, and focusing the state’s capacities in
core research strengths to meet the needs of industry and the requirements of government through
mutually beneficial public-private partnerships.
Implementing these strategies and their specified actions will require strong partnerships and
collaboration among the state’s varied AC-IT stakeholders—universities, private sector firms,
state and local government, federal agencies, and the entrepreneurial community. In addition, it is
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
16,000
18,000
Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10
Cumulative New Employment From Direct and Multiplier Effects of AC-IT Roadmap
Multiplier of Increased AC-IT Employment (1.64)
(Cumulative In-Direct/Induced)
Multiplier of Directly-Funded (University) Employment (1.5)
(Cumulative In-Direct/Induced)
Projected Total Employment from Relocations
Projected Total Employment from Start-ups
Projected Total Employment from Direct Roadmap Funded
Activities
Arizona’s AC-IT Roadmap
xxxi
critical that the state’s ongoing efforts to improve and develop its technology-based economy, as
represented by the recommendations put forth by the GCIT, are fully implemented. By
implementing both this Roadmap and the GCIT recommendations, Arizona will position itself
well for taking advantage of the opportunities provided by the global AC-IT industry.