Beyond the Beltway
Information technology companies outside Northern Virginia expect continued growth
- September 29, 2011
During the next two years, the future looks bright for Bernard Robinson’s IT company in Chesterfield County. The president and CEO of Networking Technologies and Support Inc. (NTS) expects revenues and profits to continue growing by 15 to 17 percent a year. The growth, he says, will come by increasing the company’s focus on large health-care companies as well as small- and medium-size businesses seeking to cut costs by outsourcing parts of their IT infrastructure.
NTS offers networking, hardware-maintenance and managed services. So confident is Robinson about an increase in business that his company is investing $1.5 million to expand its headquarters and staff by 140 positions by 2014.
Over at Richmond-based CapTech in downtown Richmond, the prognosis is just as sunny. Sandy Williamson, the founding CEO, says his firm’s expanding client portfolio of Virginia hospitals, national financial services firms, state governments and Fortune 500 companies should deliver “15 to 20 percent growth this year, and the next few years.”
And even though he’s leaving CXI — the company he founded in Richmond in 2000 — at the end of this year, founding CEO Ranjit Sen predicts that annual revenue and net income from clients such as Dominion Virginia Power, MeadWestvaco, Capital One Financial and Markel Corp. should continue to hover between “20 and 25 percent for the foreseeable future.”
Yes, Northern Virginia, there is a thriving IT industry outside the Beltway, one that doesn’t appear too concerned about the expected decline in the size and number of federal contracts over the next several years.
According to the Virginia Economic Development Partnership (VEDP), there are more than 11,600 information technology companies across the commonwealth. During the past decade these companies spent more than $9 billion in new investments and added more than 92,000 jobs. With an estimated total of 152,000 IT professionals at the end of 2010 — or 95 of every 1,000 civilian workers — Virginia now boasts the highest percentage of computer workers to total work force in the nation, according to the partnership, citing data from the U.S. Bureau of Labor Statistics.
VEDP also reports in promotional materials that IT companies in Virginia generated $24 billion of direct economic output in 2010 and $18 billion of additional economic activity, or about 10.3 percent of the state’s $408.4 billion GDP (gross domestic product.) “The IT story in Virginia is very broad based,” says Jerry Giles, the agency’s managing director for business development, technology, energy and corporate
services. “Twenty-five, 30 years ago [information technology] was a dedicated vertical bucket. That’s gone from a crisply defined vertical space to something much more horizontal. Ask the question: Where is your IT department? The answer is: It’s everywhere.”
While Hampton Roads has long been the home of satellite offices of prominent Pentagon contractors such as Lockheed Martin, Northrup Grumman and General Dynamics, smaller IT startups like CapTech, NTS and CXI were attracted to the metro-Richmond region to serve the evolving digital needs of Fortune 1000 companies, many of whom remain in the area.
More recently, U.S. companies have come to realize that they don’t have to locate in the suburbs of Washington, D.C., to reap the benefits of Virginia’s highly qualified IT work force. Plus, it’s cheaper to do business away from the nation’s metro area in terms of salaries, real estate and other expenses. IT companies operating in areas of the state with high unemployment are exempt from the Retail Sales and Use tax, while small technology firms headquartered in Virginia with less than $3 million in annual revenues can now claim a state income tax exemption on long-term capital gains and any income from their investment partnerships.
Some companies have set up operations in cities such as Martinsville and Harrisonburg and rural counties such as Russell, Bedford and Patrick. CGI, EMI Imaging Inc., Innovative Computer Solutions and Rosetta Stone are increasingly prominent employers in these areas. Fourteen months ago, Microsoft decided to spend $499 million on a new East Coast data center in the Mecklenburg County town of Boydton that will employ 50 people. In April, General Electric announced it would create 200 jobs at Innsbrook Corporate Center in Henrico County as part of a new cyber security, data management and network design center.
“Yes, there’s much greater transactional volume in Northern Virginia,” says Robinson of NTS. “However, the costs there are phenomenal ... The contracts are much larger, but at the end of the day it’s not about revenue, it’s about profitability ... And I’ll take profitability any day of the week.”