OLMIS

by Jill Cuyler
Published Mar-9-2009

Introduction Noteworthy Rise in 1990s and Mid-2000s Higher than Average Wages A Strong Future Success Rooted in Soft Capital

Few industries in Oregon have been spared the job losses brought on by the current economic slowdown. Within Oregon's high-tech sector, manufacturing's workforce declines have been well noted and severe. However, high-tech's service-based sectors are enjoying relative stability and strong prospects for the future. Software publishing is one such industry.

Firms in the software publishing industry are primarily engaged in the design, development and publishing of computer software. Offerings in this industry include operating, utility, and applications programs. Companies in this sector also provide user services such as the preparation of software documentation, installation of software, and training in the use of software. Products satisfy a variety of business needs including financial platforms, social networking, mobile services, business intelligence, clean technology, and open source development.

Oregon's software publishing industry has demonstrated strong historical growth. The industry grew from an annual average of 1,600 jobs in 1990 to 8,500 jobs in 2000, a dramatic increase of 18 percent per year brought on by the rise of high tech and the Internet. The industry reached peak employment levels in 2001 with 9,200 employed and then took a hit due to the statewide recession. Between 2001 and 2004, software shed 2,500 jobs, a decline of 27 percent. Job growth resumed since the last recession. In 2007, the industry matched its 2001 employment peak (Graph 1).

Despite the resurgence of software publishing, it remains a small portion of Oregon's high-tech group. As of 2007, there was an annual average of 594 software publishing business units and 9,100 jobs. This represents 15 percent of Oregon's high-tech employment, which we define as including computer and electronic product manufacturing, computer systems design and related services, and software publishing.

Growth in software publishing remained relatively unfazed by the current economic downturn until December 2008. The latest employment figures - those from January 2009 - show 8,900 jobs statewide, 3.3 percent less than last year. This figure is similar to all-industry growth and better than growth in the high-tech industry. Total statewide year-over-year growth for all industries was -3.4 percent in January; job losses in high tech were greater with a year-over-decline of 6.6 percent (Graph 2).

According to Alex Yoder, President and CEO of WebTrends, a Portland-based software publishing firm, the industry remained strong in the face of the current downturn because of clients' need for solutions that increase efficiencies. "Thus far, things have been really solid. We continue to see our customers staying with us as we provide additional services to support existing investments. We are seeing an interest in services to optimize current service offerings as opposed to buying new ones," says Yoder.

He notes that his firm is not seeing the pullback in interest it saw during the 2001-2003 recession and attributes this to the established credibility of the industry and the broad acceptance of Internet-based advertising. "We were hurt a lot more in the last recession because the space we are in was not as mature. During this recession, services and support around Web analytics are a 'must have.' Internet advertising is established and will probably increase during this downturn."

One of the distinguishing characteristics of the software publishing industry is its high average wages. In 2007, it paid an average annual wage of $89,910, higher than the annual average wage for the high-tech industry overall and significantly higher than average wages across all industries statewide (Table 1). These wages are paid despite the fact that most software publishing firms are small businesses. In 2007, 86 percent of firms employed 20 or fewer employees.

According to Harvey Mathews, president of the Software Association of Oregon, "Most companies are small by traditional definitions. Less than 5 percent of our membership is over 75 employees. Most companies doing applications do not require a large staff." Mathews notes that, "average wage is high so the impact on a community is similar to what a 100-plus person shop would be in a normal industry."

Along with its small-business-minded landscape, the industry is characterized by a sense of entrepreneurship and an appreciation for change. "There is a lot of flow with employees bouncing back and forth between companies. There is always change; it is not unusual to have someone highly respected moving between jobs every two to three years," says Mathews.

A promising future exists for the software publishing industry in Oregon. The Oregon Employment Department projects it to grow by 22 percent between 2006 and 2016, an increase of 1,800 jobs. In comparison, total statewide growth is projected to be 14 percent during this same time period. High-tech, which has seen significant losses in the computer and electronic product manufacturing sector, is projected to grow by only 4 percent (Graph 3).

Of the new software publishing jobs created, half are projected to be in Washington and Multnomah counties, Oregon's high-tech hubs. While the Portland area is certainly the largest in terms of industry presence, experts see growth potential in other regions as well. Mathews cites the great relationships that his members have with the University of Oregon and Oregon State University in the Eugene and Corvallis areas, as well as the promise the Medford-Ashland area holds due to its growing population. Both Mathews and Yoder also mention the industry's small but strong presence in the Hood River/Columbia River Gorge area.

Despite room for improvement, Oregon enjoyed some comparative advantages. The state's strong intellectual capital contributed greatly to the growth of the software publishing industry and its promise for the future. During its rise in the 1990s, the industry was able to draw from the skilled labor market of professionals already working in adjacent areas within the state's high-tech sector. In addition, Oregon's prominence as a focal point for the open source movement fosters continued innovation in the field.

Besides the availability of a skilled workforce and technical infrastructure to support the burgeoning industry, software publishing's roots in Oregon can be traced to what Mathews describes as Oregon's ethos. "We have an independent spirit which merges nicely with software professionals," he says. Yoder agrees. "Oregon has a history of attracting people that tend to be both creative as well as highly educated and intelligent. This business appeals to that type of person. A lot of it is technologically based but a lot of it is creative. That contributes to a strong workforce in the industry."