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Is Indianapolis Becoming the Silicon Valley of the Midwest?

Most places in America aren't adding many tech jobs. The Indianapolis region is an exception.

When most people think of the hottest areas for the tech sector, Indianapolis probably doesn’t immediately come to mind.

But in recent years, the metro area has landed thousands of new tech jobs and its digital service sector is among the fastest-growing in the nation, nearly doubling in size since 2010. Late last year, Salesforce announced plans to bring more than 800 high-paying jobs to a downtown office tower, a move expected to further benefit several local firms that do business with the cloud computing conglomerate.

The Indianapolis region stands out as somewhat of an anomaly: A Brookings Institution analysis published earlier this month suggests newly created tech jobs are becoming increasingly concentrated in coastal centers and a small number of other established hubs.

The think tank analyzed jobs data for the digital services sector between 2010 and 2015. It found that the share of national tech jobs either declined or remained unchanged in 86 of the 100 largest metro areas. Just five metro areas accounted for approximately 28 percent of the sector's overall growth.

Given that the Indianapolis region's tech industry represents one of the few success stories, it’s worth taking a closer look at how it has thrived while others have struggled.

In all, the Indianapolis region added nearly 9,200 digital services jobs between 2010 and 2015, according to Brookings calculations. That’s more than the nearby metro areas of Cincinnati, Ohio; Columbus, Ohio; and Louisville, Ky.; combined. It’s also the most of any Midwestern metro area with the exceptions of Chicago and Detroit, both of which grew but did so at a slower pace.

For one, the area benefits from a strong array of higher education institutions serving as a talent pipeline, says Jason Kloth, president of workforce development for the firm Ascend Indiana. Several Indiana colleges and universities offer nationally-regarded tech and engineering programs, while local coding academies provide opportunities for people new to the field.

“Indianapolis is uniquely positioned relative to the rest of the country,” says Kloth. “We have an increasing supply of talent and relatively low costs for labor and office space.”

Another crucial advantage Indianapolis enjoys over other regions that haven’t seen their tech sectors take off can be traced back to a few companies that started there more than 20 years ago. These firms provided a solid foundation, and their employees have since started new companies and invested in local capital without leaving the area, says Mike Langellier, president of TechPoint, a nonprofit that promotes Indiana’s tech community.

“It’s very difficult to jumpstart a tech hub from scratch because you have to have these ingredients and the ecosystem in order to do it,” says Langellier. 

Salesforce’s expanding presence has also supported other companies in a broader marketing technology cluster.

Langellier further added that the region’s employers benefit from a workforce loyalty factor. Midwestern tech workers don’t seek new employment perhaps as often as their peers on the coasts. 

Those advantages have even helped lure a few firms from top-tier tech hubs. Consider Appirio, a cloud services consulting firm, which moved its global headquarters from San Francisco to Indianapolis in 2015. Company CEO Chris Barbin explained his decision in a blog post.

“With a booming tech community and a business-friendly environment, Indianapolis is a strong choice for a technology services company to expand -- but it’s not necessarily an obvious one,” he wrote.

But Appirio's decision to shift its expansion away from San Francisco is the exception, not the rule.

For the most part, companies aren’t fleeing other regions or closing, it’s just that they're not growing much in the vast majority of metro areas. And while the tech sector is growing in Indianapolis and a few other places, Mark Muro of Brookings says "it’s not happening fast enough or broadly enough to alter the continued concentration of tech in the Bay Area."

The tech hubs of San Francisco and San Jose, Calif., still continue to dominate much of the sector’s growth nationally. About 10 percent of all U.S. digital services jobs are found in the Bay Area, up from 7.7 percent in 2010, according to Brookings.

While many industries employ tech workers, Brookings limited its analysis to four particularly fast-growing industries in the digital services sector. The sector is considered key to the tech boom, providing high-paying positions with large multiplier effects.

The Bay Area region pursues a much different approach to economic development than Indianapolis and most other places attempting to spur tech growth. While San Francisco has reformed its tax policies to appeal to the business community, for example, it’s certainty not the main reason for the area’s booming tech industry.

“Our strategy is not to compete with low-cost cities,” says Todd Rufo, director of the San Francisco city and county government’s Office of Economic and Workforce Development. “We’re competing on being a place where you can go to get game-changing order of magnitude innovation.” 

Officials say they’re doing just as much, if not more, to retain local talent as they are to hold onto their employers. This includes funding a program that provides training for unemployed tech professionals and investing in neighborhood revitalization efforts where they’re employed.

If there’s one clear advantage the Bay Area has, it’s having so many tech companies in close proximity, many of which participate in collaborative innovation centers. For the majority of other regions without already-established tech clusters, generating this type of activity could continue to prove challenging. 

“A headquarters in a suburban office park, based on your own research and development team, isn’t going to cut it anymore,” says Rufo.

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