Tech sector spurs state's economic recovery

Massachusetts' economic recovery has gathered momentum in recent months, and there's a good reason: The technology sector is back.

After enduring a brutal shake out at the beginning of the decade, Massachusetts hardware and software companies are once again growing and hiring. No one is calling it a boom, but analysts say a healthy expansion is underway, providing a much-needed spark to the Massachusetts economy.

Employment in professional and business services, comprising a variety of tech firms, has grown a healthy 2 percent in the last year, twice the rate of overall employment growth in Massachusetts, according to the state Department of Workforce Development. Makers of technology products are bucking the trend of job losses in manufacturing and adding jobs -- more than 3,000 in the last year. Massachusetts tech exports are surging; foreign sales of semiconductor manufacturing and testing equipment nearly doubled in the past year.

Technology has long driven the state's economy. The two technology-dominated employment sectors, professional and business services and manufacturing, account for about one-fourth of state employment, but they capture only a small part of the industry's impact because it increasingly reaches into areas from pharmaceuticals to financial services. High-tech machinery, instruments, components, and similar products account for nearly 60 percent of the state's exports.

Demand for technology workers, meanwhile, is growing. The state's most recent survey of job vacancies, at the end of 2005, showed openings for information technology occupations jumping 13 percent from a year earlier. Monster Worldwide Inc. , which operates the job-matching web site Monster.com, reported last month that on line job postings for IT workers grew 10 percent in Greater Boston over the year.

The Federal Reserve found in a recent survey of businesses that the supply of technical workers in the Boston region is shrinking to the point of companies boosting wages as much as 15 percent.

``It's not 2000, but it's also not 2001," said Larissa Duzhansky, regional economist at Global Insight of Waltham, referring to the tech boom and bust years. ``The sector has grown at a healthy pace and it's continuing to recover well."

Certainly, the state's technology sector faces a long road to recovery. Professional and business services so far have regained only about half the nearly 70,000 jobs the sector lost in the last recession. Tech manufacturing, which also shed about 70,000 jobs, has recovered only about 5 percent.

But analysts and industry officials add that today's technology industry is different from that of the dot-com craze, when it seemed any company with an Internet domain could attract millions of dollars from investors, regardless of whether they had profits or even products. Today's sector is more diverse and better grounded financially, reaching across an array of markets and technologies.

Phase Forward Inc. of Waltham, a nine-year-old firm, provides an example of how the traditional tech sector is developing business models and expanding into new niches of the economy. Phase Forward specializes in software and services to automate clinical trials for biopharmaceutical companies, and has consistently reported double-digit revenue growth since its shares began trading on the stock market in 2004. Its employment has grown nearly 16 percent over the past year to about 420.

``We're seeing the convergence of software and services," said Bob Weiler, Phase Forward's chief executive. ``Companies want to focus on their core competencies, like developing new drugs, instead of building in-house IT departments. That's where we come in."

Corporate investment in technology is a key factor in the rebound of Massachusetts tech sector, which primarily sells to other firms. Nationally, business spending on software and equipment rose 7 percent in second quarter of 2006 from a year earlier, following a 10 percent increase in the previous year, according to the Commerce Department.

EMC Corp., the state's largest technology firm, makes commercial data-storage systems, for example. Since business spending began recovering in early 2003, the Hopkinton firm has posted 12 consecutive quarters of double-digit revenue growth and created about 1,000 new jobs in Massachusetts.

Oco Inc., a seven-year-old software services firm, is also benefiting from the pickup in business spending. A few years ago, noted George O'Conor, the Waltham firm's chief executive, companies would take up to 12 months to decide whether to upgrade systems. Now, they're making buying decisions in a few weeks.

As a result, Oco, which recently rolled out software allowing firms to consolidate, analyze, and report data from disparate systems, is growing rapidly. It has more than doubled employment to about 35 over the past 15 months, and expects to soon double employment again to about 70.

``Companies were so restrained for so long, they almost have to spend to keep up their systems," said O'Conor.

Global demand for technology products, from cell phones to MP3 players, also is boosting Massachusetts tech firms, which make the equipment for manufacturing such products. Booming electronics companies in China, for example, need the advanced manufacturing and testing equipment designed and made in Massachusetts. Those equipment sales have helped make China the state's sixth largest foreign market, as well as one of its fastest growing.

Sales to China and other Asian nations account for at least 70 percent of sales for Axcelis Technologies Inc., of Beverly, a maker of semiconductor manufacturing equipment, according to Mark Namaroff, senior vice president of strategic marketing. The company, which employs about 1,000 in Massachusetts, has reported double-digit revenue growth this year, while adding about 50 manufacturing jobs.

``Asia, particularly China, is hot," said Namaroff. ``Their growth has meant opportunities for us."

The tech rebound also means more opportunities for tech workers. Don Benson, 53, of Watertown, is a software engineer and contract worker. A year ago, he received only limited interest from companies, searching for months before landing a six-month contract at a custom software development firm.

This spring, however, he received calls from at least two dozen headhunters after posting his resumé on line, and landed new, one-year contract in a month.

Benson received the contract through Sapphire Technologies, a Woburn staffing firm, which placed him at credit card company Capital One in Framingham for a software project. Dan Foley, Sapphire's president, recalled that during the tech bust, the company had 10 workers for every job. Now, it has six jobs for every worker.

Meanwhile, Greg Netland, chief executive of Sapphire's parent, Vedior North America of Wakefield, expects the market for tech workers to only get tighter. ``The war for talent is back," he said.

Robert Gavin can be reached at rgavin@globe.com.