Digital technology to the United States
Trends and opportunities
Digital technology is a catchall industry that includes everything from software to artificial intelligence (AI); the driving force in the industry is disruption. Digital innovation has transformed the way all industries use technology across all verticals. This transformation is driven by digitisation and integration of vertical and horizontal value chains, digitisation of product and service offerings, and digital business models and customer access. Technology is enabling governments, corporations, and individuals to do things they never have before.
The global technology spend for corporations and governments is projected to be US$2.9 trillion by the end of 2016. That includes US$17.5 billion on mobile apps, US$625 billion on telecom services, and US$597 billion on software. The market size and adoption rates are enormous (Source: Forrester ‘Global Tech Market Outlook for 2016- 2017’).
Digital technologies, such as artificial intelligence, cloud computing, the Internet of Things, data analytics and more are disrupting industries from healthcare and mining to telecoms and financial services.
More than a quarter of the US$3.8 trillion global IT market is in the United States (US). The industry accounts for 7.1 per cent of US gross domestic product and 11.6 per cent of US. private-sector employment. There are more than 100,000 software and IT services companies in the United States, and more than 99 per cent are small and medium-sized firms (under 500 employees).
In addition to the sheer volume of companies in the US eight of the top ten largest technology companies are headquartered in the US (Apple, Amazon, HP Inc. and HPE, Microsoft, IBM, Alphabet (Google), and Dell Technologies). These companies are leading the charge with disruptive technologies, investing heavily in research and development.
There are also relatively large clusters of venture capital investment in Los Angeles and Southern California, the Pacific Northwest, Texas (Austin, Houston, and Dallas) and Chicago. These investment clusters largely correspond with the technology hubs in the US (Source: Martin Prosperity Report 2016).
The demand for technology is driven by government, corporates, individuals, and educational institutions. Educational institutions in the US spent over US$6.6 billion on IT in 2015. IT spending for education in California alone was approximately US$2.3 billion. Institutions in Texas and New York had the second and third highest consumption of spending in the IT industry (Source: Centre for Digital Education, 2015).
The technology industry in the US is highly competitive and concentrated around several cities, driven by access to capital. The San Francisco Bay Area (including Silicon Valley) is by far the largest and most famous technology hub in the world, but is not the only place with a thriving technology scene in the US.
The San Francisco Bay Area topped the list with US$13.3 billion invested in 2015, accounting for almost forty per cent of the US total. New York accounts for almost ten per cent of the US total VC investment worth US$4.87 billion.
While access to capital is a driving factor behind location for many technology start-ups, it’s important to note that it should not be the only consideration. While the Bay Area accounts for forty per cent of the nation’s VC investment, it is also the most expensive place to do business and a highly competitive environment. Cities likes Austin, Boulder/Denver, and Milwaukee are smaller markets but each has a thriving community of technology start-ups with a less cut throat and cheaper environment for getting a company off the ground.
Marketing your products and services
The US market is the most competitive in the world and attracts ambitious companies and entrepreneurs from domestic and international markets. A competitive, well-formulated market strategy is essential and companies need to spend time and money understanding the market, their end user customers, their competitive position and their partnering approach to make market entry work. See Austrade's International Readiness Indicator for new exporters.
There are over 200 Australian ICT companies with a presence on the ground in the US. Most establish a sales and marketing operation in the US and keep R&D and support in Australia. However, a considerable investment is required to establish a US presence. Before establishing a presence, it is wise to have analysed US market potential and engage consultants or other advisers to assist with partner and customer introductions and sales and marketing planning.
There are also a number of incubators and accelerators in the US that offer partnerships and a soft landing into the United States market. There are a number of technology specific accelerators depending on your company.
Additionally, there is the Australian Government Landing Pad in San Francisco that was established as part of the National Innovation and Science Agenda. Find out more information about the San Francisco Landing Pad.
Business Software Alliance
Computer & Communications Industry Association (CCIA)
Information Technology Industry Council
Software and Information Industry Association
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