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San Francisco digital economy worth billions

Industry Standard

(IDG) -- Amid San Francisco's recent cultural backlash against a perceived "dot-com invasion," a new study reveals just how important San Francisco's digital economy is to the success of the city.

The study, conducted by the San Francisco Partnership, a corporate-funded consultancy specializing in relocating businesses to San Francisco, found that the city's digital-economy revenue reached $5.7 billion in 1999 -- a 500 percent increase over 1995.

The number of employees working in San Francisco's digital economy reached 40,000 in 1999. An additional 42,000 workers are employed by San Francisco-based companies but work in satellite offices outside the city.

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Digital-economy companies included in the study were software developers, service providers, content developers and content services, as well as business-to-business and business-to-consumer e-commerce companies. Offline companies with significant Web presence, such as Gap and Williams-Sonoma, were not included.

Though it is difficult to gather comparable data for other cities, similar studies last year estimated -- not surprisingly -- that San Francisco was one of the top U.S. cities for Net-related businesses.

The average San Francisco digital-economy firm reported $4 million in revenue, with 74 percent of that revenue coming from digital-industry activities. San Francisco's payroll for the digital industry clocked in at $2 billion in 1999.

The study revealed what many have already suspected: The robust competition for digital-economy employees in San Francisco makes them better paid than employees in the rest of the country.

"In general, San Francisco's salaries are 28 percent higher than the rest of the nation," says Marie Jones, director of economic development at the San Francisco Partnership. In fact, the report found that salaries for management positions average almost $155,000 in San Francisco, which is 81 percent higher than the rest of the nation. Systems administrators, bringing home an average salary of $73,000 in San Francisco, are making 41 percent more than the rest of the country. A total of 88 percent of San Francisco's employees have stock options, while only one-third of digital-industry employees have them nationwide. (All of the report's nationwide comparative data originated from a study by the Association of Internet Professionals.)

It is estimated that 9,000 new digital-economy jobs will be created in San Francisco in 2000. But filling those positions is a challenge: 45 percent of San Francisco companies reported that recruiting and hiring is the greatest obstacle they face in terms of company growth. The average annual turnover of employees in San Francisco is 24 percent.

"There is a shortage of employees," says Jones. "We'll see more [digital companies] tempting reverse commuters from going to [work in] the South Bay with salaries and stock options." Currently, 60 percent of San Francisco's digital-economy workers live in the city limits, higher than the 54 percent average for all industries, according to a recent report published by the San Francisco Planning and Urban Research Association.

Currently, 24 percent of San Francisco's digital-economy workers are minorities, not much lower than New York's 26 percent. While New York's digital-economy employees are 38 percent female, San Francisco's high-tech workforce is 45 percent female.

The study received a 6 percent response rate from the 1,048 companies in San Francisco that the San Francisco Partnership considered within the digital-economy parameters. Though the rate is low, the authors found their results in-line with similar data from the Employment Development Department and the Department of Commerce.

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