Sunday, June 22, 2008

Dislocation Economy

Today's tale starts with a skill shortage in the United Kingdom and ends with the news that Eutechnyx "will open a games studio in Pittsburgh, Pennsylvania, later this year." Running the length of this narrative is the wealth of talent located in Southwestern Pennsylvania helping to fuel the boom of virtual collaboration:

Ansys makes 3-D simulation and testing software for the auto, aerospace and chemical-processing industries. Profit has grown 48% year on year in each of the last two quarters — the best in years.

Its shares rose 3% to a new high of 49.15 on Thursday.

The company also has beaten profit views by at least 16% in each of the past five quarters, though sales growth has decelerated over that span, from 91% to 25%.

The top line should get a boost from Ansys' planned $832 million buyout of Ansoft, which makes design tools for electronics makers.

Both are based in the Pittsburgh area but generate over 60% of revenue overseas. The merged firm will have annual sales of $500 million.

"The bottom line is we get a very talented group of people," said Ansys CEO Jim Cashman.

In my view, this emerging talent cluster is the core of Pittsburgh's comparative advantage, which is why Eutechnyx is seeking a Pittsburgh presence. Of course, there is a certain irony in businesses building better tools for virtual collaboration agglomerating in one region. However, that's exactly what is happening.

Driving much of the innovation is the Entertainment Technology Center (ETC) at Carnegie Mellon University. The best example I know about is Etcetera Edutainment, an ETC spin-off:

Etcetera Edutainment specializes in adapting the techniques and technologies of the videogame industry to simulations for training and educational purposes. Our mission is to be a leader in virtual training software for industry safety and education.

Eutechnyx is joining the party, albeit for the more expected purpose of entertainment. But instead of CMU graduates moving to the UK for a job, the jobs are beginning to come to them. Now if we can just help foreign-born Desis remain in the States, the regional economy might finally kick back into high-gear.

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