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Great article by the same economic think tank that puts on the yearly economic seminar for the state.
High-Tech Soars Despite Pandemic
by Christina Quick Henderson Montana Business Quarterly
When COVID-19 first hit the United States in the spring of 2020, Bozeman software company Zoot Enterprises acted quickly to address the health crisis. According to president and CTO Tony Rosanova, Zoot upgraded cleaning, safety and air handling practices, and shifted some teams to fully remote work.As the pandemic accelerated into an economic crisis, Zoot, which provides advanced decisioning engines and data connection solutions, saw its revenue pipeline abruptly shut off.
“We had retail clients that closed their doors or had their doors closed for them because of lockdowns,” Rosanova said. “They saw 30% to 40% revenue reductions, and those were direct translations to us … As we were moving through March, April and May of last year, it was a very uncertain time.”
Early on, Zoot’s leaders focused on maintaining stability for their workforce of around 300 employees. As the year progressed, Zoot found new business, pivoting to support clients in e-commerce and laying the groundwork to advance into the medical industry. Approaching the midpoint of 2021, around three-quarters of Zoot employees have returned to the office and things are looking up.
“There’s just a great deal of activity out there,” Rosanova said. “And it’s not just Zoot – it’s the community, it’s our business world and it’s our staff. There’s just a new energy and excitement. It was a really tough year last year for everyone … So it’s nice for things to be moving again.”
Zoot’s story reflects the experience of many Montana tech companies during COVID-19, and the larger trend of an industry that has adapted to meet the challenges of 2020 and come back strong in 2021.Multi-Year Trend of Fast Growth ContinuesIn May 2021, the Bureau of Business and Economic Research at the University of Montana completed its seventh annual survey of Montana’s high-tech and manufacturing companies commissioned by the Montana High Tech Business Alliance. The report found Montana’s tech sector generated more than $2.9 billion in revenues in 2020, up from $2.5 billion in 2019. It is growing up to seven times faster than other sectors.Tech firms employ about 15,772 workers and pay an average salary of $73,100, 59% higher than the average earnings per Montana worker. Companies surveyed expect to add 1,500 new jobs in 2021, making a significant contribution to Montana’s recovery from the pandemic recession.
Montana high-tech companies plan to increase wages by 5% in 2021, somewhat faster than the 4.2% growth rate of all Montana employers. Survey respondents anticipated making at least $164 million in capital expenditures in Montana in 2021, a significant increase from anticipated 2020 capital expenditures ($133 million).
Firms reported that access to capital was their largest impediment to faster growth. For the first year in four years, slightly more high-tech leaders (12%) said that it was harder to obtain capital in 2020 compared to the previous year (9%). Other frequently mentioned impediments to growth were the need for new customers, visibility or marketing, and hiring skilled technology workers.
Despite pandemic-induced headwinds, deals kept flowing in 2020. Missoula-based biotech company Inimmune secured a $22 million series A investment from Two Bear Capital in Whitefish. Major acquisitions of Ascent Vision Technologies in Bozeman and Helix Business Solutions in Dillon also fueled economic growth across the state.
COVID-19 Accelerated Remote Work, Technology Adoption
The 2021 survey asked tech businesses what challenges and opportunities they faced due to the pandemic. The most frequently cited COVID-related challenge was conducting internal communications and other management activities while working remotely, followed by a loss of sales and economic uncertainty. The main opportunities created by COVID-19 were increased acceptance of or need for technology and increased sales.
Ryan Hansen, founder and CEO of marketing technology company Lumenad, found that like Zoot Enterprises, revenues slowed abruptly early in the pandemic, but later picked up as businesses rushed to get online.
Lumenad has roughly 80 employees, with about 10 in the Bozeman office, 20 outside Montana, and the rest at the Missoula headquarters. Like many leaders, Hansen is wrestling with how to safely bring employees back to the office, and how to organize hybrid work going forward.
“We’re going to try to find that balance between asynchronous distributed work and work centered around an office,” Hansen said. “People aren’t necessarily looking to rid themselves of that office culture entirely … There’s something fun about just being around colleagues, collaborating and teamwork and making friends … I think right now we’re taking for granted how important of a role the office environment plays, just so long as you’re not forced to be there Monday through Friday, 9 to 5.”
For the seventh year, the survey found Montana’s quality of life – its lifestyle, work/life balance, recreational opportunities and the beauty of the landscape – provided significant advantages to doing business. During the pandemic, the ability to spend time outdoors was a particular advantage.
Hansen believes offering flexibility for employees to enjoy the Montana lifestyle alongside the benefits of an office could help tech companies like his attract talent.
“People want to be in Montana,” Hansen said. “Now, because of the transition to fully remote that’s been embraced by the Twitters and the Facebooks … There’s going to be greater competition for the people who want to work fully remotely. But I think we can be very successful competing for the people who want to still have an office component to their job. Montana is an awesome place to do that hybrid work, where you can have a little bit more of a flexible day to get to go do whatever it is you want to do.”
Challenges Finding Skilled Talent, Lack of Affordable Housing, Access to Childcare
Hiring a skilled workforce has been one of the biggest barriers to growth facing Montana tech companies for the past seven years. Leaders say dynamics in the wider community compound the problem.
“The cost of living in Bozeman is becoming a really difficult variable for hiring qualified people,” Rosanova said. “And then also childcare is becoming a really significant impact on our workforce.”
Zoot Enterprises invested in on-site childcare at its Bozeman headquarters in 2018, as a benefit to attract and retain workers. According to Rosanova, the childcare facility doubled in size this year due to increased demand. Finding qualified teachers has been a challenge, though Zoot childcare workers receive the same benefits package as other employees, including full healthcare and 401k.
Rosanova said Zoot has worked hard to bring staff back together in the office, recovering a culture of “collaboration, spontaneity, nimbleness and entrepreneurship” that was hampered by remote work. Zoot’s workforce strategy also includes growing its smaller office in Billings to take advantage of a new pool of talent and lower cost of living there, particularly in housing.
Missoula tech companies also face workforce challenges due to the steep increase in housing costs during the pandemic. By the end of the first quarter of 2021, the median home price was up 20% to $420,000 according to a report by the Missoula Organization of Realtors.
“The flock of people moving to Montana is making it very, very expensive for our employees to live here,” said Hansen. “This is going to be a new thing that we’re going to have to figure out how to navigate because most of our entry-level employees aren’t going to be able to afford to buy a house in Missoula … The demand for Montana housing has skyrocketed.”
Companies in rural Montana have not been spared by the housing crunch.
Katie Spika, CEO of Spika Design and Manufacturing in Lewistown, said her biggest concern for growth is homes for their workforce of about 50. Spika is hiring positions in assembling, welding, machining and engineering.
“We’re trying to hire but really struggling,” Spika said. “Like a lot of places, Lewistown is having a horrible housing challenge. There are 11 homes on the market right now in [practically] all of central Montana, and they’re not homes worth having. There’s nowhere to rent. Prices are going up. So bringing in people is really hard.”
For the third year, the survey asked what job titles tech firms hire most often. The most frequent response was software developer/computer programmer, followed by sales representative and engineer. When asked what skills they are looking for in new hires, employers most often said coding and software development, followed by sales or marketing, communication skills, general experience and problem solving.
Like many employers, Spika prioritizes cultural fit and personal strengths in candidates.
“We really need people who kind of thrive on challenge, are very adaptable and good at problem solving,” Spika said. “[We also] just need people who want to live this small town, Montana way of life.”
Spika is also looking for workers who are generous with their time, help other teammates and help the community. To underscore these values, Spika Design and Manufacturing commits to a companywide day of service every year and provides 12 hours of paid volunteer time for employees.
Across the state, the pandemic has made it harder for companies to find talent. Lumenad has been hiring varied roles in engineering, accounting, administration, marketing and content management.
“We’re finding ourselves really having to up level our recruiting capabilities,” said Hansen. “We have never had as hard of a time finding experienced candidates as we have today. The amount of time our positions are open, and how aggressively we are having to recruit people, feels very different than pre-pandemic. It is a job seeker’s market right now.”
Lumenad has worked to strengthen its workforce pipeline by partnering with the University of Montana’s College of Business to develop a new course in marketing analytics.
“Our customers are all over the country and not in Montana,” Hansen said. “We help marketers navigate this world of advertising technology. And it’s cool to be able to bring those capabilities into the business school to teach the next generation of marketers.”
Zoot Enterprises also partners with higher education and economic development organizations to develop workforce locally. Zoot hosts college and high school internships that provide meaningful experiences for students and ROI for the company.
“We hire [interns] to come and work on specific projects that are of value to the organization … So they get to walk out with a sense of pride and ownership in what they do,” Rosanova said. “Last year, [Zoot] had significant cost savings and efficiency gains on specific projects we did to the tune of six figures.”
Though the pandemic has changed some dynamics in the economy, tech leaders still see the same benefits to doing business in Montana.
“We cannot overlook the quality of life in Montana,” Rosanova said. “We can’t overlook the quality of the individuals that live here, that work ethic, the true commitment to doing what they do well. You take that and couple it with a beautiful place and a healthy supportive business environment … It’s a pretty easy sell.”
Source: High-Tech Soars Despite Pandemic | Montana Business Quarterly