Report: Computer modeling sector showing signs of healthy growth

Computer modeling and simulation in Hampton Roads continues to grow, and workers are reaping the benefits, according to an economic report released Friday by Old Dominion University.

During the past three years, the average annual salary earned by employees in the industry jumped 37.4 percent, to $82,733 from $60,212 - more than double the region's average salary of $38,428.

Officials said the sharp rise in pay - based on survey responses from 53 private companies and public-sector agencies - is a sign of healthy growth in a high-tech industry that regional leaders have been trying to nurture for the past decade.

The sector has grown around the military's Joint Forces Command warfighting and experimentation complex in Suffolk, but officials are aiming to diversify beyond defense into such areas as medicine, education, homeland security and transportation.

"I think the news there is very, very positive," said Mike McGinnis, executive director of ODU's Virginia Modeling, Analysis and Simulation Center, or VMASC, in Suffolk, which commissioned the report.

The new report updates a 2004 study that attempted for the first time to measure the sector's

contributions to the local economy.

Trying to compare results between the two reports, however, was complicated because of changes made to the economic model used to estimate the industry's impact.

The changes altered how the economic model measured the "multiplier effect" on the region as dollars generated by modeling and simulation businesses filtered throughout the economy. The model was revised to account for changes the federal government made to how it classifies certain industries.

The 2004 report said the industry pumped $413 million into the economy and accounted for 4,023 jobs. The new report indicates that the sector in 2007 contributed nearly $365 million and 4,420 jobs.

That appears to be a decline in economic output of $48 million over the three years. However, when the updated economic model was used to analyze the 2004 data, the output that year was calculated to be only $258.4 million and 3,524 jobs.

That means that the industry's economic output grew by more than 41 percent and jobs by 25 percent.

ODU delayed the report's release by more than two months to verify the accuracy of the conclusions, McGinnis said.

"Maybe in 2004 they overestimated what the economic impact was, or in 2007, with the

changes they made to the model, they are not counting some of the impacts," McGinnis said. "Regardless, a 40 percent improvement in economic output over a 2-1/2 -year period is good news. I'd take that any day in the stock market."

Jack McGinn, an operations manager at Alion Science and Technology in Norfolk and chairman of VMASC's board of advisers, said salaries are rising because the demand for workers is outpacing the supply and companies are paying more to keep the employees they have.

"We've got good people, they're highly trained, and we can't afford to lose them," McGinn said.

Nearly two-thirds of private-sector employers in the survey agreed that the region's labor force lacks people trained in modeling and simulation. A majority of the businesses responding employed fewer than 100 workers, had annual sales of $50 million or less and have been in the area for at least six years.

"It's an emerging industry, and we're all drawing from the same labor pool," McGinn said.

Vinod Agarwal, an ODU economist not involved in the report, said the results look "very good" and indicate healthy growth, especially in salaries.

"I think it's a very important industry for this area," Agarwal said. "It is too early to say how far it will go, but it seems to be going in the right direction."

Jon W. Glass, (757) 446-2318, jon.glass@pilotonline.com