Kansas City’s growing technology ecosystem is a critical component of the region’s overall vitality. Given the new possibilities of remote work, significant investment in the city’s tech sector in recent years and the region’s employment picture, Kansas City and its tech industry are poised to flourish as some workers decide to move inward from the coasts.
As of the first quarter of 2022, the Kansas City metro area had recovered 81% of the jobs it lost during 2020, according to Oxford Economics, and all lost jobs are expected to be recovered by the end of 2022. Throughout the pandemic, the region’s recovery has outpaced the overall U.S. recovery rate, and that trend is expected to continue. In addition, the significant number of federal government jobs in the metro has helped to mitigate the volatility in the labor market.
The metro has a younger population and a higher employment rate in STEM occupations than the United States on average, and the area is expected to grow via migration. Kansas City also has an affordability factor; the metro’s income distribution is more heavily weighted to the middle class than other metros, with households earning more than the national average in all income groups other than those making less than $35,000 and over $250,000 annually.
As the Kansas City technology sector works to expand its thriving tech ecosystem for a post-pandemic future, it will be critical for companies to embrace the technologies shaping the way we work, communicate, educate, care, and entertain. And investment trends show that ecosystem is already drawing attention; the region has recently experienced substantial venture capital and private equity investment in technology companies. Over $22 billion of capital has been invested in regionally-based tech companies in over 1,200 deals in the trailing four and a half years, according to PitchBook Data Inc.
Small and large businesses alike will likely take advantage of this moment to increase discretionary spending. However, it would be wise to focus a large portion of that spending on technology implementation and upgrades to meet the demands of new hybrid work environments. Plenty of businesses—not just in the tech sector—are already upping their expenditures; 42% of respondents to the second-quarter RSM US Middle Market Business Index survey said in April that they had increased capital expenditures, and 51% expected to do so during the next six months.
Investment in talent will be just as important. The competition for—and cost of—highly skilled technology talent climbed significantly in 2021, and although wage pressure has subsided slightly, wage levels remain elevated in 2022. Moreover, in the same survey mentioned above, 62% of executives reported raising compensation in the last three months. The tech industry job market has experienced more competition than most other sectors as technology companies move to make some or all positions remote. That means the competition for top tech talent finds employers not only competing with regional rivals, but also at a national level. On one hand, this will likely benefit Kansas City as the talent pool expands and more top-tier candidates become available than in the past.
The drawback, however, is that top tech talent will continue to require more competitive compensation packages as have been historically offered by coastal tech employers, including those residing locally. As of this release, the median pay for tech occupations in Kansas City is $81,500, which falls $11,200 below the national median of $92,700. The comparison of median tech salaries to median area salaries also shines Kansas City in a less competitive light. Nationally, the median tech salary is 120% higher than the median for all jobs. The same measure for Kansas City is 93%, which for a government job-heavy metro leaves plenty of opportunities for improvement.
The elevated labor costs will likely prompt tech companies to explore the use of artificial intelligence and automation to free their teams from repetitive manual processes, in turn allowing them to retrain and upskill their local workforce. Almost $2.4 billion of capital has been invested in AI and automation companies over 278 deals in Kansas and Missouri since 2018, according to data compiled by PitchBook.
The pace of technology adoption will continue as technology finds its way into every corner of our economy. If a company suspends its technology investments, it could disrupt its business model. Kansas City businesses are continually looking to enhance customer relationships, operational effectiveness, and their company’s culture. With labor and competitive challenges in Kansas City and across the United States on the rise, there has never been a better time to invest in technology.
RSM US LLP is proud to be a Cornerstone Sponsor of the KC Tech Council and grateful for the opportunity to be a part of this year’s KC Tech Specs report. RSM is the leading U.S. provider of audit, tax, and consulting services to the middle market. We understand the importance of communicating industry-specific trends to Kansas City and are grateful for the opportunity to promote the technology ecosystem in this great city.
Senior Analyst Technology, Media & Telecommunications Senior Analyst & Director
Technical Accounting Consulting