How Massachusetts Got Its Groove Back

The sign has been gone for a while. Route 128: AMERICA’S HIGH-TECH HIGHWAY, it boasted — the waymark of a boom that went bust almost a decade ago.

Today, if you’re driving down Route 128 with high tech on your mind, you could easily fall asleep at the wheel. Apart from a few buildings that poke above the trees with the occasional corporate logos visible to drivers (Parametric… Polaroid… Microsoft…), there’s not a whole heck of a lot to set visions of cyberspace whirling in your head.

By all appearances, this strip of asphalt is worlds removed from the 101 Freeway in Silicon Valley. That road stretches out for miles, a veritable Las Vegas Strip of the high-tech world, studded with signs that read like a roll-call of who’s who — and who matters — in the ever-faster, ever-changing computer industry. By comparison, Route 128 is a country road. It’s worth bearing in mind, however, that appearances can be deceiving. It may not be the nation’s high-tech highway anymore, but this isn’t your father’s Route 128, either. Scattered throughout the area, in small office suites, on large corporate campuses, and in university research labs, high-tech enterprises are thriving.

“There’s a real momentum in the industry here, and it’s growing,” contends Cathy Welsh, human resources director at the 1,100-employee Chelmsford operations of California-based Sun Microsystems, which recently broke ground on a Burlington site that will nearly double its current size. “There’s a lot of excitement here; there’s a second wind going on.” “There are a lot of roots here for the industry,” says Welsh, an 18-year veteran of the Bay State’s high-tech world. “A lot of things started here. I think Massachusetts is pushing to be back on the map.”

On the Rebound

Of course, Massachusetts never really has been off the high-tech map, literally or figuratively. This is the place, after all, that has given birth to some of the most important developments in the field: work stations, the Internet, e-mail, and interactive computing, as well as groundbreaking software applications like Lotus Notes.

But the region did falter, badly, when its industrial giants — notably, Wang and Digital Equipment Corp. — failed both to foresee and capitalize on the trend away from mainframe and minicomputers and into personal computers. (Sun’s Cathy Welsh still remembers her days at Digital, when company founder Ken Olsen dismissed personal computers as a “toy market.”)

Although Silicon Valley suffered a serious setback around the same time — when Japan captured the market in semiconductor memory — California rebounded from its crisis much more quickly, forging ahead of Massachusetts as the undisputed leader of the industry. Local optimism notwithstanding, it’s been a parlor game of sorts in recent years to compare the Massachusetts technology sector with California’s. What do they have that we don’t? And do we care?

In her 1994 book, Regional Advantage, AnnaLee Saxenian — a California urban planning professor — contends that one of the main reasons Massachusetts lost its edge was because of its hidebound culture. Unlike the Silicon Valley, where companies built open partnerships with each other and were willing to take risks, and where employees changed jobs frequently and networked constantly, Route 128’s business culture was more closed, conservative and hierarchical, and therefore less capable of adapting to a rapidly changing market, according to Saxenian’s analysis.

But a lot has changed since Saxenian wrote her book, which reviewed data only up to the year 1990. While the Silicon Valley has continued to dominate the field and generate endless hype and headlines, Massachusetts has quietly gotten on with the business of change.

According to a recent report by the Massachusetts Technology Collaborative, the state is developing a healthy technology-based economy, one that is driven by innovation and is far less dependent on defense spending and computer hardware — fields that each lost some 15,000 jobs between 1992 and 1997.

(Nine technology-based industry clusters were identified in the report as providing 35 percent of the state’s private sector payroll. The clusters include software and communications services, healthcare technology, computers and communications hardware, financial services, and innovation services. Together, the clusters accounted for a net increase in new employment of 18,220 jobs between 1992 and 1996.)

In comparing key growth indicators in Massachusetts with six other leading technology states — California, Florida, Illinois, New Jersey, New York, and Texas — the report found that Massachusetts ranked first in number of patents per capita. It also found that although the state’s share of the nation’s venture capital pool declined in 1996, the total was still an all-time high of $831.5 million. Initial public offerings (IPOs) rose from 32 in 1995 to 52 in 1996. And the state’s number of “gazelles” – rapidly growing, publicly traded companies — grew from 38 in 1992 to 99 in 1996.

“My perception is that the Boston area, and Massachusetts, are on the same track as Silicon Valley,” says Doug Henton, president of Collaborative Economics, a Bay Area firm which prepared the MTC report, and which has produced several similar reports on the Silicon Valley.

“There may be a couple of years lag between the two regions,” he says, “but today, the profiles are quite similar in terms of growth.”

Henton singles out the fields of health care technology, and software and telecommunications as particularly strong fields here. In fact, according to the Massachusetts Software Council, an industry organization with 550 members, software companies have exploded — growing from a total of 800 companies employing 46,000 people and generating $3 billion in revenue in 1989, to a 1997 total of 2,500 companies with 122,000 employees and $8 billion in revenues.

“We are doing just fine,” says Council President Joyce Plotkin. “We don’t have big visible companies. We have hundreds of smaller firms that are doing all sorts of exciting things. But because they’re small and they’re not public companies, they don’t get the publicity and the visibility that bigger companies do.”

“They fall below the radar screen of most of the people that track the industry,” she says. “We just don’t do as good a job of marketing ourselves as California does.”

One of those small companies is Courion Corp., a Natick-based company which is trying to carve out a potentially lucrative spot in the $1 billion market of help-desk software. As a former financial services consultant, Courion co-founder and CEO Chris Zannetos was struck by statistics showing that some 20 percent of the calls to computer help desks come from people who’ve forgotten their password. Zannetos has developed a small, Internet-based application, written in Java programming language, that eliminates the need for those calls by allowing users to, in essence, solve the problem themselves — saving costs for companies and increasing convenience for users.

“We’re not trying to get on the cover of Web Week with the latest cool thing,” says Zannetos, a Boston native and graduate of MIT. “We’re going after a niche in the market. We’ve developed the first product in what I think will be a long line of products that automate specific, common support functions for both internal employees and external customers.”

Courion, which is still in its start-up phase, grew from two employees (Zannetos and his partner) in June 1996, to 11 in November 1997, with plans to increase to some two dozen employees by the end of 1998. From the beginning, Zannetos adopted the kinds of attitudes and strategies that author Saxenian identified as West Coast strengths, including an open exchange of information and developing partnerships with other companies.

Already, Zannetos has formed seven partnerships that support his software in areas of marketing, sales and product capability. In addition, he participates in a monthly breakfast group that includes colleagues from a high-tech law firm, a venture capital company, and other software ventures.

“We get together to make connections and share advice,” he says. “There’s a lot of that sort of stuff happening around here. We’re just low-key about it. That’s more the Massachusetts style of doing things.”

Heading West

Across the country in San Francisco, Massachusetts native Mike Mullen goes to work each day to his dream job — playing computer video games and writing about them as an editor for GameSpot.

Although he’s not too crazy about the Bay Area’s high cost of living and he thinks San Francisco can’t match Boston for intellectual culture, Mullen loves the fact that he can wear a T-shirt to work while his friends back home slog through cold weather; that he works with people with colored hair and no one seems to mind; and that if he gets tired of this job, he can “basically walk over to the building next door and have another job.”

“I’ve been addicted to games since day one,” says the 25-year-old. “Most of the major video game publishers and designers are within 40 miles of this city. In Boston, if you have the ability and want to do database and networking, there’s tons of positions. But if you want to be an online editor or a programmer creating something new, there’s not a lot of opportunities to do something like that.”

Dan Nye is another transplant, a Harvard Business School graduate who wanted to go into high tech in Massachusetts but felt that in the early 1990s, the region’s big companies seemed “big and sort of established and bureaucratic.”

He headed west, to Intuit, where he is now director of marketing for small business products. Although Nye gives the Bay State high marks for its “awesome” intellectual horsepower and the availability of venture capital, he says that in the Bay Area and Silicon Valley, he always gets the feeling, “Wow, this is where it is — it’s all happening here.”

At a time when the computer industry is being driven by the exponential growth of the World Wide Web, he says, California is the hub of the new universe. “The Web is all about relationships and strategic alliances,” he says. “I’ve never known an industry more dependent on those than high tech.”

And if alliances are what matter, it doesn’t hurt to be down the street — instead of across the country — from the company that you’re interested in. “Arranging meetings is no big deal here, there’s a flow here” says Nye. “We get companies calling us all the time, saying, ‘Let’s work together,’ and we can say, ‘Okay, let’s meet this afternoon.’ “

“If we were on the East Coast,” he says, “we’d have to schedule something for two weeks out, get somebody on a plane. It’d be a big deal.”

Sybase CEO Mitchell Kertzman – one of Massachusetts’ most well-known emigrants — goes even further, calling current trends in the industry a “rich getting richer phenomenon,” with California leading the way. (Kertzman is also the founding chairman of MassINC, the publisher of CommonWealth.)

“Big companies are getting bigger,” he says. “Some of the more promising Boston-based companies are being bought up by California companies, but I’m not aware of any significant activity in reverse. All of that contributes to the current state of affairs, which is that California, the Bay Area, is extending its leadership and domination of computing technology.”

“That’s not to say that nothing interesting is going on in Boston,” Kertzman adds, “but in terms of the kind of critical mass required to be competitive, Massachusetts is slipping behind. There’s just more critical mass in California, more industry here.”

Fluidity and Loyalty

Climate, culture, critical mass — they’re all part of what continues to drive the Silicon Valley’s success. (Not to mention venture capital investment, which grew 73 percent between 1995 and 1996, to a total of $1.8 billion, twice the amount in Massachusetts, according to a 1997 report prepared by Collaborative Economics.)

But there are down sides to the California dream: Silicon Valley continues to face quality of life problems — such as traffic jams and high housing prices. And California high-tech employees — once lauded for their fluidity in frequent job changes — have begun to be viewed critically as “free agents,” who jump from company to company, looking for the best stock options.

“The people I worked with in California didn’t want to touch workers from Silicon Valley.”

“The people I worked with in California didn’t want to touch workers from Silicon Valley,” says Vickie Farrell, who left Massachusetts to work for a San Diego software firm, and recently returned to Boston. “They are seen as fickle and as having no commitment. If your stock values drops, they’re off to the next company. I think almost without exception, every sales and support person my company hired from the Silicon Valley was gone within two months.”

“My colleagues’ impression of Massachusetts and Boston employees, on the other hand,” she says, “was that they’re loyal, that they have a work ethic and they’re not going to flit off to the next thing.”

When the company decided to open a second engineering firm, she says, they looked East — and chose Burlington, Mass. They’re not the only ones: Many of the big players in the industry have a large Massachusetts presence, including Microsoft, Sybase, IBM (through its purchase of Lotus Development Corp.), and Sun Microsystems.

“Silicon Valley is just saturated. We find that within Sun, we can’t get employees to relocate to Silicon Valley,” says Cathy Welsh, who notes that her firm had lined up a Texas candidate for one of its top positions at California headquarters — only to be turned down by the prospective employee, who didn’t want to move there.

“Part of Sun’s strategy to expand here, to get more of our core businesses beyond the Bay Area is to take advantage of the talent base here, and of the lifestyle issues here,” she says. “New England has a lot of creativity and spirit.”

Alan Webber, founding editor of Fast Company, which covers the high-tech industry from its home base of Boston, sees virtues in the Massachusetts work force that, for a time, were seen as vices by many in the industry.

“The two coasts have very different styles of playing the game,” he says. “If you’re a sports fan and think of it in terms of offense, the West Coast offense is much more open, there’s much more fluidity. You’re playing the game on good turf and you can run faster and there’s a lot more room for improvisation.”

“The East Coast offense,” he says, “is used to bad turf and bad weather, and unexpected rain and snowstorms. It’s much more inclined to buckle down and play a little smash-mouth football, to play hard and be more conservative, because there’s an unpredictability of the environment that requires being somewhat more traditional. You’ve got to be more direct and less faddish, which I think is a strength.”

There is also a core group of Massachusetts loyalists who, while acknowledging the West Coast’s economic domination of the industry and the excellence of university resources such as Stanford, continue to argue that truly significant change is more likely to come from the East Coast.

“For those of us who’ve lived here all the time, we feel that we are, quote, the real place,” says Allen Razdow, a software pioneer who taught himself computer programming in B.F. Skinner’s lab at Harvard in 1967.

“Economically, yes, maybe the West Coast is where the big business is,” says Razdow, whose Kendall Square company, Torrent Systems, is doing cutting-edge work in parallel computing. “But they’re not doing fundamental, real technology. We’ve spawned the stuff that is being turned into trendy markets over in California; but they shouldn’t take themselves too seriously.”

“Two hundred years from now, nobody is going to remember Java,” he says of one of the industry’s hottest commodities, which was created by Sun. “Java is just the latest in a long line of programming languages. Things like that are not profound technologies.”

Razdow, and others like him, including Michael Dertouzos, director of MIT’s Laboratory for Computer Science, argue that advances in areas like artificial intelligence and biotechnology are more likely to be made in Massachusetts, which has a long, deeply rooted tradition of technology breakthroughs. (Boston also happens to lead the nation in research grants from the National Institutes of Health, money which is important to the development of new health care technologies.)

“The kinds of innovations that are under wraps now are powerful.”

“I have no concern about our long-term prospects,” says Dertouzos, whose new book, What Will Be, looks at how information technology will affect future lifestyles. “I know what’s happening in labs and centers around here. The kinds of innovations that are under wraps now, in areas like the Internet, software and human machine interfaces, are powerful.”

“Any one of these things could alter the course of the digital revolution,” he says. “They could dramatically alter the balance in what you see today. That’s the nature of the beast.”

New Challenges

But the Bay State’s high-tech future is not without a bug or two.

The same Massachusetts Technology Collaborative report that identified the Commonwealth’s strengths also found potential weaknesses. According to the report, for example, although the state’s eighth-graders rank at the top of national test scores in math and science, the number of undergraduate engineering degrees awarded in Massachusetts decreased by 35 percent between 1987 and 1996 (from 3,882 to 2,538).

The number of graduate engineering degrees rose by 14 percent during that same period, but still lagged well behind the national rate of 33 percent.

In addition, according to the report, Massachusetts’s growth in exports lagged behind the nation between 1991 and 1996, a rate of 21 percent compared with 31 percent nationally (and 47 percent in California).

“These are things that as long as you’re paying attention to them, can be handled,” says Fred Hoskins, vice-president of MTC. “It’s up to organizations like ours to pinpoint them and bring them to the attention of policy-makers.

“We need to look at the decline in engineering degrees, for example, and figure out how we deal with that,” he says. “In its simplest form, it might be communicating to high school guidance counselors that there’s a market for engineers out there.”

“The strengths we have are likely to remain and aren’t going to disappear overnight,” he says. “But that doesn’t mean we can just take them for granted. We need to nurture them.”

Some observers suggest that Massachusetts could learn a lesson from California in developing regional strategies for tackling industry problems. Although there are some organizations like the MTC (a public-private group) and the Software Council in the Bay State, there is nothing like “Joint Venture: Silicon Valley Network,” an activist group of government officials and local industry leaders who have promoted regional cooperation as a way of keeping the area’s high-tech industry competitive.

Since its beginning in 1992 (to a chorus of skeptical comments), Joint Venture has tackled a number of projects, including the development of economic business plans, fundraising efforts for local schools, lobbying for changes in state tax policy and working to keep Silicon Valley companies from migrating elsewhere.

“Since the recession of the early ’90s, there’s been an incredible amount of collaboration between industry and local public officials,” says Henton, of Collaborative Economics. “There’s an increasing number of people in the high-tech community who realize that if they don’t get involved in issues like education and industrial development, the whole region will suffer. They realize that it’s critical to the success of their companies.”

Still others lament the fact that Boston lacks a culture of computing — a general sense of buzz or public feeling that the area is an exciting place to be. They say last year’s loss of the MacWorld convention due to the city’s shortage of convention space — a $60 million loss in revenues and a less easily quantified loss of public enthusiasm — was a major blow, as was the closing of the Boston Computer Society, once one of the largest computer user groups in the world.

“One of the problems with this town is there’s a lot of politics,” says Al Natanagara, a site producer for the Wild Wild Web, a Newton-based syndicated television show that also produces Internet programming. “People are so dug in and so used to having their own way of seeing things that they don’t look to the future. I don’t think politicians are considering the computer industry as much as they should for the future of the area.”

Allan Webber, of Fast Company, argues that there should be more public and private efforts to create local and regional “coffee pots” — places, events, or organizations where people gather to share ideas.

“You’ve got to have get-togethers where people can find out they’re not just competitors, but they can share a regional agenda,” he says. “Most stuff happens by accident and by relationship and by fortuitous conversations. The more regional coffee pots you build for people to collect around and have conversations, the more likely you’ll be to have initiatives that work.”

But, warns Webber, conversations about the future should be about a lot more than the rivalry between Route 128 and Silicon Valley. Successful high-technology pockets are cropping up all across the country, from Arizona and Texas to Illinois and Florida, he notes.

“If Massachusetts is serious about doing better, it makes sense not to be fixated on California.”

“It’s no longer just a bi-coastal issue,” he says. “It’s not about East Coast-West Coast competition. If Massachusetts is really serious about doing better and about having more enterprises start here, grow here, and stay here, it makes a lot of sense not to be fixated on California.”

Meet the Author
“You’ve got to look at all the things going on,” he says. “Look at other unanticipated competitors, whether it’s South Dakota, Miami, or Austin, and ask, ‘How are other people playing the game? How can we learn from them?’ “

Sara Terry Gabrels is a free-lance writer in Boston, whose work has appeared in the Christian Science Monitor, The Boston Globe, and the New York Times Magazine.