When people discuss America`s high-technology industrial centers, they invariably mention California`s Silicon Valley and Boston`s Route 128. They may not say much about Chicago, but maybe they`re missing something.
Although decidedly a low profile in the company of the nation`s East and West Coasts, Chicago`s high-tech scene is in some ways steadier and more secure than its flashier cousins, and-at least of late-more prosperous.
Though several hardware and software firms call Chicago`s environs home, few would assert that the nation`s heartland is in the same league with the coasts when it comes to numbers of computer firms.
But the Chicago area`s diverse technologic base includes many firms that help others plan and implement computer systems. It also includes
manufacturers that design and build hardware and software into products that, though not computers, use similar technology.
This diversity has helped Chicago`s high-tech stalwarts weather the current recession better than their coastal brethren. Though there is no cause for complacency, local denizens usually are pleased that their businesses are in the Midwest, and some even say they have coastal colleagues who wish they were here.
One enterprise with a good perspective on Chicago`s standing as a computer industry center is Interactive Systems Corp., a Kodak company that provides software, consulting and development services for businesses. Interactive moved its headquarters from Santa Monica, Calif., to Naperville in January.
Many factors make this area attractive, said Ezra Goldman, Interactive marketing vice president. Many intensive technology users, such as markets traders and brokers, are located here and they are excellent customers for the open-systems products that Interactive provides, Goldman said.
”We`ve been doing business here since we were founded in 1977,” he said. ”And the average length of time an employee stays with us is six years, which is a lot longer than what anyone sees in California. It has a lot to do with the Midwest culture. I have a lot of friends who moved out to California and who moved back here within a year or two.
”I`m satisfied we`re doing good high-tech work here but with a better quality of life, and I think our employees agree.”
Tim Millar, president of AIS, a Palatine-based systems integrator, also finds the Midwest more congenial than Silicon Valley, where his firm has a software development company.
”The valley is losing a lot of its charm,” Millar said. ”One reason is the high cost of living out there. You need good people to run systems and do support work-good technicians-but they are running out of them in Silicon Valley because of high costs. . . . We have plenty available in Chicago.
”And we are closer to our customers here. We set up networks and test them in corporate offices. You don`t have firms like Firestone or Sears with headquarters nearby in Silicon Valley.”
Even during the current recession, Millar said, his firm has experienced growth of 10 to 30 percent, and most of that business has come from the Midwest.
”A lot of businesses are leaving Silicon Valley,” he said. ”The tax rate there is triple ours.”
Chicagoans in traditional software and hardware computing businesses also find many advantages to the area`s central location.
Dan Rosensteel, a vice president of Zenith Data Systems, a laptop computer maker headquartered in Buffalo Grove, said that ”we are well-positioned to reach out into the world. Having O`Hare Airport close by is a real plus.”
Zenith Data added 50 employees last year and boosted research and development by 25 percent, Rosensteel said.
Larry J. Ford, chief executive officer of System Software Associates in Chicago, the largest supplier of software for International Business Machines Corp.`s AS/400 computer line, said that he has noticed it is easier to travel from Chicago than from the coasts.
Several years ago, Silicon Valley was such an icon of high technology that any place aspiring to lure technological firms began to speak of itself as ”the Silicon Valley of (your name here).”
About 5 to 10 years ago there was talk about the high-tech corridor along the East-West Tollway being such a center. Many technology-oriented companies, including AT&T Bell Labs and Amoco Corp., have research centers there. But technology firms also are flung north, northwest and south of Chicago as well as residing inside it.
Failure of technology to cluster in any one corridor or sector may reflect the technologic diversity here.
”The nature of technology here is different,” said Dennis Rheault, a vice president in the Chicago office of Boston Consulting Group, which does strategic management consulting. ”An awful lot of software is shipped from the Midwest, but it`s in bigger systems than just personal computers. What you see is an established firm, like Motorola, pioneering new technology, instead of lots of little startup firms that keep coming and going in Silicon Valley.”
CIMLINC, a firm that develops software for manufacturing equipment, finds its Itasca location advantageous, said John West, company president.
”We have a mindset in the Midwest that is attuned to manufacturing,” he said. ”Manufacturers here have been through these cycles so many times, they`ve really gotten their processes down pretty well. It is an advantage for us to be here, near these customers.”
The Illinois technology corridor in Du Page County is an excellent candidate to attract a variety of technology firms later in this decade when the Advanced Photon Source at Argonne National Laboratory, near Darien, begins operation.
The facility, which will create the world`s brightest light beams, should attract firms that want to be near this unique research tool.
”Any time you bring together investment and brain power, you get technology development,” said Gary Curtis, another Boston Consulting vice president.
Pharmaceutical firms such as Baxter Healthcare Corp., Deerfield, and Abbott Laboratories, North Chicago, are often unrecognized developers of computer technology used in diagnostic medical test equipment, said Rud Istvan, vice president and director of new business development at Motorola`s automotive and industrial electronics group.
”What they are developing isn`t a computer, but it`s computer technology with special applications,” Istvan said. ”The same is true for telecommunications. The chips and software that go into the products are the same as used in the computer industry, but the products are different.”
If there is a single facet of workplace technology in which Chicago-area firms excel, it probably is in helping businesses plan strategies and implement the technology needed to execute them.
Andersen Consulting, a part of St. Charles-based Arther Andersen & Co., is a leader in this field, and several other practitioners are also based here. This enterprise lies at the heart of using technology effectively, but because of its subtleties, it seldom enjoys the public attention of hardware and software products.
Failure to plan well before implementing technology can mean that even the slickest new system won`t produce real benefits for a company.
”One fallacy we work with all the time is that . . . coming up with a good idea and creating a technologic solution . . . will by itself create a benefit,” said Martin Brown, an Andersen Consulting partner. ”That is clearly not the case.
”The only way it works is if you create a partnership between the systems people and the operations people. You have to have them work together to figure out what the machines will do and what the people will do with them. ”In a lot of cases it happens that a system is near perfection, but it fails because the people working with it had no idea how to make the job better as a result of the system. We probably drive our clients crazy with our focus on cost benefits and business justification for the technology, but that`s what you must do to realize the benefits.
”Technology management is becoming much more important, and there is less and less excitement now over new hardware, new products.”
That attitude may be especially prevalent in the Midwest. Business people here have never been as enamored of new technology for its own sake as their counterparts on the coasts, say people who sell that technology.
”When our sales representatives go out to make a call and talk about the latest and greatest products that have just been announced, they get a cool reception,” said John Kunzer, president of Micro Age Computer Centers of St. Charles. ”The customers are glad to hear about it, but they tell us to come back in six months. They want to see if all the bugs are out of these new products yet.
”Midwestern businesses aren`t behind in technology, but they prefer the tried and true to the latest and greatest. They`ll use the technology, but may skip some bells and whistles in favor of reliability.”
Carlos Frum, president of Northbrook Computers, has a similar impression. ”Midwesterners are certainly keeping up with technology, but they aren`t experimenting with things as much as you might see around Silicon Valley or near Boston,” he said.
There is good reason for conservatism. Often new products come and go so quickly there is little software or support for them. Cycles of boom and stagnation are common to hardware and software markets.
The Chicago area`s emphasis on computer planning and consulting rather than hardware and software production may help avoid some aspects of cyclical swings, said Michael G. Witt, vice president of the Chicago Computing Co. in Lincolnwood.
”Both Boston and Silicon Valley are in stagnation, but Chicago is a service area, as opposed to new products, and we`re going at a good pace,”
Witt said.
Even though the recession hasn`t been as hard on Midwest technology firms as on those elsewhere, this is no time for Chicago high-tech firms to feel smug. The winds of change blowing through the industry will have an effect here, observers expect.
John West of CIMLINC noted that many Chicago area firms are built around the fortunes of IBM. System Software Associates, Chicago, writes software for IBM machines, and Comdisco of Rosemont leases IBM machines to businesses. As Big Blue restructures itself, striving to regain competitive advantage, companies in its orbit should be careful, West said.
”My perspective is that IBM is going through a real soul-searching,” he said. ”Some strange shifts are going on within companies-downsizing, outsourcing and so on. All are attacking IBM`s lifeblood, which is the mainframe computer. It is causing IBM to rethink its model, and companies built up around supporting IBM have got to rethink their strategy.”
In the final analysis, West said, one reason Chicago doesn`t have the array of startup computer companies seen on the coasts is that the area lacks an infrastructure to nurture them. The right mix of venture capitalists as well as bankers and lawyers with an eye for new technology are needed to incubate an area`s brain power in forming new ventures, he said.
Though they`re threatening, changes rippling through the computer industry and the U.S. economy offer an opportunity for reassessment and change, West said.
”Companies don`t change on their own,” he said. ”There`s too much pain associated with it. But in an economic downturn, they are forced to change, and that`s happening now. It`s going to be painful, but I hope this experience will put us back into a competitive posture to face the world markets.”
