Benjie Sanders / Staff Todd Sander, left, and Bob Hagen, ITASA co-chairs. "We're on the edge of seeing significant changes," says Hagen.

By Jonathan J. Higuera
ARIZONA DAILY STAR

In the race to become a magnet for information technology companies, Tucson has done much in the last three years to strengthen its drawing power.

"We want to provide Tucsonans a chance to stay in a place they love, make a real wage and create a career path for their children and grandchildren," said Laura DeNinno, executive director of the The Information Technology Association of Southern Arizona, a professional trade group with about 250 dues-paying members.

To do that, ITASA has teamed with groups such as the Greater Tucson Economic Council, University of Arizona and other public and private entities to make Tucson more attractive to high-tech companies.

Together, they are tackling critical issues facing high-tech companies: Developing a strong local labor pool, encouraging venture capital investment, creating business opportunities by transferring academic research to commercial use and building the infrastructure needed to keep high-tech firms running smoothly.

"We're on the edge of seeing significant changes," said ITASA co-chair Bob Hagen. "We're already seeing it. Tucson will be much different in five years."

More than just computer firms

The local information technology industry includes far more than computer companies: It encompasses software engineers at Raytheon, tech specialists at the local newspapers and call center workers at Intuit. It includes a commercial printer who specializes in digital reproduction, a graphic artist - and anyone who maintains computers and computer networks at work.

Add up all those people and the numbers get big quickly. ITASA estimates that the local information technology industry includes 50,000 workers in more than 1,200 companies. Those companies generate nearly $4 billion in annual revenues.

Earlier this month, the Los Angeles-based Milken Institute ranked Tucson 23rd of 200 metro areas for its high-tech climate - up from 28th last year and 40th in 1998, when the survey began. The ranking was based on high-tech jobs, earnings growth and high-tech growth and output.

"Smaller tech firms don't want to be squeezed in big metro areas like San Jose, San Francisco or even Los Angeles," said Perry Wong, a Milken Institute economist. "If they can operate away from those centers, Tucson is a good place to be."

The obstacle for Tucson is its small base of tech companies, Wong said.

"Firms tend to move to locations that have an established technology base," he said. "Tucson is weak in that area and that could hamper development a little bit."

Silicon Valley-like growth

Mike Lupien, chief operations officer at Broadband Laboratories, sees the potential in Tucson. He lived in Silicon Valley for 10 years before moving here in 1996. The level of IT activity here is similar to what he saw in San Jose in early 90s.

"In a lot of ways Tucson reminds me of the Silicon Valley growth in the early years when there was so much energy stimulating small business growth."

Those similarities wouldn't have been drawn five years ago, said George Ball, executive vice president of Intersect Technologies, a local software company.

"Tucson is just now waking up to technology," he said. "The optics sector is going well but software is just starting to come into its own."

So what's different now from five years ago? It's the collaboration level between various groups, including the public sector, UA and the high-tech cluster groups, says Hagen.

ITASA has been instrumental in establishing the Southern Arizona Technology Council, a cross-cluster coordinating group, said Kendall Bert, director of the city's Economic Development Office.

The organization also works hard to bring together company owners and workers to discuss issues. Its 10 special-interest groups meet at least once a month on various topics, including human resources, marketing, teleservices and marketing.

"Silicon Valley exploded because people got together and said 'What if?' I think that's what ITASA has been fostering here," Lupien said.

The state has stepped up, too. This year, state lawmakers approved $1 million in funding to cluster groups. Last year, clusters received $100,000 from the Legislature, the first time it had ever funded clusters. That original funding - leveraged into more than $2 million when grouped with state, city, Greater Tucson Economic Council and county grants - was used to:

* Bolster work force development programs such as "Train to Gain," which trains promising teleservices workers for entry-level IT jobs.

* Create a job path awareness program designed to tell area high school and college students about industry careers, training opportunities and contacts.

* Launch a virtual one-stop employment center that allows job seekers and employers to connect via the Internet. The program, to launch next month, also instructs users where they can go to bolster their skills.

* Buy three computers for the Southern Arizona Institute for Advanced Technology, which provides certification and credit classes for high-demand jobs.

* Give $300,000 to the UA's technology transfer program, which turns research into commercially viable products.

Identifying skilled workers

The hot topic for IT companies is - and will continue to be - identifying a skilled local pool of workers to draw from.

"That's the number one thing I'm asked: 'Where do I find a skilled work force?' " said ITASA's DeNinno.

A solid work force requires a solid public education system, something ITASA addresses through partnerships. Still, it's something that needs considerable improvement, several local executives said.

"There's a lot of good activity but because kids can't make sense of this early enough, they get bored and don't make the jump into the work world," Broadband Laboratories' Lupien said.

Intersect's Ball said the quality of schools is one thing all information technology companies look at when deciding where to locate. And it's not just for labor - many workers want to know what kind of schools they'll be sending their kids to.

Marketing essential

The region's success will depend largely on its marketing efforts.

A recent marketing publication funded by GTEC and the clusters is one of the first to tout Tucson as something other than a vacation getaway or retirement community.

It frames Tucson as an ideal place to start a high-tech business, coupling lifestyle with technological opportunities. The publication was distributed in Silicon Valley and is sent out to companies that show an interest in Tucson.

Another $100,000 print advertising campaign ran in business journals in Seattle and Silicon Valley earlier this year. That effort started with a $20,000 state grant.

"There's a lot of room for growth and it's a great place to live," said Scott Greene, president and chief executive officer of Great Scott Enterprises, a computer consulting company. "We need to make people realize we're here."

"It all comes down to marketing," agreed Steve Levine, president of Aviator Software, which develops document management software. "If the city can sell and market itself, we see a lot of things happening."

Tucson's goal is not to replicate Silicon Valley, ITASA's DeNinno said, but rather to be a "quality addition to the Silicon Valleys of the world."

To do that, Tucson will have to find a way to attract more investment money for startup companies. To date, that flow has been minuscule compared with other cities around the nation.

"Trying to raise money is extremely difficult," said Aviator's Levine. "There is not a well-grounded investment history in Tucson, nor access to capital."

Some venture capital activity is starting to percolate. The Desert Angels, a network of individual investors, started last year, and Tucson Community Ventures, which has raised nearly $10 million, launched in January. Last August, the CERES Seed Fund, which offers early stage funding, opened. A couple of national venture capital firms have a Tucson presence as well.

"As we put capital in play, we'll attract better ideas to the community and get additional folks moving here," said Larry Aldrich, managing director of Tucson Community Ventures.

Pamela Sutherland, a manager of the CERES Seed Fund, agreed: "Whenever you start to get a critical mass happening, good stuff happens."

So far the fund has invested in two companies and is considering four more.

"There are a number of infrastructure-related IT companies that have the potential to be the next Apple Computer," Sutherland said. "People just have to start believing it."

* Contact Star Business reporter Jonathan J. Higuera at 573-4104 or at higuera@azstarnet.com.