Technology is Big Business – Colorado’s High Tech History

In the early 1970s, Colorado had more in common with West Texas than it did with Silicon Valley. The agricultural reports led off KOA’s morning business broadcast. Programming jobs were few and far between, outside of a few large companies and the government. This magazine published its first issue, and words about mining, water and energy dominated the pages. As it related to business, technology was ultra-specialized and ultra-expensive, and garnered only a tiny fraction of the ink.

But the foundation for today’s high-tech economy was already in place. The federal labs in Boulder and the military and space installations in Colorado Springs were both products of the 1950s. Colorado’s remote, mid-continent location made it a defense hub, in turn luring contractors like Martin Marietta and Ball Aerospace. By 1960, when Hewlett-Packard chose Loveland as the site of its first manufacturing facility outside of California, the high-tech ball had started to slowly roll.

Developer George M. Wallace helped speed things along by transforming 40 acres of pasture into the Denver Technological Center, beginning in 1962, as did the arrival of the University of Colorado as a research center for space technology and other leading-edge subjects.

IBM followed H-P to the Centennial State in 1965, opening its manufacturing plant and R&D labs near Boulder. Within six months, IBM Boulder was swamped with 10,000 applications and requests for transfer to the new facility. Programmers and engineers started arriving on a daily basis, not unlike the newcomers who came in search of gold and silver a century earlier. It became apparent that recruiting high-tech talent to Colorado would not be a problem.

Thanks to the presence of this diverse mix of national companies and federal entities, the state’s high-tech labor pool got deeper and deeper. In 1969, four engineers left IBM and founded a data storage startup that would make an indelible mark on the state’s emerging tech landscape as its first and foremost homegrown hero. That company – StorageTek – ultimately made Boulder County a capital for the storage industry, spawning dozens of startups in the process.

In the last 35 years, companies have come and gone, technologies have materialized and become obsolete, and innovation has surpassed our wildest dreams. Decade by decade, the only constant has been change.

1970s –

“The modern office is built around 19th century devices – the typewriter and the telephoneâÂ?¦The communications revolution has come to Colorado, and the Colorado businessman can save money and get greater productivity by utilizing new products and services.” – Colorado Business, December 1978, “A Revolution In Communications,” by Dennis R. DuBe

The disco decade saw more than 100 high-tech manufacturing companies commence operations in Colorado, as banking, insurance, healthcare and other old-guard industries welcomed information technology with open arms. IBM, H-P, and numerous now-defunct hardware suppliers saw sales boom.

After Jesse Aweida, Zoltan Herger, Juan Rodriguez and Tom Kavanagh left IBM and struck out on their own in 1969, the four launched the company now known as StorageTek from an office above the Aristocrat Steak House (the home of The Gap today) on Pearl Street. The company’s early growth curve was impressively steep, and it quickly captured the leading market share in the tape storage market – a position it continues to hold to this day.

In the early 1970s, Aweida and company had modest goals: to capitalize on the demand for high-performance data storage products, and capture a small chunk of IBM’s business in the process. Did Aweida ever fancy StorageTek becoming a $1 billion dollar business by 1982? “No way,” he answered. “At that time, we thought maybe $10 million.”

But the big-business acceptance of IT resulted in hefty revenue gains for StorageTek during the ’70s, and downward pressure on pricing led smaller companies to get in the game during the decade as well. Founded in 1972, Denver-based Lewan & Associates, Inc. was selling watches and typewriters in its early days, migrating into more advanced technology as it became available.

Another company that emerged to meet the IT needs of business was J.D. Edwards & Company, founded in Denver in 1977. Initially a three-person consulting firm, the company grew into an enviable position as a 5,000-employee leader in the ERP market in the time since. Recalled Idella Kercher, J.D. Edwards’ first hire and now vice president of customer advocacy: “That first year we billed $160,000 in consulting revenues. Last year in consulting, our billings were about $600 million.”

On the wall of Kercher’s office today is a framed copy of J.D. Edwards’ first invoice. The highest hourly consulting fee: $29. “Now I bet you can’t find a consultant for less than $200 an hour,” she laughed.

Denver’s cable seeds were also sown during the ’70s, when entrepreneurs like Bill Daniels, Bob Magness, John Malone and Glenn Jones ramped up the industry, initially to serve rural customers in Colorado and Wyoming. After HBO aired “The Thrilla live via satellite in Manilla” boxing match in 1975, it became clear to Colorado’s cable mavericks that content would drive the industry forward in the years to come. And they were right.

1980s –

“As new technological developments continue to spiral, it’s obvious that Colorado’s technological infrastructure will grow at a similar pace. Technical types talk about Colorado having reached a level of ‘critical mass’ – which apparently means that the working environment has evolved into a sophisticated network of beneficial interactive relationships.” – Colorado Business, October 1982, “From Cow Chips to Computer Chips,” by Sharon Almirall and Glenn Meyers

This critical mass in high tech turned out to be a savior for the state’s economy after the oil bust of 1982 and the recession that followed. Low points aside, the 1980s were loaded with high-tech bright spots. Led by TCI, metro Denver emerged as the nation’s cable capital.

“The economy became more diversified, and cable played a big part in that,” said Jim O’Brien, president of the Cable Center in Denver and former president of Jones Intercable. Despite Comcast’s acquisition of AT&T Broadband, “I still look at Denver as cable’s intellectual capital,” O’Brien added. You still have the same people in some form or fashion.”

After the AT&T breakup in 1982, the Mile High City also became the telecom hub for a 14-state region, a standing that was further cemented when US West chose Colorado over Utah for its advanced tech research center in 1987.) The space industry gained ground and became the state’s third largest, after agriculture and tourism, with Colorado plants producing 80 percent of the nation’s launch capability. The decade also saw Colorado Springs blossom as a semiconductor fabrication center.

Perhaps the most significant development of the “me decade” was the dawn of the PC era, ushering in a new way of life for the hardware and software industries, not to mention the average small business. “The PC really revolutionized computing,” said Don McCubbrey, Ph.D., professor at the University of Denver’s Daniels College of Business. “I like to say it gave power to the people.”

Amidst a flourishing software industry, J.D. Edwards experienced tremendous growth during the ’80s, opening seven branch offices across the U.S., and its first international office in 1988. The shift from IT consulting to packaged software was the market trend that defined the decade, said Kercher. “There were a lot of oil and gas customers in the early days,” she added. After the crash, “It was time for us to look at spreading our wings.”

StorageTek entered the ’80s like a lion, but took on too much debt, over-diversified and filed for Chapter 11 bankruptcy protection on Halloween 1984. It took only three years to emerge from Chapter 11, and the company learned a lesson in the process, said Gary Francis, a 26-year StorageTek veteran and current corporate VP. “You can’t do everything,” he said. “You really have to focus on what you’re good at.”

Beyond StorageTek, IBM and other tech stalwarts were downsizing during the mid-’80s. The mass high-techs layoffs had their silver lining: Hordes of pink-slipped employees took destiny into their own hands and launched their own tech startups. “Some of the people that left the company were darn good people,” said StorageTek’s Francis. “They had ideas and they liked the area.”

Not dominated by any one employer, Colorado’s high-tech economy resultantly became more resilient than ever before, all systems go for takeoff.

1990s –

“Today the Internet is a global computer network with an estimated 30 million users – and more plugging in every day. We stand at the threshold of cyberspace.” – Colorado Business, December 1995, “Internet Innovator,” by Ed Swartley

In the shadow of the ragged economic conditions of the mid- to late ’80s, the state was in need of a more diverse economic base. It got one. Telecommunications and software thrived. High-tech job growth was stellar, representing nearly 50,000 new jobs between 1993 and 1998. Colorado Springs led the nation’s cities during that period, its high-tech employment base jumping by 77 percent, and Denver was close behind. Throughout the decade, mergers and acquisitions dominated the headlines (i.e. Lockheed Martin, AT&T-TCI, Qwest-US West).

And StorageTek recovered nicely following bankruptcy, thanks to R&D on automated tape drives that took place during Chapter 11. “We hit the sweet spot of the market,” said Francis. After peaking at 16,000 employees in the mid-’80s, the company now employs about 7,000.

The incubator concept, which arose locally in the late 1980s as a means of diversifying the economy, gained ground, and the Boulder Technology Incubator (now known as the Colorado Technology Incubator) emerged as a standout.

The ’90s saw a phenomenon of “all these big employers turning into a bunch of small companies under 20 employees,” said Jerry Donahue, who served as the incubator’s director throughout much of the ’90s and currently works with CU’s Technology Transfer Office.

The Front Range received its fair share of national press as an up-and-coming high-tech hotspot. The October 1995 issue of Inc. “highlighted Boulder County as kind of a Playmate centerfold” of the tech boom, said Donahue.

In the latter half of the decade, the heady days of Internet mania struck the nation, and Colorado was no exception. Growth was rampant and driven largely by high-tech: Colorado companies buried millions of miles of fiber-optic cable, venture capital flowed like no other time in the state’s history, and dot-com startups budded left and right. As we know all too well, many of these businesses are not around today.

2000s –

“Cyberspace is starting to look a lot like Main Street. Storefronts go up, storefronts come down. Getting rich quick is the exception, not the rule.” – ColoradoBiz, July 2001, “Surviving the Dot-com Debacle,” by Eric Peterson

Like the silver swoon and the railroad rout, the tech bust is now part of Colorado’s economic lore. Once the dot-com bubble popped, the local high-tech economy hit its first stumbling block in more than a decade.

Amidst the empty office parks on the U.S. 36 corridor and Qwest’s mess, it’s easy to lose sight of how far Colorado high tech has come, and how fast it’s gotten there. According to the American Electronics Association’s June 2002 study, Colorado had the highest concentration of high-tech workers in the nation (9.8 percent of all private sector jobs), and high technology represented 50 percent of the Colorado’s exports. In 2000 alone, $4.6 billion in VC was invested in the state, compared to $42 million for all of the 1970s. Investments plummeted in the early 2000s, but the total amount of Colorado-based VC has risen sharply.

“There’s been a dramatic evolution to where are we now,” noted onetime Colorado Secretary of Technology Marc Holtzman. “The primary characteristic is the diversification of the tech economy that is happening right before our eyes.”

In the end, it comes back to an attribute so often touted it has become a clich�©: quality of life. But these three words ring true, as they have since the early days of high tech in Colorado.

And innovation never stops. New technologies – satellite imaging, photonics, nanotechnology – are expanding their footprint in Colorado, and Level 3, flush with $500 million from an investment group led by Warren Buffett, could eventually climb out of the fiber glut as the broadband market leader.

“We’re very, very early on in this revolution,” said DU’s McCubbrey. “It’s going to be marvelous to watch.”

SIDEBAR: STARTUP ENVIRONMENT

The days of spinning a PowerPoint presentation into millions in VC gold are long gone, and that’s a good thing. “There definitely has been a healthy rationalization in the startup environment,” said Secretary of Technology Marc Holtzman. Venture capital under management in Colorado increased by a factor of five from 1997 to 2002, he added, to $3.3 billion.

While there is more money in the state, Colorado’s post-dot-bomb VC scenario is tight-fisted, as investment is the lowest it’s been in five years. Nonetheless, the entrepreneurial landscape is much more vital now than it was in the period before 1995.

“There’s no question in my mind that, where we are today, it’s much more conducive to people doing their own thing, ” said StorageTek co-founder and current venture capitalist Jesse Aweida. “Back in the ’60s, that did not happen that much – people did not want to leave the security of the big companies.”

Leave a Reply

Your email address will not be published. Required fields are marked *


six − = 1